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Initial Decision Would "Permanently Revoke" Retail Supplier's License; Would Fine Retail Supplier $2.5 Million and Order $2.4 Million in Refunds


ALJs Would Rule That Failure For Supplier To Inform Customer "How [Variable] Price Would Be Calculated" Is Deceptive


July 8, 2016

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

An initial decision from two Pennsylvania PUC ALJs in a complaint brought by state consumer agencies against Blue Pilot Energy, LLC would conclude that Blue Pilot Energy, "violated numerous provisions of the Public Utility Code, Chapters 54, 56, and 111 of Title 52, Pa.Code, as well as Pennsylvania consumer protection laws," would order $5 million in fines and refunds, and would "permanently" revoke the company's license

The initial decision is not final and may be appealed to the full PUC.

The initial decision addresses a complaint filed by AG/OCA against Blue Pilot in the wake of the polar vortex, and which alleged pricing and marketing/disclosure violations resulting in its aftermath (click here for specifics on the original complaints)

Specifically, the initial decision would conclude that the Attorney General and the Office of Consumer Advocate (Joint Complainants), "have satisfied their burden of proving that Blue Pilot Energy, LLC ('Blue Pilot' or 'the Company'), an electric generation supplier (EGS): 1) failed to provide accurate pricing information; 2) failed to bill prices in conformity with its disclosure statement and marketed prices regarding its variable rate plan; 3) misled consumers with deceptive promises of savings; 4) lacked good faith in the handling of complaints; and 5) failed to comply with Commission regulations requiring compliance with the Telemarketer Registration Act (TRA)."

The initial decision would order Blue Pilot to pay civil penalties in the amount of $2.5 million and fund a refund pool amount in the amount of $2.4 million

The initial decision would provide that Blue Pilot’s variable rate customers in existence during the time period of December, 2013 to March 2014 are eligible for refunds in the amount of the difference in prices for electric generation supply between what Blue Pilot charged them versus what their respective electric distribution companies (EDCs) would have charged them during the same months given the EDCs’ respective price to compare (PTC) rates during that time period

The initial decision would deny the AG/OCA's request for restitution in the form of cancellation, termination fees and other financial late fees/penalties charged to customers as a result of overbilling by Blue Pilot or switching from Blue Pilot is denied. The initial decision would deny Joint Complainants’ request for restitution in the form of directed contributions to EDCs’ hardship funds. The initial decision would deny Joint Complainant’s request that officers and owners of Blue Pilot be enjoined from participating in the competitive telecommunications market.

However, the initial decision would "permanently" revoke Blue Pilot's electric generation supplier license. "No future license application for any electric supply service filed by the owners, officers, directors or managers of Blue Pilot shall be considered by this Commission," the initial decision would provide

"Commission staff may take action upon any viable security instrument such that appropriate claims may be made against it," the initial decision would provide

One of the counts related to Blue Pilot's disclosure statement, which provided, "Price per Kilowatt Hour. You have a variable rate plan. Your price may vary on a month-to-month basis. This price includes Transmission Charges, but excludes applicable state and local Sales Taxes and the Distribution Charges from your local EDC. At any time, but not more frequently than monthly, Blue Pilot may increase or decrease your rate based on several factors, including changes in wholesale energy market prices in the PJM Markets. Your variable rate will be based upon PJM wholesale market conditions."

Although such language did not limit Blue Pilot to changing rates based on only wholesale market conditions (as has been an issue in other polar vortex proceedings), the initial decision would find that Blue Pilot knew that it based its rates on "anticipated weather patterns" and an "acceptable gross margin," yet failed to disclose these drivers in the disclosure statement. The lack of identification of known pricing drivers is deceptive, the initial decision would conclude.

"A reasonable person would know it is deceptive to the consumer when he/she decided to base variable rates on not only the disclosed factor of PJM wholesale market conditions, but also upon undisclosed and undefined factors, including but not limited to, 'anticipated weather patterns' and an 'acceptable gross margin,'" the initial decision would find

The initial decision would conclude, "There is an insufficient relationship between the Company’s disclosure statement and the actual prices charged by Blue Pilot."

