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Regulator Issues Notice Of Violation Against Retail Supplier, Seeking $900,000 Civil Penalty

Regulator: "Egregiousness" Of Alleged Violations Prompts Question Of Supplier's Technical And Managerial Capacity

March 22, 2018

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

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The Public Utilities Regulatory Authority (PURA or Authority) issued a Notice of Violation and Assessment of Civil Penalty (NOV) against Spark Energy, L.P. (Spark or Company) under which PURA would impose a civil penalty in the amount of nine hundred thousand dollars ($900,000) against the Company.

The NOV does not constitute a final action by PURA, and Spark may contest the NOV and seek a hearing on the NOV.

In the NOV, PURA stated that Conn. Gen. Stat. §16-41(a) provides, in pertinent part: Each electric supplier shall obey, observe and comply with all applicable provisions of this title and each applicable order made or applicable regulations adopted by the Public Utilities Regulatory Authority. Any such electric supplier which the Authority finds has failed to obey or comply with any such provision of this title, order or regulation shall be fined by order of the Authority.

"The Authority has reason to believe that Spark violated Conn. Gen. Stat. § 16-245d(a)(2) and the August 2015 Decision in Docket No. 14-07-19RE01, PURA Investigation into Redesign of the Residential Electric Billing Format – Billing Format Clarifications. The Authority therefore assesses a civil penalty of $900,000 pursuant to Conn. Gen. Stat. §§16-41(c)," PURA stated in the NOV

In the NOV, PURA stated, "In February 2018, the Authority received a complaint that the Next Rate appearing on customer’s bills, as required by Conn. Gen. Stat. § 16-245d(a)(2), was not always correct and customers were not necessarily being charged the displayed Next Rate on their bill. In contradiction to instructions contained in the Authority’s Decision in Docket No. 14-07-19RE01, Spark admitted that it had been delinquent in supplying electric distribution companies (EDC) with the Next Rate in a timely manner. Answers to Interrogatories SEU-1 and SEU-2. Spark failed to respond in a meaningful manner to the Authority’s interrogatories regarding whether or not it supplied other information required for display on customers’ bills, instead responding to every field with 'In Progress.'"

PURA stated in the NOV that, "Spark violated Conn. Gen. Stat. § 16-245d(a)(2) and the August 12, 2015 Decision in Docket No. 14-07-19RE01 by not providing the Next Rate to EDCs in a timely manner."

PURA stated in the NOV that, "Conn. Gen. Stat. § 16-245d(a)(2) instructed the Authority to initiate a docket to implement changes to the information to be included on the bill for each residential customer receiving electric generation service from an electric supplier. More specifically, § 16-245d(a)(2) required that the following information be displayed on the first page of each such bill: (i) The electric generation service rate; (ii) the term and expiration date of such rate; (iii) any change to such rate effective for the next billing cycle; (iv) the cancellation fee, if applicable, provided there is such a change; (v) notification that such rate is variable, if applicable; (vi) the standard service rate; (vii) the term and expiration date of the standard service rate; (viii) the dollar amount that would have been billed for the electric generation services component had the customer been receiving standard service; and (ix) an electronic link or Internet web site address to the rate board Internet web site described in section 16-244d and the toll-free telephone number and other information necessary to enable the customer to obtain standard service."

PURA stated in its NOV that, "The Authority followed this directive and in Docket No. 14-07-19, PURA Investigation Into Redesign of the Residential Electric Billing Format, issued a January 21, 2015 Decision requiring the Electric Distribution Companies (EDCs) to implement the Summary Information on customer bills and for suppliers to work with the EDCs to find the best way to effect implementation. In 14-07-19RE01, PURA Investigation Into Redesign of the Residential Electric Billing Format - Billing Format Clarifications, the Authority issued a Decision requiring suppliers to 'carefully manage their Next Rate data to assure that timely, accurate and credible information is being provided to consumers.' August 12, 2015 Decision at p.17. Additionally, the Decision required 'licensed suppliers to provide the Summary Information specified by Conn. Gen. Stat. §16-245d(a)(2),' which included requirements one through five designated in the statute."

