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Updated: Draft Decision Would Fine Retail Supplier $1.5 Million

Supplier Would Be Prohibited From Residential Marketing, Enrollment For Six Months, Except For Online Enrollments

Draft Would Set Standard Under Which TPVs Are Invalid

May 30, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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A draft decision from the Connecticut PURA would impose a $1.5 million fine on Liberty Holdings, LLC [sic] ("Liberty" or "Company") and prohibit Liberty from accepting new residential customers and/or marketing to residential customers via any means other than online enrollments for six months, as the draft would conclude that Liberty, "violated Conn. Gen. Stat. §§ 16-245(c), 16-245(g)(2), 16-245o(f)(2), 16-245o(h)(1), 16-245o(h)(2), 16-245o(h)(3), 16-245o(h)(4), 16-245o(h)(5), 16-245o(h)(7), 16-245o(j), 16-245s, 16-245t, 16-245u, and 42-110b."

The draft decision is not a final order and parties may contest the draft's proposed findings.

A Liberty Power Spokesperson provided the following statement:

"The Connecticut ('CT') Public Utilities Regulatory Authority ('PURA') originally opened up a proceeding regarding Liberty Power’s sales and marketing practices in 2017 which principally focused on customer satisfaction issues dating back to 2015.

"At Liberty Power we make quality personal and strive to continuously improve everything we do. We take our sales quality programs very seriously and have made many investments over the years to develop a best-in-class program. These efforts have resulted in a low complaint rate; Liberty Power’s reductions in overall complaints is exhibited on PURA’s Complaint Scorecard. Liberty Power appreciates the privilege of serving customers in the state of Connecticut and strives for excellence throughout the customer experience.

"Liberty Power has fully cooperated with CT PURA during the course of this proceeding, providing extensive materials and insights into the many programmatic and continuous improvements that the Company has made, and demonstrating the robustness of its quality assurance program. We believe the evidence in the record does not support the level of sanctions that have been set forth in PURA’s proposed final decision. Liberty Power remains committed to an excellent customer experience, including full compliance with applicable laws and regulations, and quick resolution of any issue of customer dissatisfaction."

--- Liberty Power Spokesperson

Notable to the wider market is that the draft would conclude (as discussed further below) that TPVs which continue despite the customer expressing at any time a desire to not proceed with enrollment or to complete the verification are not valid.

The draft decision would conclude that Liberty violated the provisions described above by:

1) entering into contracts containing early termination fees in excess of fifty dollars;

2) not identifying Liberty in its marketing;

3) not indicating Liberty does not represent an electric distribution company (EDC);

4) not explaining the purpose of its solicitations;

5) indicating its rates are all-inclusive;

6) implying in marketing that a customer must choose a supplier;

7) misrepresenting an EDC’s rate;

8) not correctly explaining all rates;

9) not following proper third-party verification procedures;

10) not directly training its third-party agents; and

11) employing what the draft terms, "unfair and deceptive marketing," including but not limited to the violations listed above.

Discussing Liberty's defenses, the draft states, "To begin, Liberty posits the argument that the Authority had to prove Liberty’s marketing intended to solicit customers with a demand of one hundred kilowatts or less for Liberty’s actions to have committed these statutory violations. The Authority can dispose of this argument before it analyzes the specific violations. The language in the statute is meant to distinguish between marketing to residential customers, whose average demand is significantly less than one hundred kilowatts, and business customers, whose average demand is greater. Conn. Gen. Stat. § 4-178 allows the Authority to use its 'experience, technical competence, and specialized knowledge' to evaluate the evidence. The Authority’s knowledge and experience indicate, as Liberty well knows, that residential customers do not have a demand greater than one hundred kilowatts. It would be impossible for Liberty to conduct door-to-door residential marketing in the areas in which it marketed and telemarketing [sic] to residential customers and engage with a residential customer with a maximum demand of greater than one hundred kilowatts. Liberty’s argument is not grounded in reality or knowledge of residential electric customers."

