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Regulator Issues $750,000 Notice Of Violation Against Retail Supplier

September 7, 2018

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Copyright 2010-17
Reporting by Paul Ring •

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The Connecticut Public Utilities Regulatory Authority has issued a Notice of Violation (NOV) and Assessment of Civil Penalty in the amount of $750,000 against Spark Energy, L.P. (Spark or Company), related to the content of alleged sales calls made by a subcontractor

The Notice of Violation does not represent final agency action. Spark has a right to a hearing to contest the Notice of Violation and Assessment of Civil Penalty.

The NOV states, "the Authority finds a civil penalty is authorized to be assessed against Spark for violations of Conn. Gen. Stat. §§ 16-245(g)(2), 16-245o(h)(1), 16-245o(h)(2)(A), 16-245o(h)(3), 16-245o(h)(4), 16-245o(j), and 42-110b."

The NOV states, "In May 2017, the Authority was alerted to customer complaints regarding Spark’s marketing practices. Through the complaints filed with the Authority’s Consumer Services Unit, the PURA determined that Spark had used a pre-recorded message from telephone number 475-275-8919, which stated the following: 'Hello and thank you for being a valued customer of Eversource Energy formerly Connecticut Light and Power. The following is an important update regarding your account. Starting this month, all current customers that have not missed a payment in the past six months may now be eligible for a discount up to 15% on their monthly bill. If you would like to check your eligibility for this discount, simply press 1 on your phone now. If you are not a current customer, press nine to update our records and you will not be called again.'"

The NOV states that Spark acknowledged to PURA that the subcontractor of a vendor used an automated message when contacting potential customers.

The NOV states, "In these calls, Spark’s representatives implied to potential customers that they were calling on behalf of The Connecticut Light and Power d/b/a Eversource (CL&P or Eversource)."

The NOV states in an interrogatory response, Spark provided both a recording and transcript of the following message that the NOV states was similar to the one stated above in the customer complaints to the Authority: "Hello, Thank you for being a valuable customer of Eversource. This call is being recorded for quality assurance. If you have not missed any payments from last 6 months, so you can get up to 15% discount for next 12 months. To check your eligibility, Press 1, to see other promotions Press 2, to talk to a representative Press 0. Thank You!"

The NOV states, "A reasonable person could infer that the above pre-recorded message was made on behalf of Eversource. In fact, the message never mentions Spark; Eversource is the only entity to which it refers."

The NOV notes that Conn. Gen. Stat. §16-245o(h)(2)(A) states: that, "For any sale or solicitation, including from any person representing such electrical supplier, aggregator or agent of an electric supplier or aggregator (i) identify the person and the electric general services company or companies the person represents; (ii) provide a statement that the person does not represent an electric distribution company; (iii) explain the purpose of the solicitation; and (iv) explain all rates, fees, variable charges and terms and conditions for the services provided."

The NOV states, "The pre-recorded message violates this statute. The message never identifies that it is from Spark as required by Conn. Gen. Stat. §16-245o(h)(2)(A)(i). Not only does the message never indicate that it is not from an electric distribution company (EDC, on the contrary, it is worded to appear as if it is from an EDC in violation of Conn. Gen. Stat. §16-245o(h)(2)(A)(ii). Furthermore, the message violates Conn. Gen. Stat. §16-245o(h)(2)(A)(iii); as the message appears to emanate from Eversource, it does not explain the purpose of the solicitation, which was to have customers enroll in a supply contract with Spark."

The NOV states, "Likewise, the message violates Conn. Gen. Stat. § 16-245o(h)(3), which states, 'When advertising or disclosing the price for electricity, the electric supplier, aggregator or agent of an electric supplier or aggregator shall (i) disclose the electric distribution company’s current charges. . . .'. Here, the message states that a customer could receive a discount of 15% on their 'monthly bill,' but it does not disclose the EDC’s charges to which a customer would compare this purported savings, let alone the portion of the bill to which the discount would apply."

The NOV states, "the message was likely to mislead customers into thinking they were interacting with Eversource because the message refers to them being Eversource customers and never mentions Spark."

The NOV states, "it would have been reasonable for a customer to interpret the message as being from Eversource given its script."

The NOV states, "the misleading representation was material in this case because it misrepresented the party with whom the customer was contracting. Had the message revealed itself as being from Spark, customers not wishing to change their electric supplier would not have engaged with the message. Instead, Spark tricked customers into engaging by causing them to think that they were receiving a call from their EDC."

