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Citing Management's "Deliberate Choice" To Dishonor Contracts, PUC Fines Retail Suppler $1.8 Million, Adopts $2 Million Refund Settlement

December 3, 2015

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

The Pennsylvania PUC imposed a $1.8 million civil penalty on HIKO Energy, LLC for what the PUC called, "knowingly and deliberately," deciding not to honor guaranteed savings contracts with customers due to the polar vortex

Specifically, the PUC imposed a civil penalty of $1,836,125 on HIKO. That reflects penalty of $125 per violation, which the PUC ruled occurred on each billing in excess of the contracted agreement for each customer involved.

The PUC concluded that, "HIKO knowingly and deliberately chose to dishonor its promised and contracted-for savings of 1% to 7% on 14,689 occasions to 5,708 customers, in direct violation of Section 54.4(a) of our Regulations. We find that in so doing, HIKO effectively treated its own customers as the financial guarantors of its own business plan, which backed contracts offering customers guaranteed savings with what was essentially a speculative supply portfolio based exclusively on spot market purchases."

Section 54.4(a) provides that, "EGS prices billed must reflect the marketed prices and the agreed upon prices in the disclosure statement."

In rejecting HIKO's exceptions which had sought a smaller penalty, the PUC said, "HIKO cannot escape the fact that its decision to violate its promised guaranteed savings was a deliberate choice of top management that affected over 5,700 customers, factors that figure prominently into our determination of the appropriate level of penalty in addition to the number of violations."

According to the initial decision adopted by the PUC in an order yesterday, "HIKO does not dispute that it failed to honor the guaranteed discounted rate during the winter of 2014. HIKO admits that from January 2014 through April 2014, HIKO billed a large number of customers within the service territories of Duquesne Light, Met-Ed, PECO, Penelec, PPL and West Penn a unit rate for electricity supply during the customers’ introductory periods that exceeded, and sometimes far exceeded, the discounted introductory rate that was guaranteed at the time of each customer’s enrollment as a HIKO supply customer."

Regarding the case, PUC Chairman Gladys Brown said, "The Commission has and will continue to work diligently to foster a robust retail energy market in Pennsylvania. This mission requires the PUC not only to properly design the market, but also to effectively monitor and enforce the market ... [T]hese proceedings serve as an example of the Commission's responsibility to be a retail energy market watchdog."

"This outcome today serves as a reminder to the retail supply industry that the Commission will not hesitate to take action against bad actors," Brown said

The PUC also adopted a settlement without modification between HIKO and the Pennsylvania Attorney General and Office of Consumer Advocate under which HIKO Energy, LLC will provide $2 million in customer refunds, and agrees to not offer variable rates through June 30, 2016

For customers enrolled in HIKO's guaranteed 1%-7% savings program, all customers will receive a refund reflecting 3.5% savings as compared to the applicable Price to Compare for January, February and March 2014 after taking into account any refunds a customer may have already received from HIKO. This amount totals about $1.7 million. The remaining $350,000 shall be allocated as refunds for HIKO's customers not enrolled in HIKO's 1%-7% guaranteed savings program.

HIKO will also make a $25,000 contribution to the utilities' hardship funds separate from the $2 million in refunds

Under the settlement, HIKO agrees that it will not accept any new Pennsylvania customers starting April 1, 2015 and lasting until June 30, 2016; provided, however, that if HIKO finds that it is able to offer a fixed rate product before June 1, 2016, it will be able to do so pursuant to stipulated provisions.

The settlement also requires various remedial measures and includes conditions on marketing, such as providing that HIKO, its agents, employees and representatives shall refrain from using terms in their variable rate marketing campaigns, such as "risk free," "competitive," "guaranteed," or any other terminology that represents, explicitly or by implication, that HIKO guarantees that the price offered will be lower than the EDC's Price to Compare.

Click here for more specifics regarding these provisions and the settlement

Cases C-2014-2431410, C-2014-2427652

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