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Retail Supplier Would Be Fined $10,000 For Agent's "False and Misleading Statements" Under Initial Decision

December 29, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

An initial decision from a Pennsylvania ALJ would assess a civil penalty of $10,000 to Respond Power, LLC for what the ALJ would conclude were, "false and misleading statements" by a sales agent.

Respond Power would also be required to issue a refund to the customer whose complaint prompted the proposed fine.

The initial decision is not final. Parties may file exceptions to the initial decision, which would then prompt Commission review of the initial decision prior to any final action.

The case relates to a customer who alleged that the door-to-door salesman for Respond guaranteed that the EGS's variable residential rate would be no greater than his electric distribution company's (EDC) price to compare (PTC) rate. Instead, the customer was billed at a rising variable rate during this past 'polar vortex' winter, to approximately 150% the EDC's price to compare rate.

The case mainly centers on two issues: the oral representations made by Respond's door-to-door agent to the complainant, and the written terms and conditions.

"I find the testimony of [complainant] Mr. Herp to be credible that Respond Power's door-to-door sales agent promised that as an enrolled customer of Respond Power, Mr. Herp's variable priced supply service would provide savings relative to West Penn Power and was capped or constrained by West Penn Power's price-to-compare. That Mr. Herp agreed to a variable service product is not in dispute. However, based upon the statements made by Respond Power's agent, Mr. Herp understood that Respond Power 'offered rates that were always lower than the local utility company, in my case West Penn Power,'" the ALJ said.

Moreover, the ALJ would find that Respond's written T&Cs do not adequately describe the variable product and the lack of any price guarantees.

According to the initial decision, Respond Power's disclosure statement provided as follows:

"Variable Rate. Your price may vary from month to month. This rate is set by Respond Power and reflects their Generation Charge as reflected by the PJM Day-Ahead Market, Installed capacity (the cost of reserve or standby power), electricity lost on the transmission system ("losses"), estimated state taxes, and any other costs that Respond Power incurs to deliver your electricity to your electric Utility's Transmission System (where they receive the electricity). For their services, Respond Power adds a profit margin to the electricity and Respond Power's goal each and every month is to deliver your power at a price that is less than what you would have paid had your purchased your power from your local utility company, however, due to market fluctuations and conditions, Respond Power can not always guarantee that every month you will see savings. Commodity charges exclude Pennsylvania sales tax, if applicable. You may contact Respond Power for our current Variable rates."

"I find this disclosure statement to be somewhat misleading as it informs the customer that the goal is to provide power at a price less than the local utility company's price; however, Respond Power cannot always guarantee that every month the customer will see savings," the ALJ said.

"I find the testimony of [complainant] Mr. Herp credible that when he read this paragraph, he did not catch the word 'goal.' From Mr. Herp's testimony, by missing the word 'goal' he believed the disclosure essentially stated: 'Respond Power each and every month will deliver your power at a price that is less than what you would have paid had you purchased your power from your local utility company...' Missing the word 'goal' changes the meaning of the sentence," the ALJ said.

"I find the phrase of 'can not always guarantee' to be an odd choice of words. By negating the word 'always,' the phrase implies that Respond Power sometimes can guarantee and sometimes cannot guarantee. Alternatively, a possible truth from this phrase is that there is no guarantee. The phrase does not state 'can not ever guarantee' or that there is no guarantee. The phrase is confusing and misleading, probably giving some consumers false hopes of guaranteed monthly savings," the ALJ said.

"While I agree the Complainant entered into a private variable rate contract, I do not find the terms and conditions of the contract to be clear and I find the testimony of Mr. Herp to be credible in support of a finding that the agent ... did contact Mr. Herp in person and did make misrepresentations promising monthly savings in comparison to West Penn Power's charges, in conflict with the disclosure statement and terms given to Mr. Herp with the Service Agreement," the ALJ said.

The ALJ further said, "Respond Power has what appears to be at least on the surface, insufficient control over its agents or even knowledge about the actions of its field agents. These agents are the people who ultimately contact prospective customers in an in-person setting, sometimes in their residence, and make representations on behalf of Respond Power in order to secure customers and for the financial benefit of Respond Power. The testimony of Mr. Small indicates that Respond Power neither creates the marketing literature, nor directly instructs or audits either the field agents or third party verifiers. It appears these activities are sourced-out to multiple third-party marketers/vendors, which then hire, train and audit their field agents. Respond Power appears to take an overseeing approval role and it monitors quality assurance by contacting a random sampling of its marketing vendors on a monthly basis, but Respond Power does not appear on the surface to be initiating or adequately controlling the drafting of marketing literature, the training or disciplining the agents working on behalf of Respond Power. This brings into question whether the company is compliant with Chapter 111, Marketing and Sales Practices for the Retail Residential Energy Market, 52 Pa.Code §§111.1 et seq."

The ALJ would specifically adopt the following conclusions of law:

Respond Power violated 52 Pa.Code §54.4(a) by not billing Mr. Herp the prices marketed to him by [the] sales agent

Respond Power violated 52 Pa.Code § 54.7(a) in that its advertised prices did not reflect its billed prices.

Respond Power violated 52 Pa.Code § 54.43(1)(f) by not providing accurate information about its electric generation services using plain language and common terms in communications with Mr. Herp, and by the deceptive marketing acts of its agent or representative

Respond Power violated 52 Pa.Code § 111.12(d), as the disclosure statement given to Mr. Herp was not in plain and clear language designed to be understood by a customer, and Respond Power's agent made false and misleading statements including misrepresenting rates or savings offered by the supplier.

Respond Power violated 52 Pa.Code § 111.7(a)(1) because the written service agreement did not identify whether the transaction was the result of a door-to-door call or other in-person contact with an agent.

Respond Power and its agent ... did not comply with regulations governing marketing, consumer protection and door-to-door sales including consumer protection regulations at Chapters 54 and billing practices in Chapter 56 in violation of 52 Pa.Code § 111.9(b).

Docket C-2014-2413756

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