The draft states, "In the sample of phone calls provided to the Authority, the Authority notes that the transcripts and recordings follow the same pattern: without telling a customer they would be switching to a different supplier, Liberty quickly asks for the customer’s EDC account number, states a rate, and without pause, proceeds into the enrollment. Rarely in the audio recordings or transcripts does Liberty ask a customer if they want to enroll with Liberty or change electric suppliers. Rarely in the recordings or transcripts does Liberty inform a customer that the purpose of the call is for the customer to change their electric supplier. This method produces marketing in which various combinations of Conn. Gen. Stat. § 16-245o(h)(2)(A) requirements are not met[.]"

"In some calls, the customer never hears Liberty’s name, an undeniable violation of the law. See e.g., Response to Interrogatory CA-36, Re-filed Attachment B-1. In other calls, if the customer hears Liberty’s name at all, it is later in the call, after Liberty has begun either: by stating the agent’s name and that they are an 'energy consultant,'; by stating that it is calling 'in regard to the benefit on your electric bill' ; or by stating, 'Ma’am, this call is in regards to your Eversource electric bill to check if today you qualify to get the benefits,'" the draft states

The draft cites as an example the following:

Liberty: Good afternoon. I’d like to speak with the person who handles the electric bill, please.

Customer: Uh, well does there seem to be somethin’ wrong?

Liberty: Uh, no this is a courtesy call for the Eversource account about, uh, price protection on the cost of your electricity.

Customer: Yes.

Liberty: This is about the Energy Program Connecticut made available to you. My name is [name redacted] calling on behalf of Liberty Power. It’s an authorized green energy supplier utility company Eversource - calls recorded. Like I said, your account qualifies for a new price protected rate guaranteed to stay the same in the next 15 months.

The draft provides another example:

Liberty: 'And as you have been a very wonderful customer with Eversource, you have also qualified for a fifty-dollar (inaudible) gift card that will be mailed to your mailing address with your upcoming month Eversource bills….

Customer: 'And where are you calling from?'

Liberty: 'Well ma’am I’m calling you from. … Yes, I’m calling you from a certified and authorized supplier for Eversource.

The draft decision states that, "Liberty’s response to the customer’s question about where the agent was calling from violated Conn. Gen. Stat. § 16-245o(h)(2)(A), which requires the supplier to identify itself in marketing calls and state that the supplier does not represent an EDC."

The draft decision states that, in another example, the customer states, 'You know, I do business with Eversource. I don’t want to change,' to which, the draft states, Liberty responds, 'No, no, ma’am. You’re not changing. Let me help you. You’re not changing ... Liberty Power is just our certified supplier company.'

The draft decision states that, "The Authority notes the last example not only is untrue, but Liberty says it is 'our certified supplier,' implying the call is from Eversource and Liberty is Eversource’s certified supplier."

The draft further states that, "Mentioning Liberty’s name as part of the final process before transferring the customer to the third-party verification (TPV) ... does not meet statutory obligations. As the Authority has held, a supplier may not 'rely on back end compliance in a sales call of identifying itself by company name and as an electric supplier, after the salesperson may have violated the statute at the outset and during prior conversation by not stating the caller was not representing an EDC, or by using language that strongly implies the call was from or authorized on behalf of an EDC.'"

The draft decision states that, "The evidence in the record indicates that Liberty employs even more illegal methods in its door-to-door sales, sometimes outright lying to customers"

The draft decision cites as an example the following:

Customer: What does that mean?

Liberty: It’s just stating you’re gonna be having Liberty Power as the energy supply.

Customer: Oh, I don’t want to be changing the uh, uh…

Liberty: You’re not changing anything. You’re staying with Eversource.

Customer: Yeah but I don’t want to change the supply, too.