PURA stated in its NOV that, "On September 26, 2016, the Authority sent a letter to Spark in its licensing docket and Docket No. 14-07-19RE01, PURA Investigation Into Redesign of the Residential Electric Billing Format - Billing Format Clarifications, stating that it was noncompliant with the Decisions dated January 21, 2015, in Docket No. 14-07-19, PURA Investigation Into Redesign of the Residential Electric Billing Format, and August 12, 2015, in Docket No. 14-07-19RE01. These Decisions implemented the requirements of Conn. Gen. Stat. §16-245d(a)(2), which became effective on June 6, 2014. Pursuant to those Decisions, suppliers were required to begin submitting the necessary information for display on residential customer bills (Phase II Summary Information) to the EDCs effective January 1, 2016. In the September 26, 2016 letter, the Authority stated that Spark had ample time from June 6, 2014 to January 1, 2016, to create, implement and test the electronic data interchange (EDI) processes necessary to assure accurate, timely and complete compliance with this statutory mandate. Moreover, Spark had not requested any modification or suspension of its compliance obligation under Dockets No. 14-07-19 and 14-07-19RE01. The Authority directed that on or before October 10, 2016, Spark respond in detail to the following questions: (1) to explain its apparent failure to comply with the Phase II Summary Information requirements; (2) to identify what steps Spark had taken since June 6, 2014, to comply with the requirements of Conn. Gen. Stat. §16-245d(a)(2); and (3) to identify when Spark expected to achieve full compliance with the requirements of Conn. Gen. Stat. §16-245d(a)(2)."

PURA stated in its NOV that, "On October 10, 2016, Spark responded to the Authority’s September 26, 2016, letter stating that due to resource constraints, it failed to adequately oversee the implementation of Phase II Summary Information requirements through to completion. Further, Spark represented that it planned on achieving full compliance with the requirements on or before November 15, 2016, and that similar oversights would not occur going forward. On November 15, 2016, the Authority acknowledged Spark’s October 10, 2016 letter and requested that the Company provide an update on this matter on or before December 15, 2016. Spark’s response was to include the status of its compliance with Conn. Gen. Stat. §16-245d(a)(2). In a December 14, 2016 follow-up response, Spark attested to the Authority that it was compliant with Conn. Gen. Stat. §16-245d(a)(2)."

PURA stated in its NOV that, "On March 27, 2017, the Authority sent Spark another letter regarding its apparent ongoing non-compliance with Conn. Gen. Stat. §16-245d(a)(2). The letter stated that in response to Interrogatory SEU-4 in Docket No. 14-07-19RE01, the Connecticut electric distribution companies recently had submitted updated summary reports addressing all suppliers’ compliance with the Phase II Summary Information requirements. The responses demonstrated that despite its previous assertion, Spark continued to fail to comply with Connecticut law and the Authority’s Orders. In the March 27, 2017 letter, the Authority directed Spark to respond to the following questions on or before April 3, 2017: (1) to explain the failure of Spark’s senior regulatory manager and its legal/regulatory team to manage and oversee the implementation of these requirements; (2) to explain Spark’s continued failure to comply with the Phase II Summary Information requirements, despite prior assertions it had remedied internal processes; (3) to explain in detail the specific actions taken to date, and those planned, to reach compliance; and (4) to state when Spark will achieve full compliance with the requirements of Conn. Gen. Stat. §16-245d(a)(2). On April 3, 2017, which was the due date, Spark requested an extension until April 10, 2017 to respond to the Authority’s March 27, 2017 letter. On April 10, 2017, in response to the Authority’s March 27, 2017 letter, Spark again stated that it would achieve full compliance with the requirements of Conn. Gen. Stat. §16-245d(a)(2) on or before April 30, 2017."

PURA stated in its NOV that, "On May 1, 2017, Spark again notified the Authority that it was compliant with Conn. Gen. Stat. §16-245d(a)(2). The Authority notes that this third assurance of compliance came after many letters from the PURA to Spark as stated above, and a full year and four months from the statutory effective date of January 1, 2016, when the Phase II Summary Information was required by statute to be displayed on residential customer bills. During that time, the Company repeatedly stated that it either did comply or would comply, yet it did not comply. Unfortunately, Spark’s May 1, 2017 assurance of compliance was also illusory, because Spark’s answers to interrogatories in the current docket indicate that Spark violated the same Section yet again."

PURA stated in its NOV that, "Spark admitted in its answers to Interrogatories that it was delinquent in supplying the EDCs with the Next Rate. Answers to Interrogatories SEU-1 and SEU-2. According to Spark’s admissions, Spark did not provide the Next Rate for 96,395 customer bills between December 2016 and March 2018. Spark Response to Interrogatory SEU-2 Attachment. Moreover, Spark has provided the Authority with no evidence that it has supplied the EDCs with the remaining summary information required by the statutes. Information provided by the EDCs indicates Spark is not fully compliant in this aspect as well. See Answers to Interrogatory SEU-7 to CL&P and UI issued February 15, 2018. These failures fly in the face of the Authority’s directive in the Docket No. 14-07-19RE01 Decision and the purpose of Conn. Gen. Stat. § 16-245d(a)(2)."

