Energy Choice
                            

Matters

Regulator Issues $300,000 Notice of Violation To Supplier Regarding Prior Savings Guarantee in Contracts

May 19, 2016

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

The Connecticut PURA issued a Notice of Violation and Assessment of Civil Penalty to Choice Energy, LLC in the amount of $300,000 related to guaranteed savings provisions previously in Choice Energy, LLC's contracts

The NOV is not final and Choice Energy, LLC may request a hearing. In a statement, Choice Energy, LLC said that it would contest the NOV (full statement below)

According to the NOV, "[t]he record shows that Choice entered into a total of 17,630 customer contracts in calendar year 2012 that contained a 12-month price savings guarantee."

However, Choice Energy, LLC issued a letter to customers in January 2013 stating that such savings guarantees were being discontinued

The NOV considers such change to be a material change in the contracts, and finds that such material change was made without the express consent of the customers.

According to the NOV, Choice Energy, LLC maintained that its practice was acceptable, as its Terms of Service contained a provision that allowed Choice to change the terms of the contract with any customer upon a 30-day notice.

The NOV, however, rejects this argument, citing Conn. Gen. Stat. §16-245o(h)(8) which provides, "An electric supplier shall not make a material change in the terms or duration of any contract for the provision of electric generation services by an electric supplier without the express consent of the customer."

The NOV further states that statute provides that this provision cannot be waived by the customer

"The Authority determines that Choice made a material change in the Terms of Service of 17,630 contracts without the express consent of the customers, in violation of Conn. Gen. Stat. §16-245o(h)(8). The Authority imposes a penalty of one hundred thousand dollars ($100,000.00) for this violation of Conn. Gen. Stat. §16-245o(h)(8)," the NOV states

Additionally, the NOV states that, "The Authority also determines Choice misrepresented the characteristics of its savings guarantees and actual rate offerings. Customers suffered from Choice’s significant misrepresentation of its rate offering and guaranteed savings calculation. The Authority imposes a penalty of two hundred thousand dollars ($200,000.00) for violation of Conn. Agencies Regs. §42-110b-18, Conn. Gen. Stat. §§42-110b(a) and 16-245(g)."

Specifically, the NOV takes issue with Choice Energy, LLC's contract which based the savings guarantee on the customer's "effective rate," as the provision stated, "we guarantee that for as long as you remain our customer, your effective rate each year will always be below your LDU’s standard Generation Service Charge rate, also known as the Price to Compare."

"A detailed explanation of how Choice intended to calculate 'effective rate' was never defined or explained for customers and therefore, it should never have been used in the calculation of 'guaranteed savings.' The Authority determines the 2011 utility 'Price to Compare' should have been the Standard Service rate against the actual rate charged by Choice, not an 'effective rate,'" the NOV states

Additionally, as Choice Energy, LLC began focusing on selling renewable energy, the NOV states that Choice Energy, LLC's contract added a provision adding the CT Clean Energy Options rate to the utility rate comparison, providing that, "we guarantee that for as long as you remain our customer, your effective rate each year will always be below your LDU’s standard Generation Service Charge rate (also known as the Price to Compare) and, if applicable, the rate available from the CT Clean Energy Option program or its equivalent."

"The Authority determines that Choice should have utilized the Standard Service rate for a rate comparison, not the Standard Service rate plus the 'adder' for the Connecticut Clean Energy Option. Choice’s failure to fully define various terms resulted in customers being unable to verify potential savings calculations," the NOV said

"The Authority could have imposed a penalty of one thousand dollars ($1,000.00) for each of the 17,630 contracts established in calendar year 2012 in which Choice made a material change to in the Terms of Service without the express consent of the customers, in violation of Conn. Gen. Stat. §16-245o(h)(8). The Authority also could have imposed a penalty of one thousand dollars ($1,000.00) for each of the 32,674 contracts where Choice misrepresented its actual rate offering using an the [sic] undefined term 'effective rate' in its guarantee. The total penalty in this instance would have been over fifty million dollars ($50,000,000.00). However, given the size of Choice’s Connecticut operations, the gravity of the violation, the number of past violations and Choice’s plan to ensure compliance going forward, the Authority has chosen to limit the penalty in this case to approximately $6.00 per offense for a total penalty of three hundred thousand dollars ($300,000.00)," the NOV states

Choice Energy, LLC provided the following statement, "Choice Energy is disappointed by the proposed Notice of Violation and Assessment of Civil Penalty issued by the Connecticut PURA earlier today and intends to contest it vigorously in accord with PURA procedures. We cooperated fully with the investigation conducted by PURA and firmly believe that the record will show that we fully complied with our guaranteed savings program and provided proper notices to customers."

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