Liberty: Um, you’re not changing anything. We’re, we’re the supplier for Eversource. We’re just…

Customer: The rate may change.

Liberty: No, the rate is going to be stabilized. It’s going to be a fixed rate, so you know what the rate will be every month on your rate. That’s what we are out here doing today so the rate is not going to change. Nothing on your bill is going to change.

The draft decision states, "Liberty argues that the statute places no temporal requirements on when the agent must indicate she is calling on behalf of Liberty. Brief p. 47. The Authority is not placing a temporal requirement on Liberty. The Authority finds that a customer who hears Liberty’s name after hearing the call is from Eversource will think Liberty is calling on behalf of Eversource or working with Eversource to assist the customer. The Authority finds that, once this misinformation or misimpression is given to a customer, it is difficult, if not impossible, to undo the harm caused to the customer resulting directly from the salesperson’s failure to communicate clearly and unequivocally, from the start of the solicitation, that the salesperson is calling on behalf of Liberty for the purpose of offering electric generation service from Liberty.. The record indicates Liberty’s salespersons rarely, if ever, attempt to undo any initial customer misimpression or misunderstanding about who the salesperson is actually making a sales call on behalf of. To the contrary, Liberty’s salespersons capitalize on the customer’s initial lack of clarity about who the salesperson represents to make a sale. Then, the salesperson mentions Liberty’s name only when it overloads the customer with information immediately prior to sending them to the TPV. Because of Liberty’s marketing practices, customers appear to believe (and a reasonable customer would believe) that Eversource is calling to direct them to a supplier and they willingly go along with what they think is a call from Eversource."

The draft decision states, "Liberty argues that 'to the extent a Marketing Representative deviates from Liberty Power’s script ... that deviation is a discrete issue.' Brief p. 45. This argument is not grounded in reality. In only two interrogatory responses, representing only 39 marketing calls, the Authority found over one hundred violations of Section 16-245o(h)(2) alone, and eight times that many total statutory violations."

The draft decision states, "The Authority notes that these violations occurred over a multi-year time span. Liberty argues in its Response in Opposition to Motion 24 that it no longer violates these laws. Response p.5. That Liberty has so flagrantly violated the laws in the past, and especially while it was under investigation, is sufficient to warrant a substantial penalty, but the record indicates Liberty’s violations continue. Throughout 2017 and into 2018 the Authority has continued to receive complaints about similar marketing tactics from Liberty. The audio recordings obtained from Liberty in response to more recent complaints indicate the same illegal techniques as illustrated above[.]"

The draft decision states that, "[L]iberty’s marketing violates Conn. Gen. Stat. § 16-245o(h)(3) by indicating the rate Liberty offers is all-inclusive, by implying a customer must choose a supplier, and by misrepresenting an EDC’s rate."

The draft decision states that, "Replete throughout Liberty’s audio recordings and transcripts submitted as part of Liberty’s responses to interrogatories is another method of marketing that equally violates the statute. In its sales calls, Liberty quickly dives into the interactions implying that a customer must proceed with the transaction. Liberty does not ask customers if they are interested in changing suppliers and does not clarify during its sales calls that a customer is changing suppliers. Before gaining customer assent to the transaction, Liberty begins directing potential customers to provide their account information so that it can be 'verified.' The implication for customers is that their assent is not required, because at this stage, Liberty has done nothing to indicate to the customer that they are actually engaged in a voluntary sales transaction. Liberty’s marketing proceeds as if the customer must accept Liberty’s offer."

The draft decision states that, "The evidence in the record indicates that Liberty rarely discloses the EDC’s standard service charge as required by Conn. Gen. Stat. § 16-245o(h)(3). Furthermore, when Liberty references the charge for EDC standard service, it does not always disclose the correct charge."

