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ESCO Alleges Suspension Of Enrollment Authority By PSC Reflects Unreasonable Disparate Treatment Of Similarly Situated ESCOs Subject To Show Cause Orders, Seeks Rehearing

April 17, 2018

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

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Flanders Energy, LLC (Flanders) filed with the New York PSC a petition for rehearing, reconsideration and clarification in accordance with Public Service Law Section 23 and 16A NYCRR Section 3.7, of the PSC's Order Suspending Ability to Market to and Enroll Residential and Non-Residential Customers, issued by the New York Public Service Commission (PSC or Commission) on March 15, 2018 (Suspension Order).

As previously reported (see story here), the PSC suspended Flanders Energy LLC's authority to market to and enroll new residential and non-residential customers in New York

Among other things, the PSC stated in its March 16 order suspending Flanders' ability to enroll customers that, "even though Flanders states that it suspended its marketing and enrollments as of May 2017, Con Edison reports, in response to Staff inquiry, that Flanders has in fact enrolled hundreds of new customers since June of 2017."

The PSC also stated in its March 16 order that, "Moreover, the complaint case files demonstrate that Flanders typically returned the customer to the utility but did not always or consistently refund the customer for any charges in excess of what the customer would have paid to its incumbent supplier, if the customer had not been switched to Flanders without the customer’s authorization. Such a resolution does not meet the requirements of UBP §5.K.2, which mandates refunding slammed customers so that the customer pays no more than it would have paid to its incumbent provider."

In its rehearing request, Flanders alleged that the Suspension Order is, "based on an error of law to the extent DPS Staff does not implement its authority to suspend ESCO’s marketing rights uniformly, resulting in a violation of the field doctrine."

Flanders, reciting the procedural history of the case, noted in its rehearing request it made several responses to a PSC show cause order, detailing various corrective actions it was undertaking. Flanders stated that corrective actions have included:

• Provided notice of improper enrollment to all customers. Such notice, "was reviewed by Staff," Flanders stated in its rehearing request

• Provided Staff with customer complaint information and sought feedback from Staff on any concerns they may have.

• Voluntarily cessation of marketing.

• Hired in-house compliance personnel, outside counsel and consultant.

• Brought all marketing activities in-house (including both in-person and telephonic solicitation);

• Updated record-keeping protocols; and,

• Updated marketing materials, customer contracts and electronic third-party verification script. The customer contract and third-party verification script, "were both signed off by Staff," Flanders alleged in its rehearing request

In its rehearing request, Flanders stated, "Under the Field Doctrine, agency action is arbitrary and capricious if there is no explanation provided for departing from agency precedent, even if the agency’s decision is supported by substantial evidence on the record."

In its rehearing request, Flanders alleged, "The Commission has applied a consistent standard for reinstating marketing and enrollment for other ESCOs in similar positions as Flanders, but that standard is not being applied equally to Flanders as it has been to other ESCOs. Both MPower Energy, LLC ('MPower') and Marathon Energy Corporation ('Marathon') provided materials to the Commission similar to those provided by Flanders; however, unlike Flanders, MPower and Marathon were allowed to continue marketing and enrolling customers. Further, the changes Flanders submitted to the Commission go above and beyond the requirements of the UBP, unlike both Marathon and MPower."

"Similar to other proceedings, Flanders implemented organizational and compliance changes that exceed requirements of the UBP," Flanders stated in its rehearing request

"Flanders continues to acknowledge the Commission’s concerns laid out in the original April Notice of Apparent Failure and the September Order to Show Cause. Since then, like both MPower and Marathon, Flanders has taken numerous corrective action to address such concerns and as such should have been allowed to continue marketing to both residential and commercial customers. In particular, Flanders has provided greater details on its corrective actions than Marathon had in its responses," Flanders stated in its rehearing request

In its rehearing request, Flanders alleged that, "The Commission committed an error of law by applying subjective and unreasonably vague standards of review to Flanders, as compared to MPower and Marathon."

