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Regulator Adopts Guidelines on Retail Supplier Investigations, Violations; Ups Maximum Potential Penalty To $5 Million

Says Retail Suppliers Will Be Held Responsible For Use Of Non-Licensed Brokers


July 6, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Massachusetts DPU has adopted interim guidelines to apply in electric and natural gas competitive supplier formal investigations and proceedings (Docket 16-156-A)

The interim guidelines establish a process and procedure that will be uniformly implemented when a competitive supply company has allegedly violated DPU regulations, and will apply to all competitive supply proceedings that require compliance with Chapter 30A.

These interim guidelines will apply to all electric competitive suppliers, electricity brokers, gas suppliers, and gas retail agents that participate in the electric and gas retail markets in the Commonwealth of Massachusetts and are licensed by the Department of Public Utilities.

Among other things, the guidelines address penalties for violations found by the DPU

Per the adopted guidelines, each competitive supply company found to have committed a violation "shall" be subject to, "a remedial plan, licensure action, civil penalties, or a combination of the three."

Citing a statutory mandate requiring civil penalties for violations, the DPU declined to change the guidelines' language to state that a violation "may" result in a civil penalty, though the DPU noted it, consistent with statute, will take into account a variety of factors in setting a civil penalty.

However, adopting language from statute, the DPU revised its earlier draft for the guidelines, and the final guidelines state that a competitive supply company found to have committed a violation shall be subject to a civil penalty not to exceed $25,000 for each violation for each day that the violation persists; provided, however, that the maximum civil penalty shall not exceed $5 million for any related series of violations. The draft guidelines had proposed a maximum civil penalty of only $1 million.

A competitive supply company found to have committed a violation shall be subject to licensure action including, but not limited to, being:

i. Placed on probationary status;

ii. Prohibited from signing up new customers for a specified period time; or

iii. Subject to suspension, revocation, or non-renewal of its license.

The final guidelines establish that informal and formal reviews may be undertaken by the DPU, and allow for the DPU to initiate a formal proceeding without an informal review where appropriate.

The final guidelines establish provisions regarding consent agreements and remedial plans as well

While the guidelines set forth various notice and hearing procedures, the guidelines provide that the DPU, "may waive the requirement for notice and hearing under Section 3 through 5 of the Interim Guidelines before issuing a Remedial Order pursuant to Section 6 of the Interim Guidelines when the Nondelegated Commissioners determines that failure to do so would result in serious harm to life or property."

The DPU declined to adopt language in the guidelines that would subject non-licensed entities to the penalties described therein, citing a lack of jurisdiction over such companies

"While appreciative of the goals of their suggestions, the Department further declines to adopt the Attorney General’s and the Suppliers/RESA’s argument that the Interim Guidelines should apply to both licensed and unlicensed competitive supply companies operating in Massachusetts. The Department’s regulations and controlling statute permit the Department to take licensure action and levy civil penalties against a competitive supply company that has consumer issues or has committed violations of Department regulations. G.L. c. 164 § 1F(7); 220 C.M.R. §§ 11.07, 14.06(5). Further, the Department’s regulations explicitly define a competitive supplier as an entity licensed or certified by the Department to sell electricity or gas and related services. 220 C.M.R. §§ 11.02, 14.02. Thus, to be considered a competitive supplier in Massachusetts, that competitive supply company must hold a valid license issued by the Department and, as a result, the Interim Guidelines and penalty provisions of 220 C.M.R. §§ 11.07, 14.06(5), shall only apply to licensed competitive supply companies," the DPU said

Furthermore, the DPU specifically declined to extend the guidelines to companies engaged in brokering without the required license, placing the compliance obligation and responsibility on suppliers in such instances.

"The Department also finds that its jurisdiction to take licensure action or levy civil penalties against an electricity broker or gas retail agent is limited to those that are licensed or certified by the Department. As with the competitive supply companies, the Department’s gas regulations require that a gas retail agent be certified by the Department. 220 C.M.R. § 14.02. While the Department’s regulations do not explicitly define electricity brokers as those licensed or certified by the Department, the regulations prohibit competitive suppliers from doing business with unlicensed or unauthorized electricity brokers. 220 C.M.R. § 11.05(5). Thus, and consistent with our findings above regarding the causes of action associated with the pursuit of false or misleading business practices, the Department finds it to be more appropriate to place the onus on competitive suppliers to comply with our regulations and only contract with licensed electricity brokers or gas retail agents. Therefore, if a competitive supplier uses the services of an unlicensed electricity broker or gas retail agent, the Department will consider the supplier to be in violation of our regulations and subject to the processes and procedures outlined in the Interim Guidelines," the DPU said

The DPU found that requests from consumer advocates to adopt a supplier code of conduct or to require the public posting of complaint data were outside the scope of the proceeding addressing the guidelines, and declined to adopt the suggestions in its final order on the guidelines.

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