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RESA Opposes Ban On Commission-Based Compensation For Door-to-Door, In-Person Sales

Also Opposes Proposed Requirement To Record Entire Door-to-Door Sale

Citing Increase In Scams, Utility Seeks Requirement For Suppliers To Notify EDC Of Door-to-Door Marketing Activity

May 30, 2018

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

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The Retail Energy Supply Association filed comments on new electric marketing rules proposed by the Maine PUC (Docket No. 2018-00056)

As first reported by EnergyChoiceMatters.com in March, notable among various new rules proposed by the PUC are:

• A ban on commission-based compensation for in-person sales at the customer's premise, including door-to-door sales

• Requiring that the entirety of interactions during an in-person sale at the customer's premise, including door-to-door sales, be recorded.

• Applying all of the proposed disclosure and marketing rules to small non-residential service, in addition to residential service.

RESA noted that, as currently written, any in-person solicitation at a residential or small non-residential customer’s premises would be subject to various provisions of the rules, including the ban on commission-based compensation and recording of the entire sale, including solicitations via network marketing or pre-arranged appointments.

"In the Notice of Inquiry, the Commission expressed concern that CEP marketing representatives fail to identify the company for whom the salespeople work, make unreasonable repetitive sales visits to the same home, and make sales visits at unreasonable hours of the day. However, these activities are unlikely to arise in the context of solicitations via network marketing or pre-arranged appointments because the prospective customer has already had prior contact with the representative and has agreed to meet with him or her," RESA said

"Thus, RESA requests that the Commission clarify that Section 4(B)(14) of the Proposed Amendments only apply to in-person solicitations [sic] do not apply to solicitations via network marketing, pre-arranged appointments, or other in-person solicitations in which the customer has already been in contact with the CEP and is aware of the purpose of the in-person contact prior to the solicitation," RESA said

Regarding the proposed ban on commission-based compensation for in-person sales, RESA said that, "the Commission has not put forth any basis for such a requirement."

RESA noted that even the Office of Public Advocate did not recommend such a ban at this time

"Just like many other industries, CEPs utilize a variety of compensation structures. In fact, the use of commission-based compensation for sales and marketing agents of private enterprises is a widely accepted business practice. However, RESA does not believe that these compensation structures impact compliance. Moreover, no other stakeholder submitted comments to the contrary. Thus, the Commission has no factual basis to conclude otherwise. Accordingly, any ban on commission based compensation structures would be arbitrary," RESA said

RESA said that, "Furthermore, imposing such a requirement would be unworkable. CEPs frequently rely on third-party vendors to perform marketing on their behalf. These third-party vendors are generally independent contractors. As such, CEPs do not generally have the right to dictate how those vendors compensate their employees."

RESA also said that the proposed rule should not be applicable to small non-residential customers

In separately filed comments, Patriot Energy Group also raised issues with applying certain of the rules to small commercial service.

Patriot Energy Group said, "Another proposed requirement better suited to the residential market, if at all, is the recording requirement of 4(B)(l4)(f). In no other circumstance is it required that a business-to-business transaction be audio-recorded -- especially an in-person one agreed to by both parties. The rationale for recording unsolicited door-to-door transactions in the residential context might be justified, but clearly not between businesses that are accustomed to reading written contracts (which is how Patriot conducts business with its clients) from vendors, and in Patriot's case, is also consultative in nature, with the aim of aiding businesses choose the right retail electricity or natural gas supply option, regardless of supplier."

Patriot Energy Group also said that the rules are written to apply to Competitive Electricity Provider (CEPs), a term in Maine which applies to brokers as well as suppliers

Patriot Energy Group said that various of the proposed rules relate to obligations an LSE would undertake, such as those related to supply contracts, and would be inapplicable to the broker function, yet brokers would still be faced with compliance as written

"Finally, Patriot is opposed to subsection 4(B)(14)(h) [a proposed ban on commission-based compensation] relating to payment to its account executives relative to meetings with small businesses. It once again must be emphasized that in no other industry are business-to-business transactions regulated in this way. Small commercial entities, although are likely not to have significant numbers of staff members assigned to handle procurement matters, are run by entrepreneurs and otherwise business-savvy individuals that deal with contracts for all manner of goods and services daily. Likewise, Patriot is a consultative business that rightly deserves to be paid for its efforts, if successful in acquiring new clients. However, to prevent CEPs (or even ABCs like Patriot) from compensating its employees based on whether they are successful in gaining new clients, is unprecedented in nearly any industry -- especially in the business-to-business context. In no other business-to-business transactions are service providers (such as lawyers, management consultants, trade vendors, janitorial services, advertising, or competitive telecommunications and Internet services) prevented from so compensating their employees. There is no reason that electricity should be any different. Therefore, the MPUC should not apply this requirement to CEPs/ABCs when doing business with small commercial enterprises via face-to-face meetings," Patriot Energy Group said

Emera Maine (BHE) requested that suppliers be required to file notices of door-to-door marketing with the utilities as well as the PUC, citing an increase in scams involving utility service

"Emera Maine suggests that the Commission require CEPs provide notice to the utilities before engaging in door-to-door solicitation. Currently, the proposed Section 4(B)(14) only requires the CEPs to provide such notice to the Commission and the local police department," Emera Maine said

"Last year, Emera Maine received a spate of calls regarding marketers claiming to represent a certain CEP. Customers were concerned that these marketers were scammers. Because Emera Maine’s Maine Public District was not familiar with the CEP and whether it was engaged in legitimate door-to-door marketing at that time, the Company’s customer service representatives were unable to advise customers accordingly. Scams involving utility service are increasingly common in the state, and both the utilities and CEPs would benefit from the utilities having advance notice of in-person marketing campaigns so that the utility can properly advise inquiring customers," Emera Maine said

"As an alternative to the CEP providing direct notice to utilities, the Commission could also potentially provide notice to the relevant utilities once it receives notice from a CEP. In either case, Emera Maine believes it would be more useful to the Commission, the local police departments, and the Company if the CEP notices provided specific areas that the CEPs are targeting as opposed to just identifying the general utility service territory. For example, Emera Maine would find it more useful to know if a CEP was going to be marketing in Ellsworth and on Mount Desert Island during a specific time period rather than potentially anywhere in its service territory," Emera Maine said

The Office of the Public Advocate suggested that, for purposes of directing customers to Standard Offer rate information online, the on-bill message should direct customers to the OPA's website rather than the PUC site. OPA's site also contains a comparison of competitive supplier offers in addition to default service rates

"While the Commission’s standard offer rates website page is accurate, we suggest directing customers to the Maine Office of the Public Advocate homepage instead This would address the utilities concerns about the space needed to include a lengthy website address on a bill and continue to foster a competitive marketplace by allowing customers to view the standard offer rate as well as rates offered by other competitive electricity providers," OPA said

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