The NOV states, "Because the message misleads customers into believing it is from an EDC and does not disclose the EDC charges, it is deceptive and violates Conn. Gen. Stat. §§ 16-245o(h)(4), 16-245o(j), and 42-110b."

The NOV states that, according to Spark, the pre-recorded message was developed by the subcontractor of a vendor.

The NOV states, "The Authority finds that Spark cannot shed its responsibility for the actions of its third-party agent and subcontractor. Conn. Gen. Stat. § 16-245o(h)(1) provides, in pertinent part that '[a]ny third-party agent who contracts with or is otherwise compensated by an electric supplier to sell electric generation services shall be a legal agent of the electric supplier.'"

The NOV states, "The law requires Spark to be held accountable for any improper and illegal actions by its third party vendor or subcontractor because 'imposing liability on the principal will induce greater care to prevent misconduct by agents.' Hydrolevel Corp. v. Am. Soc. of Mechanical Engineers, Inc., 635 F.2d 118, 125 (2d Cir. 1980)."

The NOV states that 151,892 calls, "contained a misleading and deceptive message that violated applicable law."

The NOV also states, "Spark violated Conn. Gen. Stat. § 16-245o(h)(1) by not directly training its third-party agents."

The NOV states, "In its responses to interrogatories, Spark admits that it does not directly train its third-party agents, but delegates training to its third-party marketing vendor. ('Spark’s third-party agents have been directly trained by Spark’s third-party marketing vendor.' Response to Interrogatory RA-21). Spark’s practice of not directly training its third-party agents violates Conn. Gen. Stat. §16-245o(h)(1). Conn. Gen. Stat. §16-245o(h)(1) states, '[n]o third party agent may sell electric generation services on behalf of an electric supplier unless . . . (B) the third-party agent has received appropriate training directly from such electric supplier.'"

The NOV states that Spark terminated its contract with the vendor who had contracted with the subcontractor alleged to have placed the calls

However, the NOV states, "However, terminating a third-party marketing vendor only after the Authority investigates an issue is insufficient to remedy and prevent these types of practices from occurring in the future. Spark’s method of compliance – violating the law and ignoring its violation until it is officially notified – leaves all consumers in Connecticut vulnerable to Spark’s deceptive marketing. The inefficacy of its compliance method can be illustrated by the fact that while the Authority was investigating Spark’s prerecorded message, it received other complaints about Spark’s telemarketing and door-to-door marketing, all of which were in addition to the complaints Spark cited regarding the prerecorded message."

The NOV also cites what it terms Spark's "history" of non-compliance. The NOV cites several instances of non-compliance related to RPS or other annual filings. However, most notable is the NOV cites what it termed Spark's, "apparent ongoing non-compliance with Conn. Gen. Stat. § 16-245d(a)(2)," concerning summary rate information required to be included on bills

The NOV states, "Spark’s history of non-compliance with Conn. Gen. Stat., Conn. Agencies Regs., and the Authority’s requests and Orders indicate a disregard for its legal responsibilities. Throughout 2016 and 2017, Spark repeatedly assured its compliance with Conn. Gen. Stat. §16-245d(a)(2), only to have been found to be either wholly disconnected from the reality of its practices or engaging in duplicity. Spark has established a pattern of circumventing the law until it gets caught, pledging to change its ways only when faced with retribution, then reverting to its illegal behavior. This pattern, when coupled with the new allegations cited herein, call into question Spark’s managerial capabilities in maintaining its electric supplier license in Connecticut. The Authority notes that Spark’s 2017 Connecticut Gross Revenue was $41,722,187. A penalty of this amount is appropriate given the revenues Spark has generated while deceiving Connecticut customers."

The NOV states, "Spark’s violations cause 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 marketing violations occur. Therefore, the Authority will continue to monitor Spark’s marketing actions for one year from the date of the final decision in this docket. The Authority will direct Spark to maintain audio recordings of all telemarketing calls made by it or on its behalf by any third party. The Authority will periodically request and audit these audio recordings, and request written transcripts thereof, to ensure Spark complies with all legal requirements. If Spark does not adhere to this monitoring requirement or if the Authority finds further violations as a result of this monitoring, the Authority will subject Spark to further penalties and/or revoke its license."

The NOV, once final, is to require that no later than thirty days from the date of a final decision in the docket, Spark shall send a letter to all remaining customers who enrolled with Spark between May 17, 2017 and June 8, 2017, informing them of the current standard service rate and the rate they are currently paying with Spark. In addition, the letter shall advise these customers that they may cancel service at any time without a cancellation fee.

Docket No. 10-06-18RE02

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