The draft decision states that, "In one call, Liberty goes to the trouble to tell the customer to find the standard service rate on her bill. The customer tells Liberty the standard service rate is '7.874,' to which Liberty replies, 'I’m giving you only 0.11907.' Response to Interrogatory CA-38, Attachment 216, Transcript p. 101, Lines 23-25. The customer’s rate is not seven dollars per kilowatt hour, it is seven cents per kilowatt hour. Capitalizing on the customer’s misunderstanding, Liberty represents to her that it is giving her a savings, and a substantial one at that. This exemplifies the type of predatory actions the law means to prohibit."

The draft decision states that, "In several other calls, Liberty tells the customer that they are getting them a better rate; however, a comparison to standard service rates at the time of the call indicates that Liberty was not truthful with the customer and was not giving them a better rate."

The draft decision states that, "Liberty argues, quite unbelievably, that it did not know the correct standard service rate. Brief p. 71. The Authority will not entertain an argument from a supplier that it is unaware of the publicly-noticed standard service rate."

The draft decision states that, "Furthermore, Liberty argues, 'Referring to standard service as ‘variable’ may be nothing more than an unartful way of explaining that Standard Service rates fluctuate more frequently than Liberty Power twelve-month and twenty-four fixed price contracts.' Id. p. 72. First, Liberty should be cautious when arguing variability is relative; such an argument would imply any contract it offers for less than twelve months would be variable as well, a distinct violation of the law. Second, it is more than 'unartful' to use the term 'variable' to scare a customer into thinking standard service is going to precipitously increase at any moment – it is, in short, deceptive and dishonest."

The draft decision states that, "Furthermore, Liberty indicates to customers that they are paying a 'higher rate,' without ever questioning the rate the customers are paying. Response to Interrogatory CA-38, Attachment 348. As indicated, Liberty has no way of knowing the rate any customer is paying, and if the customer were on standard service then Liberty’s rate was the higher rate and Liberty made an active misrepresentation."

The draft decision states that, "Liberty argues that the statute does not require it to disclose all terms of other suppliers’ services. While Liberty is correct, Liberty cannot falsely explain 'all rates, fees … terms and conditions' of another supplier’s offer. If Liberty voluntarily explains another supplier’s rates, then it must abide by the statute and ensure its explanation is accurate. The record contains evidence that Liberty violated this requirement."

Regarding third party verification, the draft decision states, "When a customer indicates that they do not wish to continue with the verification, Liberty should stop the process, which the record shows it does not do."

The draft decision states that, "Liberty argues that the statute does not require it to stop a TPV when a customer indicates she does not wish to continue. Brief p. 78. It is a ridiculous argument that a statute passed to protect customers from unwanted changes to their supplier would not require a TPV end when the customer indicates she does not wish to continue. Furthermore, the Authority is alarmed at any supplier advocating for a marketing system that requires Connecticut residents to hang up because the marketer refuses to listen to them. The Authority expects licensed suppliers to demonstrate more respect for their Connecticut customers."

The draft decision states that, "The Authority finds it to be a violation of the 'oral confirmation requirement' of Conn. Gen. Stat. § 16-245s(b)(2) if the marketer or third-party telephone verifier refuses to end a marketing call or proceeds with the third-party verification process after a customer has expressed a desire to not proceed with enrollment or to complete the verification process or the customer is unable to answer the third-party verification questions without coaching from marketer during the verification process. Any supplier contract enrollment obtained or third-party verification conducted under such circumstances is invalid because the required 'oral confirmation' is invalid."

The draft decision states that, "Additionally, Liberty’s transcripts and recordings are replete with examples of Liberty coaching customers about what to say in the verification."

The draft decision provides the following example:

Verifier: ...It states, Liberty Power will supply your electricity to this account at a rate of 0.11004 per Kilowatt Hour, is this correct?

Customer: I guess so, I can’t find anything on this that I can refer to.

Verifier: Okay, Ma’am. I’m sorry, in order to proceed I need a Yes or No please.

Customer: I guess Yes.

