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Proposed Order Would Fine Retail Supplier $40,000 Over Contract Renewals, Require Customer Refunds; But Overall Finds No Misrepresentation Over Polar Vortex Rates

November 1, 2015

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

A proposed order from a Maryland Public Utility Law Judge would impose a civil penalty of $40,000 on XOOM Energy Maryland, LLC and require certain customer refunds due its automatic renewal of fixed price customers onto variable rates in what is found to be in violation of the original contracts, but would not find that XOOM engaged in any misrepresentation, in addressing post-polar vortex complaints.

The proposed order is not final and may be appealed

The proposed order results from an investigation into XOOM Energy resulting from complaints in the wake of the polar vortex

According to the proposed order, during the period January 2013 through June 2014, XOOM sent to each fixed term, fixed price customer with a so-called "evergreen contract" an email which was entitled "contract expiration notice". A failure to respond to the email during the January 2013 to June 2014 period resulted in the conversion of the contract from a fixed rate, fixed term contract to a variable rate, month-to-month contract

Notably, the email directed customers to follow links to specific terms of the renewal, and did not highlight the change from a fixed rate to a variable rate. Under these emails, the PULJ would conclude that XOOM enrolled approximately 36 existing fixed rate customers onto a variable rate plan without the customer's affirmative consent between January 2013 and December 2014.

"I find that converting a customer from a fixed rate to a variable rate, when the existing contract contemplates a renewal to a fixed rate, is a material change to a term or condition of the existing agreement between XOOM and its customer," the PULJ said.

"Further, I find that a customer's ability to access the required regulatory information by clicking 'live links' within an electronic notice cannot be considered to be a 'clear and concise' statement of or highlight of changes in the material terms and conditions contained 'in the notice,'" the PULJ said

"XOOM does not argue, nor is there any evidence, if the customer were to click on the 'XOOM Basic Energy Plan' link, that the variable pricing provision was 'highlighted' or identified in any manner as a provision that contained a 'material change in terms' from the customer's existing fixed price contract. Consequently, even if the customer were to click a 'live link' in the email, the onus was on the customer to wade through each term and condition to determine the differences between the 'new' plan and the existing plan. Further, the existence of the manner to terminate the 'new' plan would not reasonably alert the customer that the same termination process could be used to terminate the existing contract. Thus, clicking a 'live link' that merely brings up the full text of the terms and conditions of the contract without any effort to identify the material changes between the new and old contract does not meet the requirements of the language of CO MAR 20.53.07.08C and COMAR 20.59.07.08C," the PULJ said

The PULJ further highlighted that the auto-renewal email did highlight that the new plan was "month-to-month" and could be "cancelled without penalty," yet did not highlight the conversion from a fixed term, fixed rate contract to a variable rate contract

"XOOM's failure to disclose, in the text of the email renewal notice, one of the most critical material changes while highlighting other material changes, is a violation of COMAR 20.53.07.08C and 20.59.07.08C," the PULJ said

Additionally, the PULJ said that, "I find that the renewal notice's overall design was to obscure the customer's ability to terminate its relationship with XOOM. Thus, by not adequately disclosing how to terminate the existing contract without penalty and the consequence of terminating the contract without selecting another supplier, XOOM violated the Commission's evergreen renewal contract regulations."

"I find no provision, nor did XOOM point to any such provision, that allowed XOOM to unilaterally convert the customer from a fixed rate to a variable rate under the automatic renewal terms of the customer's existing evergreen contract," the PULJ said. "More importantly, XOOM has not identified the manner in which any of its customers who were defaulted into the variable rate plan could have affirmatively agreed or understood the nature and risk of the variable price as provided in the Basic Energy Plan's terms and conditions ... [C]ustomers that initially selected a variable rate plan had to verify their understanding and agree to the nature and risk of a variable rate whereas the fixed price customer did not. Therefore, I find XOOM's enrollment of a customer's account from a fixed rate plan to a variable rate plan without the affirmative consent of the customer under one of the methods of contracting with a supplier is in violation of COMAR 20.53.07.05C and COMAR 20.59.07.05C."

The PULJ would impose a $40,000 civil penalty for these violations.

Additionally, the PULJ would direct XOOM to compensate each customer who was defaulted from a fixed rate to a variable rate and filed a complaint with the PSC prior to December 2014 by refunding directly to the customer (or to the applicable utility for a credit to the customer's account), the difference for each month during 2014 (or the months in 2014 in which the customer continued as a XOOM customer) that the variable rate billed to the customer exceeded the utility's default rate

However, this found non-compliance with the renewal regulations did not amount to an unfair, deceptive, misleading or fraudulent trade practice, the PULJ said

"I conclude, however, that the record is not sufficient to support a finding that XOOM' s apparent breach of its contract with a number of its customers and the lack of required information in the renewal notices in violation of the Commission's regulations is an 'unfair, misleading, false or deceptive trade practice' ... Nor, in my review of the Maryland consumer protection laws, do I find any provision to deem XOOM's conduct to be a per se false or defective trade practice," the PULJ said

The PULJ dismissed allegations from PSC Staff and/or the People's Counsel that XOOM's statements concerning "competitive" variable rates amount to misrepresentations

"I conclude that XOOM's statements that its rates will be 'competitive when evaluated over time' is extremely vague and does not discuss the period of time for the evaluation. Further, XOOM's website provides adequate and sufficient disclosures to ensure that the customer is aware of the volatility of the variable rate and the lack of a guarantee that the variable rate would be lower than the utility rate, once the promotional rate expired. I find that XOOM's promotion rate offers were not misleading and that its website contains adequate information on the differences between a fixed rate and a variable rate as well as the nature of and risks associated with a variable rate, which includes the disclaimer that the variable rate may be higher or lower than the local utility's rate," the PULJ said

"I conclude that XOOM's training modules provide sufficient guidance to the IR [independent representative] that guaranteeing or promising savings or a lower rate than the utility's is not permitted. Although a number of the ... complaints in the record allege misrepresentations of savings, I will not assume that the percentage of these complaints to the overall number of complaints is indicative of the overall number of incidents of misrepresentations by XOOM's IRs. Further, although a customer may have perceived or interpreted the IR's presentation to guarantee or promise savings, without being able to independently judge whether the customer's interpretation was reasonable under the circumstances, I will not accept as 'true' that the IR engaged in the conduct alleged. Thus, I find no credible evidence in the record that XOOM's IRs engaged in a pattern of misrepresentations during 'warm marketing' which misled or deceived a customer," the PULJ said

The PULJ also found that XOOM's enrollment process has not resulted in a significant number of unauthorized enrollments.

For a number of the complaints claiming unauthorized enrollment, the PULJ said that XOOM acknowledged that the customer's enrollment was not authorized as alleged, returned the customer to SOS, and refunded the difference in the rate charged by XOOM over the SOS rate during the enrolled period.

"Despite OPC's assertion that there was a 'high significance of slamming' due to XOOM's acceptance of valid email addresses, without confirming the customer's identity, I conclude that the number of OER complaints alleging unauthorized enrollment submitted into the record as compared to the number of customers enrolled with XOOM during January 2013 and December 2014 does not support a finding of a significant number of unauthorized enrollments. I also conclude that not every complaint of unauthorized enrollment was legitimate. For example, a customer, who filed [a] complaint alleging unauthorized enrollment, admitted that the IR who enrolled him was his niece, he verbally authorized her to enroll him and assisted her in the enrollment by answering a series of questions relating to his credit history only he would be able to answer," the PULJ said

Case No. 9346 (a)

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