"The variable pricing provision in Blue Pilot’s disclosure statement is 'unclear or contains inconsistencies and, therefore, does not use plain language,'" the initial decision would find

"Joint Complainants have shown that the Company’s disclosure statement with regard to the pricing provisions does not provide accurate information in that consumers could not determine the price that they would or could be charged by the Company or how the price would be calculated. As such, the Company is in violation of the Commission’s regulations at Sections 54.5(c) (requiring that variable pricing terms include the conditions of variability and the limits on price variability), 54.43(1) (requiring that suppliers 'provide accurate information about their electric generation services using plain language and common terms in communications with consumers' and 'in a format that enables customers to compare the various electric generation services offered and the prices charged for each type of service'), 111.12(d)(5) (requiring that suppliers 'ensure that product or service offerings made by a supplier contain information, verbally and written, in plain language designed to be understood by the customer'), and Sections 54.43(f) and 111.12(d)(1) (requiring compliance with consumer protection laws), 52 Pa.Code §§ 54.5(c), 54.43(1), 54.43(f), 111.12(d)(5) and 111.12(d)(1)," the initial decision would find [emphasis added]

The standard that any disclosure in which, "consumers could not determine the price that they would or could be charged by the Company or how the price would be calculated," is deceptive appears broader than then-applicable and even new marketing rules. Even when defining "calculate" to mean that the customer only has to understand what factors will be used to arrive at the price (as opposed to being able to perform the specific calculation), this conclusion may create a stricter standard for examining whether rate disclosures are deceptive versus the specific variable rate disclosure language adopted by the PUC in its 2014 rulemaking.

Specifically, in the 2014 rulemaking, the PUC required that the variable pricing statement must include, "[c]onditions of variability (state on what basis prices will vary)," as well as any limits (or absence of limits) on price variability

We'll let you judge whether the ALJs' conclusion concerning the customer's ability to determine, "how the price would be calculated," exceeds this specific requirement for the "basis" of variability to be disclosed

The ALJs do later narrow their conclusion on disclosure statements, stating, "Although the exact pricing calculation need not be disclosed on the disclosure statement, the pertinent factors upon which the EGS’s variable rate will depend must be revealed in plain language."

The initial decision would also find, "Blue Pilot’s disclosure statement, Welcome Letter, sales script, verification script, and marketing materials are misleading and give customers a false assurance of the efforts the Company was undertaking to keep rates low and only described the variable rate product in terms of savings and cost reductions without any disclosure of the possibility of a variable rate exceeding the EDC’s PTC; thus, increasing the customer’s overall costs for electricity."

"Blue Pilot presented no evidence that any variable rate customer in Pennsylvania achieved an overall savings or a range of savings. As Blue Pilot provided insufficient information in its written 'Service Agreement for the Purchase of Electric Power and Enrollment Form,' sales script, Welcome Letter and disclosure statement by which a reasonable customer could conduct its own independent research of all relevant material pricing factors, the variable rate plan customers in existence in December, 2013 – March, 2014, could reasonably have relied upon the misleading representations of cost savings to conclude the expected range of the variable rate would not exceed the utility’s PTC rate in any given month. The omission of the risks of the variable rate product can mislead customers as to the range of expected variable rates," the initial decision would find

"Further, by not disclosing that its variable rate could go above the PTC, and by emphasizing an introductory rate only, a reasonable consumer could have believed the variable rate would vary from the initial rate, but not exceed the PTC. Additionally, as there was no express 'no guarantee' regarding the introductory rate beyond the 60-90 days, the language could imply that these rates would probably continue or stay close to the rate beyond the 60-90 days. This finding is supported by numerous consumers who believed they were on a longer fixed rate product," the initial decision would find

"Blue Pilot’s written marketing materials were deceptive and misleading because they included inaccurate statements about the PTC (i.e. 'When they [referring to EDC 'rate stabilization plans,'] expire, customers may face dramatic rate increases, as their 'price to compare' is transitioned to more closely align with current market conditions,'" the initial decision would find

The initial decision would reject Blue Pilot's arguments that Blue Pilot's disclosure statement was implicitly approved when the PUC granted the company a license

The initial decision would find that Blue Pilot violated Section 54.4(a) each time it overbilled the residential and small business customers (approximately 7,861 times) and violated Section 54.5(a), approximately 2,516 times by either giving a misleading disclosure statement to its customers, or no disclosure statement at all

As discussed more in our related story today (click here), the ALJs would also conclude that Blue pilot violated PUC regulations when it failed to obtain a signed contract from the customer for its telesales which were authorized via TPV

Related:

SHOCK: Initial Decision Would Require Signed, Written Contract For Retail Energy Telesales in Pennsylvania

Use of Exception to Wet Signature Requirement Denied

Docket C-2014-2427655

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