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PSC Affirms $140,000 Fine Against Retail Supplier

Proposed Order Had Found That Not Reducing Variable Rates As Wholesale Rates Decline Violates Marketing Rules


December 2, 2016

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

The Maryland PSC adopted in total a May 13 proposed order from a Public Utility Law Judge (PULJ) which imposes a $140,000 civil penalty on Blue Pilot Energy, LLC, and suspends the supplier's license for what the PULJ found are violations of Maryland marketing and solicitation regulations.

Blue Pilot Energy had appealed the proposed order, arguing that the fine was excessive, and that issues related to potential violations of the Maryland Telephone Solicitation Act (MTSA) were not properly before the PSC in the case.

The PSC denied both of these arguments from Blue Pilot Energy's appeal, and affirmed the PULJ's proposed order in total. The PSC said that the record supports the PULJ's conclusions regarding the appropriate level for the fine, and the PULJ's conclusions that potential violations of the MTSA were within the scope of the case, which originated from a show cause order.

Click here for our prior story for details of the PULJ's proposed order which the PSC has adopted as final, including the specific violations found by the PULJ and findings concerning the Maryland Telephone Solicitations Act

Additionally, the proposed order had implicated broader market issues in its conclusions concerning whether certain of Blue Pilot's behavior amounted to a violation (see story here).

Blue Pilot Energy's variable rate disclosure statement during the relevant period provided as follows: "You have a variable rate plan with a starting price set at x.x cents per kWh. This initial rate will be effective for at least the first ninety (90) days of service. Thereafter, your price may vary on a month-to-month basis ... At any time after ninety (90) days of service, 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."

However, the PULJ found such disclosure to be at odds with the company's business practices, as the PULJ concluded that the company's practice was to not lower the customer's rate in response to lower wholesale prices, unless the customer affirmatively contacted the company for a new rate.

"I find that the Company's business practice or policy was to either maintain a customer's initial rate or to increase the rate after the guarantee period to allow it to recover unexpected costs in procuring its electricity supply," the PULJ had said

That prompted the PULJ to conclude in the proposed order, "I find that, based on the evidence in the record, the Company did not adequately disclose the nature of its monthly rate, because the Company business plan was that the initial rate offered to the customer would be 'fixed' during the customer's enrollment, and the Company would not decrease the monthly rate based on the PJM market prices for wholesale electricity even after the guarantee period, unless the customer contacted, or was contacted by, the Company to obtain a 'better rate' and be locked into another 'guarantee period.' Only after the Company began to experience substantial increases in its wholesale electricity costs, did it rely on its description of its 'variable' rate to increase monthly rates for customers who were outside the guarantee period. After March 2014, the evidence suggests that the Company did 'proactively' decrease most of its customers' monthly rates ... but the monthly rate remained well in excess of the BGE SOS rate.'"

"I therefore find that the Company's disclosure of the manner in which the billed rate would vary after the expiration of the 60- or 90-day guarantee period was an unfair or misleading marketing and trade practice in violation of COMAR 20.53.07.07A.(2)," the PULJ had said

As noted, the PSC affirmed the PULJ's proposed order. In doing so, the PSC did not disturb or otherwise opine on the PULJ's conclusions that Blue Pilot's pricing, and failure to lower its rates as wholesale prices declined, violated COMAR 20.53.07.07A.(2) given prior disclosures made by Blue Pilot to customers concerning the rate plan.

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