"In this case, the standard set by the Commission’s decisions to allow MPower and Marathon to continue marketing and enrolling customers has not been applied to Flanders. This both fails to provide a reasonable opportunity to understand the decision and is an arbitrary enforcement against Flanders," Flanders alleged in its rehearing request

"By ignoring Flanders’ organizational and compliance changes that are similar to the changes to compliance protocols and marketing processes followed by other ESCOs that did not have their marketing rights suspended both (i) constitutes an arbitrary and capricious exercise of the Commission’s discretion; and (ii) is unfairly prejudicial against Flanders," Flanders alleged in its rehearing request

Flanders further alleged in its rehearing request that, "The Suspension Order’s basis for suspending Flanders because of the rise in QRS is based on an error of fact because it does not consider that the rise in QRS was a result of the Notice Letter, and not Flanders’ recent marketing activity."

According to the PSC, in January 2018, Flanders sent a letter to customers informing them that they may have been improperly enrolled with Flanders. DPS Staff reported a significant increase in the number of complaints to the Department about Flanders and its marketing and enrollment practices after the issuance of such letter.

Flanders in its rehearing request said that, "once its customers received the letter, a small percentage of customers expressed their concerns to Department Staff about Flanders through the QRS process," which Flanders, "fully anticipated" based on the customers receipt of such letter

Flanders in its rehearing request said that, "Specifically, from January 21, 2018 through February 26, 2018, the Department received 23 QRS inquiries about Flanders. [While [sic] the consumers’ QRS inquiries were categorized as 'slams' by Department Staff, the majority of customers were actually unaware that they were being served by an ESCO and only requested that they be returned to their default utility service."

While Flanders said that the vast majority of the QRS recounted that Flanders enrollment practices were severely deficient, Flanders noted in its rehearing request that it had, "openly acknowledged that its enrollment practices were severely deficient," and, "[t]his is why it voluntarily suspended marketing in May 2017 without a Commission Order telling them to do so."

"The whole entire point of sending the letter out was to notify and identify customers that may have been properly enrolled so Flanders could rebate the amount they overpaid and send them back to the default utility if they so choose. In fact, Flanders notified staff via email when the letter was sent out that they may see more customer complaints and the letter is the reason why," Flanders said, arguing that the issues raised in customer complaints in response to the letter were not novel, but rather, "one of the primary bases behind the Commission’s issuance of the Show Cause order in the first place."

Flanders further alleged in its request for rehearing that, "The Commission committed an error of fact by relying on unsubstantiated allegations that information from Flanders may be not be relied upon because new customers were enrolled after it suspended its marketing activity."

Flanders noted in its rehearing request that the PSC in its Suspension order had concluded that even though Flanders states that it suspended its marketing and enrollments as of May 2017, Con Edison reported, in response to Staff inquiry, that Flanders had enrolled hundreds of new customers since June of 2017.

"Flanders disputes that is has signed up new customers since it suspended marketing. Any customers that appear to be signed up after their voluntary suspension were customers who already were in enrolled and it just took a cycle for them to show up on Con Edison Reports. Furthermore, this was never discussed with Flanders at any point after the Order to Show Cause was sent to them in September. The first Flanders is hearing about this is the March 15th Order. This is a concern that was never raised by Staff either in the Order to Show Cause, on the conference calls afterwards or any email correspondence," Flanders said in its request for rehearing

"The only customers enrolled since the voluntary suspensions were 24 customers associated with the January letter that offered customers an ability to re-enroll for a new green energy product," Flanders said in its request for rehearing

Flanders alleged in its request for rehearing that, "Staff was fully aware that this letter was sent out to Flanders’ customers as Commission Staff reviewed the letter, and even made an edit to the letter before it was sent out. Flanders believes this accusation is based on Staff confusion and is disingenuous in light of the transparent manner in which Flanders communicated its intention to offer current customers an opportunity to sign-up for a green energy product."

In a statement, the Department of Public Service's press office said that the petition for a rehearing will be reviewed.

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