PURA stated in its NOV that, "In this case, Spark has admitted its failure to abide by the law. Spark’s violation caused numerous customers not to know the correct Next Rate. The Authority notes that Spark has a repeated history of noncompliance, violations, and ignoring and/or falsely claiming compliance with Authority directives."

PURA cited in its NOV instances where Spark failed to comply with the RPS compliance reporting requirements and an instance where Spark failed to timely file a report of intrastate revenues.

Furthermore, PURA stated in its NOV that, "On October 23, 2014, the Authority notified Spark of a customer complaint that the Company was actively marketing in Connecticut and advertising on the Energize CT website an early termination fee (ETF) of $100. The Authority stated that practice did not comport with state law, specifically Conn. Gen. Stat. §16-245o(h)(7)(A) [previously Public Act 14-75, Section (7)(A)]. In addition, the Authority requested responses by October 31, 2014 to a number of questions regarding the $100 ETF. One specific question requested that the Company '[d]escribe in detail Spark’s plan to ensure ongoing compliance with all applicable Connecticut statutes and regulations, including the date by which its policies and procedures will be reexamined for compliance.' On October 31, 2014, Spark informed the Authority that it attributed the incorrect reference to a clerical error on its part. The Company stated that it planned to send notifications to each of its 432 customers that enrolled under a product that referenced the $100 ETF. The notification would inform the customers about the change in terms, which reduced the ETF to $50. Spark indicated that it had corrected and updated its EnergizeCT information on October 28, 2014. Finally, Spark stated that its regulatory team would hold monthly compliance meeting [sic] to ensure that all Connecticut statutes and regulations were being followed to ensure ongoing compliance."

PURA also stated in its NOV that, "On July 26, 2017, the Authority issued a Decision in Docket No. 10-06-18 noting that Spark’s responses to the Authority’s interrogatories regarding a telemarketing issue were inadequate and unsatisfactory. Consequently, the Authority directed Spark to provide adequate responses. The Company was warned that failure to properly and fully answer the questions would be deemed a violation of the Authority’s Order and may result in penalties up to and including revocation of Spark’s electric supplier license."

PURA stated in its NOV that, "In reviewing Spark’s history, the Authority notes the fact that twice before it has reprimanded Spark for failure to comply with its obligation to provide the Phase II Summary Information under § 16-245d(a)(2) and the Authority’s Decision implementing that statute. PURA September 26, 2016 and March 27, 2017 Letters to Spark. On both occasions Spark stated that it became compliant or would soon be compliant. Spark December 14, 2016 and April 10, 2017 Letters to PURA. The present case indicates that Spark’s assurances were false, and do not indicate a good faith effort to achieve compliance. Given Spark’s habit of violating the law and then erroneously assuring the Authority of its compliance, the Authority has reason to question Spark’s managerial capabilities in maintaining its electric supplier license in Connecticut, and will monitor Spark’s compliance going forward as set forth below."

PURA stated in its NOV that, "Pursuant to Conn. Gen. Stat. §16-41(a), the Authority has discretion to prescribe a fine of up to ten thousand dollars for each offense. After considering all of the factors set forth in Conn. Agencies Regs. §16-245-6, the Authority finds that a civil penalty of $900,000 is appropriate. A penalty at this level is warranted given Spark’s continued violations and is necessary to ensure that the Company complies with statutes, regulations, marketing standards and Authority Orders going forward."

PURA stated in its NOV that, "The egregiousness of Spark’s violations causes the Authority to question Spark’s technical and managerial capacity. Because of Spark’s pattern of inaccurately assuring regulatory compliance, the Authority distrusts Spark’s ability or commitment to ensure no further violations occur with respect to provision of the Next Rate and other Phase II Summary Information to the EDCs for display on customers’ bills. Therefore, the Authority will continue to monitor Spark for one year from this date. By order below, the Authority will require Spark to maintain documentation that it is supplying to the EDCs in a timely manner for each customer billing cycle the Next Rate and all other required Phase II Summary Information. The Authority will periodically request and audit this documentation to ensure Spark complies with all legal requirements. If Spark does not adhere to this monitoring requirement or if the Authority finds further violations, the Authority will subject Spark to further penalties and/or consider revocation of its license."

Docket No. 10-06-18RE01

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