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Retail Supplier Enters $2.4 Million Settlement With Attorney General, Includes Moratorium on Use of Variable Rates

March 25, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Pennsylvania Attorney General Kathleen G. Kane and Acting Consumer Advocate Tanya J. McCloskey announced a proposed settlement with an electric generation supplier, which the AG and OCA had alleged had engaged in deceptive marketing of variable electric rates to Pennsylvania consumers, many of whom filed complaints about spikes in their rates during the winter of 2014.

Under the settlement, Energy Services Providers Inc., which does business as Pennsylvania Gas and Electric (PaG&E), has agreed to pay $2.3 million in refunds to eligible consumers in addition to the $4.5 million the company has already paid. The corporation must also pay a civil penalty of $25,000 and make a contribution of $100,000 to the electric distribution companies’ hardship funds, the AG said.

The settlement would resolve a formal complaint filed against PaG&E at the PUC by the OCA and AG. PaG&E does not admit liability or wrongdoing under the settlement.

Consumers who were on variable rate plans in January, February or March of 2014 will be contacted directly by a third-party settlement administrator if they qualify for a refund. The refunds will be based on consumers’ usage and the price they were charged during that time period, with specific amounts determined by the AG and OCA. Refunds already received will be a factor in any additional refunds.

According to the AG, "The settlement also imposes an 18-month moratorium on the selling of variable rates by PaG&E. The company must offer fixed-rate products for terms longer than six months during this time period, which started March 1."

This restriction does not apply to PaG&E's existing contracts.

"Should the company begin to offer variable rate contracts in the future, PaG&E will be required to disclose to consumers in plain language that prices may fluctuate monthly," the AG said.

Other provisions of the settlement provide:

PaG&E its agents, employees and representatives shall refrain from using terms in their variable rate marketing campaigns, such as "trial period" or "introductory rate," without a clear and conspicuous disclosure of the material terms and conditions thereof, including and without limitation to, a description of the price that will be charged after the expiration of that introductory or trial period and the basis on which that price will be calculated, the circumstances under which the consumer can cancel, and the consequences of cancellation.

PaG&E, its agents, employees and representatives shall not make representations, either directly or by implication, about "special programs" for which a Pennsylvania consumer qualifies, unless PaG&E provides documentation to the consumer explaining in detail the "special program," including but not limited to the parameters of the program, term of the program and eligibility requirements for acceptance into the program.

Except as set forth herein, PaG&E, its agents, employees and representatives shall not make representations, either directly or by implication, about the Price to Compare increasing or the Price to Compare being a variable rate; notwithstanding the foregoing, nothing herein shall prohibit PaG&E, its agents, employees and representatives from making truthful statements about the current level of the EDC's PTC or future PTC if that information is publically [sic] available. If a PaG&E agent, employee or representative identifies the current PTC or a published future PTC, the PaG&E agent, employee or representative shall also provide the term that the referenced PTC will be in effect; and (ii) PaG&E, its agents, employees and representatives shall not make any representations whatsoever about how a consumer's utility purchases electricity

Every communication by a PaG&E representative with a potential customer shall begin with the sales representative stating: "My name is [Sales Representative's Name]. I am calling on behalf of Pennsylvania Gas & Electric. PaG&E can provide you with your electricity. I do not work for or represent your electric utility."

If PaG&E offers variable rate products to residential and small business consumers in the Commonwealth, after the time period set forth above, the PaG&E salesperson must state the following during any of its variable rate sales contacts: "After ___ month(s) [if Introductory Price period is applicable], the price you pay under this variable rate contract can change every month. This is not a fixed rate contract. Variable means the price can go up or down. There is no limit on how high the price can go."

PaG&E shall not state or represent to customers in the Company's variable rate programs that the price PaG&E will charge will be "market-based" or set on "market conditions" unless PaG&E also provides a specific explanation by means of a formula, or other explanation immediately following such representation in a manner readily understandable for the customers that specifies with particularity what such "market" may consist of, some representation of what components of the price fluctuate with that market and a publicly available source of information so that a customer can calculate the price and any applicable charges in terms of dollars and cents or cents per kWh.

The proposed settlement requires approval by the Public Utility Commission. The PUC's Bureau of Investigation and Enforcement supports the settlement.

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