Verifier: Okay we cannot accept that, we would need either a Ye-

Liberty: Okay, [name redacted]?

Customer: Yes.

Liberty: Honey, it’s me [name redacted] Back on the phone with you all they simply want [name redacted], that’s the new rate we’re giving you is 0.11004.

Customer: Okay.

Liberty:... So, when they just ask you a question, just answer all the questions- most of the-except the Email address and when you state your name, just answer the questions with a simple Yes or No, okay? If I’ve done my job correctly, just answer with a Yes, okay?

The draft decision states, "This particular example has several problems. First, the verification attempts to continue despite the customer not being able to answer the questions, clearly violating Liberty’s own policy of discontinuing a TPV if a customer asks questions. See Response to Interrogatory CA-31, Attachment A. Second, Liberty’s agent then steps in to tell the customer exactly what to say. Third, if the purpose of third-party verification is to ensure customers understand the transaction, a customer that has to be coached as to what to say cannot possibly have understood the transaction. Yet the majority of Liberty’s audio recordings and transcripts contain this very sort of coaching, which Liberty embraces."

The draft decision states, "Liberty’s third-party verification violations are made worse by Liberty’s consistent reliance on a 'downstream process' to protect customers. Transcript p. 264, Lines 16-17, p. 665-66. As Liberty testified throughout the hearing, it relied on the TPV as a large part of its quality assurance, assuming that a customer that completes a TPV is a customer that wanted to be enrolled. Transcript p. 301, Lines 20-23. When confronted with TPVs illustrating customers asking questions, a clear violation of Liberty’s internal policy, Liberty waffled and testified that the customer needed to ask the question more than once or ask it in a specific way. As much as the Authority is alarmed by Liberty’s reliance on a 'downstream process' to correct for any legal violations that may have occurred during the sales call, it is even more troubled by a 'downstream process' that requires magic words to work."

Regarding the statutory requirement for suppliers to "directly" train sales agents, the draft decision states that Liberty argues that no "statute, regulation, or Authority order defines what constitutes 'directly.'"

The draft decision states, "The Authority is not required to adjudicate every statutory requirement or every word in a statute in order to give it effect ... The statute says the third-party agents must receive 'training directly from such electric supplier.' Liberty’s misguided attempts to muddy the definition of 'directly' are to no avail. To interpret the statute in any way other than requiring the electric supplier to train its third-party agents would read the word 'directly' out of the statute."

The draft decision states, "The examples of Liberty’s marketing practices cited throughout this Decision meet all criteria of deceptive marketing. The record shows that Liberty’s marketing is likely to mislead customers in several ways: Liberty does not state in all calls that the call is from Liberty; Liberty often invokes Eversource’s name in a way that implies Liberty is affiliated with Eversource; Liberty indicates or implies it is the sole supplier for Eversource; Liberty misrepresents the EDC standard service rates and that the EDC standard service rate is variable; Liberty implies that customers must engage in the transaction and pushes customers to provide their account information prior to obtaining informed consent; Liberty often implies that customers must have a supplier; and Liberty sometimes misrepresents its own rates as being all-inclusive and being lower than standard service. A reasonable customer would interpret all of these practices the following ways: a reasonable customer would think that when Liberty begins a phone call by saying it is calling about his Eversource bill without also clearly stating where they are calling from, Liberty is affiliated with Eversource; a reasonable customer would think that when Liberty states it is 'calling you from a certified and authorized supplier for Eversource,' that Liberty is affiliated with Eversource; a reasonable customer would think that when Liberty states it is the supplier for Eversource, that Liberty is the sole supplier for Eversource; a reasonable customer would think that when Liberty says she has a variable rate her rate constantly, or at least frequently, varies; a reasonable customer would think that when he is promised an 'all-inclusive rate' the rate includes every charge; and a reasonable customer would think that when a call begins by invoking Eversource’s name, asks for her Eversource account number, and then begins an enrollment process, that she is required to engage in this transaction for Eversource. Finally, all of these examples, which are not a comprehensive collection of the myriad violations in the record of this docket, affect consumer decisions and conduct because they implicate costs or engagement with an EDC."

