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Proposed Order Would Fine Retail Supplier $140,000, Suspend License

May 16, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

A proposed order from a Maryland Public Utility Law Judge would impose a $140,000 civil penalty on Blue Pilot Energy, LLC, and suspend the supplier's license for what the PULJ would find are violations of Maryland marketing and solicitation regulations.

The proposed order is not final and may be appealed by Blue Pilot Energy. Blue Pilot Energy previously voluntarily ceased marketing in Maryland and had sought to cancel its license

The PULJ would find that Blue Pilot Energy violated the following:

"COMAR 20.53.07.07. The Company did not comply with the Maryland Telephone Solicitations Act as required when it was marketing its product through telephone solicitations as it did not reduce the agreements made with residential customers to writing and have agreement returned with the signature from the customer, it failed to properly format the agreement as required by the Maryland Telephone Solicitations Act, and its Disclosure Agreement included a clause disclaiming the oral or written representations made in connection with the telephone solicitation transaction. Thus, the residential customer was not adequately advised of the terms and conditions to which it was agreeing to be legally bound and therefore did not have adequate information to make an informed decision on the purchase of electricity.

"COMAR 20.53.08.09A. In four instances, Blue Pilot compared its rate to another competitive supplier rather than comparing to BGE's SOS rate.

"COMAR 20.53.07.07A(2) Blue Pilot made unfair, false, misleading or deceptive statements in its marketing materials and oral representations and thereby did not provide adequate information for a customer to make an informed decision on the purchase of electricity, specifically:

         "a . During the period from December 2012 through March 2014, the Company's statement that it had 'no contracts' was false and misleading as the Company considered the customer to be legally bound to all the terms and conditions set forth in the Disclosure Agreement, which was sent to each one of its customers after enrollment

         "b. During the period from December 2013 through March 2014, the Company's statement that the Company 'specializes in reducing the amount of money you are spending every month on your electricity bill' was false and misleading. The Company's management team had no prior experience in energy procurement prior to forming the Company and beginning operations. It procured its energy on the day-ahead market and did not initiate any form of procurement to mitigate the higher wholesale electric prices which it was paying. The Company knew or should have known that the guaranteed rates promised in or after December 2013 were artificially low and the customers would not see a 'savings' in costs once the guarantee period expired based on the wholesale costs of electricity in the PJM wholesale market.

         "c. During the period from December 2012 through March 2014, the Company's representation that the customer would be returned to the rate it had prior to enrolling with the Company if the customer called his/her sales representative due to a lack of satisfaction with the level of savings or the Company's service was false, misleading, and inaccurate. The Company did not adjust any customer's rate to the rate prior to enrollment when the customer cancelled due to dissatisfaction with the billed rate from the date the customer cancelled to the date on which BGE transitioned the customer from Blue Pilot.

         "d. Although Blue Pilot disclosed the variable rate may vary from month to month, its practice was to either maintain the 'guaranteed' rate month to month or to increase the rate if it needed to recover its costs of wholesale electricity procured in the PJM day ahead market. Except for the period on and after March 2014, it decreased the rate only if the customer called and received a 'better rate.' This practice was inconsistent with its description of the manner its rates may vary; thus, it was a false and deceptive sales practice.

         "e. Blue Pilot failed to routinely refer to the 'Supply Price Comparison Information' when conducting its rate comparison during the telephone solicitation call. "

The PULJ found that such violations are not of such a nature to warrant revocation of Blue Pilot's license.

"I take into account that the Company had no customer complaints prior to January 2014. Complaints received in and after January 2014 primarily were the result of the drastic increase in the monthly rate that the customer was accustomed either during the guarantee period or for some month after the period expired. I also consider that the Company, once recognizing that its marketing and operational practices were hampered by the volatility of the wholesale electric prices, voluntarily suspended any further marketing in Maryland," the PULJ said

"I also take into account that until November 2013, the Company did not increase the initial guaranteed rate of a customer even though the guarantee period had expired; therefore, these customers apparently received the savings that they expected based on the rate comparison conducted," the PULJ said

"Nevertheless, the Company may not be excused from engaging in unfair, false, misleading or deceptive marketing practices and a civil penalty is an appropriate measure to ensure that the Company reviews its marketing materials to ensure that the statements are and remain accurate at all times," the PULJ said

The $140,000 civil penalty recommended by the PULJ reflects $60,000 related to what the PULJ found to be unfair, false, misleading or deceptive marketing practices as described above, and $80,000 related to the violations of the Maryland Telephone Solicitations Act

The Maryland Telephone Solicitations Act requires that telephonic contracts be reduced to writing with a wet signature, with specific disclosure requirements, unless the transaction meets one of several exemptions.

One of these exemptions is that a wet signature is not required if the sale is in response to the examining by the consumer of an advertisement which includes certain information, including, "the name, address, and telephone number of the merchant; a description of the goods or services being sold; and any limitations or restrictions that apply to the offer."

Blue Pilot argued that telephonic enrollments which did not include a wet signature were exempt from the Maryland Telephone Solicitations Act based on the fact it aired a radio advertisement August 2013 to December 2013 on one AM radio station in Maryland

The PULJ said that reliance on such a radio ad for a "blanket" exemption from the Maryland Telephone Solicitations Act fails.

The PULJ first noted that the radio ad did not disclose Blue Pilot's address and telephone number, a complete description of the services being sold, or the limitations or restrictions that applied to the offer (such as, the variable nature of the rate after the expiration of the guarantee period), as would be required for the exemption

Moreover, the PULJ said that even if the radio advertisement met all the requirements of the Maryland Telephone Solicitations Act, "Blue Pilot must still demonstrate that a consumer being solicited by phone had 'examined' the advertisement (or heard it) prior to purchasing electricity from Blue Pilot in order for the telephone solicitation to fall within the applicable Maryland Telephone Solicitations Act exemption."

The PULJ noted that Blue Pilot's sales script did not include language asking the customer if they had heard the radio advertisement, and the PULJ said that Blue Pilot admitted that it kept no specific documentation to show which Maryland consumers were placed into the TPV process after affirmatively indicating that he/she had heard the radio advertisement aired between August and December 2013.

Consistent with recent PSC decisions, the PULJ would also reject Blue Pilot's argument that, under the Maryland Uniform Electronic Transactions Act, the TPV constitutes a wet signature in compliance with the Telephone Solicitations Act

"[T]he Maryland Uniform Electronic Transactions Act does not preempt other State law requirements that information be provided in writing or that the record contain 'the information formatted in the manner specified by the other law.' Consequently, reliance by Blue Pilot on the Maryland Uniform Electronic Transactions Act to establish a 'signed' document does not relieve it of the requirements associated with the Maryland Telephone Solicitations Act, i.e., the contract must be reduced to writing and then signed and returned by the customer, with the appropriate legend within the text of the written document," the PULJ said

The PULJ further noted that, "the MDTSA prohibits a vendor/seller from excluding from the written contract any oral or written representations made in connection with the transaction . In the Disclosure Statement, Paragraph 18 states 'This Agreement contains the complete understanding between Blue Pilot and the Customer and supersedes all other written or oral communications or representations.' Arguably, not only is the inclusion of this clause in the Disclosure Statement contrary to the Section 14-2203 (b) (6) of the Maryland Telephone Solicitations Act, the clause, by its terms, appears to supersede any contract that Blue Pilot argues is formed by an electronic signature resulting from the customer's oral consents in the TPV call.'"

Case 9346(c)

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