The draft decision states, "The information gathered throughout this investigation gives the Authority reason to believe that one of the causes of Liberty’s deceptive marketing is that Liberty consistently does not bother to enforce its internal policies. For example, Liberty’s stated policy is to start a field sales recording at the knock on the door, but field sales recordings clearly do not start at the knock and Liberty testified that it had never abided by that policy. Response to OCC-34, Attachment A, p. 22. Liberty requires a TPV to be discontinued if the customer asks a question, but the record indicates examples of this policy being violated. Response to Interrogatory CA-31, Attachment A; Response to Interrogatory CA-36, Attachment G-1, Lines 413-446; Response to Interrogatory OCC-46, Attachment A, Lines 672-678. Liberty’s guidance regarding elderly customers states, 'DO NOT SELL to them if you’re not sure they understood 100% of what you said and know they are signing up with Liberty Power as their electric supplier,' yet this Decision is replete with examples to the contrary. Response to Interrogatory CA-24 Refiled Attachment A; See e.g., Response to Interrogatory CA-36, Attachment G-1. Liberty’s policy is to require a sales agent to be trained before they sell to Spanish customers and not to allow a translator, yet Liberty sells to customers who speak English so poorly someone else in their household has to function as the translator, even going so far as to function as the translator during the TPV."

The draft decision states that, "Liberty admitted in its [interrogatory] Responses that it entered into 26,217 contracts with early termination fees of one hundred dollars."

"Liberty proffers that it did not actually charge a customer a termination fee greater than fifty dollars, but this argument is misplaced. The statute does not limit itself to prohibiting a supplier from charging a termination fee greater than fifty dollars; the statute prohibits any contract from indicating a customer would be required to pay a termination fee greater than fifty dollars," the draft would conclude

The draft decision states, "Liberty proffered several times in the July 24, 2018, hearing that it had changed many of its practices as a result of the 'Assurance of Discontinuance' it signed in New York. This appears to be Liberty’s manner of operation – violate the law until forced to comply by a regulatory authority, then cite to changed practices in an attempt to escape repercussions. A supplier that waits until it is implicated in an investigation to change its behavior is not a supplier exhibiting a concern for customers."

The draft decision states, "Liberty’s violations in the present case go to the heart of the intent of the electric supplier market. The Connecticut legislature set forth a statutory scheme to balance the benefits of electric supply with the customer protections necessary to facilitate a fair market. If suppliers are allowed to systemically violate the legal protections created by the legislature, it erodes confidence in the entire supplier market. The Authority’s response to such violations will take into consideration the harm they cause to customers and to the market as a whole."

The draft notes that Liberty’s Connecticut gross revenue in 2017 was $30,412,314.

The draft decision states, "In the instant case, imposing $10,000 per penalty on solely the violations noted in Exhibit A, the resulting monetary penalty would have been $8,320,000, and would have been even greater had the Authority assessed a $10,000 penalty for every violation contained in this record. Additionally, the Authority could have imposed further penalties for the 26,217 contracts containing an excessive termination fee and for Liberty not directly training its agents."

In addition to the fine and prohibition on marketing described above, the draft order would direct Liberty to maintain complete audio recordings of the entire interaction for all telemarketing and door-to-door sales calls made by it or on its behalf by any third party.

"To ensure Liberty complies with all legal requirements, the Authority will periodically request and audit select audio recordings and will require Liberty to produce transcripts of those recordings. Upon the Authority’s request, Liberty will provide the Authority with the dates, times, and locations in which it will conduct any form of marketing, including but not limited to telesales, door-to-door and in-person marketing, and the Authority reserves the right to observe and audit such marketing," the draft states

Docket 06-12-07RE07

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