Retail Supplier To Pay $82,000 Under Settlement Relating To Pricing Disclosures, Alleged Slamming; Issue Refunds

June 11, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Liberty Power Holdings, LLC ("Liberty Power") would pay $82,800 under a settlement with the Bureau of Investigation and Enforcement ('I&E') of the Pennsylvania PUC to resolve allegations that its pricing disclosures did not conform to regulations, and to resolve allegations of alleged slamming

The settlement states, "I&E’s investigation was initiated based on information provided by the Commission’s Bureau of Consumer Services ('BCS'), which had received informal complaints from residential consumers alleging that Liberty Power enrolled their electricity accounts to receive the Company’s electric generation supply without authorization. During this same time, Liberty Power had initiated its own internal investigations of the enrollments from its independent, third-party marketing vendor which ultimately lead to the termination of this vendor’s contract as well as a self-reporting of the issue to the Commission’s Office of Competitive Market Oversight ('OCMO'). Upon a review of the informal complaints, BCS also became concerned with pricing information presented to customers in Liberty Power’s disclosure statements and other marketing materials."

The settlement states, "This matter involves the (actual and attempted) enrollments of residential accounts by one of Liberty Power’s prior independent, third-party vendors whose contract with Liberty Power was terminated shortly after Liberty Power initiated its own internal investigation of the submitted enrollments."

The settlement states, "BCS received allegations from residential consumers alleging that their electricity accounts had been switched to receive electric generation supply provided by Liberty Power without the customers’ authorizations. Such complaints caused BCS to review the Company’s disclosure statements and marketing materials, in which BCS became concerned that Liberty Power was not marketing an all-inclusive price on a consistent basis."

Pricing Disclosures

The settlement states, "The informal complaints prompted BCS to review Liberty Power’s disclosure statements and other marketing materials, such as Liberty Power’s Door-to-Door Solicitation Disclosures. BCS became concerned that Liberty Power was not consistently representing an all-inclusive price to residential consumers in its marketing materials. At times, Liberty Power marketed an 'Energy Only Rate' on Door-to-Door Solicitation Disclosures, which did not include utility distribution and delivery charges, applicable federal, state and local taxes and charges, or the Pennsylvania gross receipts tax ('GRT'), and was lower than the Liberty Power 'Price to Compare' rate, which was all-inclusive. However, both the 'Energy Only Rate' and 'Price to Compare' rate appeared on Liberty Power’s residential disclosure statements."

The settlement states that, "Prior to February 10, 2017, Liberty Power’s residential disclosure statements presented two (2) prices to Pennsylvania consumers: (1) a Liberty Power 'Energy Only Rate,' which did not include utility distribution and delivery charges, applicable federal, state and local taxes and charges, or the Pennsylvania GRT; and (2) a Liberty Power PTC, which consisted of the Liberty Power 'Energy Only Rate' plus the Pennsylvania GRT. The Liberty Power PTC was the rate that the Company billed to customers."

The settlement states that, "I&E’s investigation uncovered several instances where Liberty Power sales representatives, including agents working on behalf of the Company, only wrote or typed the 'Energy Only Rate' on marketing materials that were distributed to consumers, such as the 'Pennsylvania Residential Energy Door to Door Solicitation Disclosures' and the 'Prospective Product Content Label.' The 'Energy Only Rate' was the lower rate as it did not include an amount for the Pennsylvania GRT."

The settlement states that, "It is unknown to I&E how many occasions agents acting on behalf of Liberty Power advertised the lower 'Energy Only Rate,' in lieu of the Liberty Power PTC, or how many residential customers received Liberty Power’s disclosure statements that contained both an 'Energy Only Rate' and a Liberty Power PTC."

The settlement states that, "Though the number of instances in which the 'Energy Only Rate' was marketed to customers is unknown, I&E avers that such conduct took place from October 2014 until February 10, 2017, when inclusion of the 'Energy Only Rate' in Liberty Power’s pricing information was eliminated ensuring that Liberty Power’s enrollment and disclosure documents set forth only one price which includes all relevant components of the commodity price charged by Liberty Power to include GRT."

I&E was prepared to allege that, "The presentation of the 'Energy Only Rate' on Liberty Power’s disclosure statements and marketing materials, which is a rate that did not include the GRT and, therefore, did not represent an all-inclusive price that consumers were able to compare to the PTC that is used for default service."

I&E was prepared to allege that, if proven, such pricing disclosure conduct would have violated 52 Pa. Code § 54.43(1) and the Commission’s Order regarding Guidelines for Use of Fixed Price Labels for Products with a Pass-Through Clause, Docket No. M-2013- 2362961 (Order entered November 14, 2013) (multiple counts).

I&E was prepared to allege that, "The presentation of the 'Energy Only Rate' on Liberty Power’s disclosure statements and marketing materials, which is a rate that did not include the GRT, did not reflect the prices billed for Liberty Power’s electric generation supply."

I&E was prepared to allege that, if proven, such conduct would have violated 52 Pa. Code §§ 54.4(a), 54.5(a) and 54.7(a).

The settlement states that, had this matter been litigated, Liberty Power would have denied each of the alleged violations of the Commission’s regulations, the Code or Commission’s Orders, raised defenses to each of these allegations, and defended against the same at hearing.

Alleged Slamming

The settlement states, "Between May and June 2016, BCS received approximately six (6) informal complaints submitted by residential customers alleging that their electricity accounts had been switched to receive electric generation service supplied by Liberty Power without their authorization."

During this same time period, the settlement states that Liberty Power conducted an internal investigation of all the enrollments submitted by an independent, third-party marketing vendor. The vendor was an exclusive sales agent for Liberty Power and does not have a license to broker electric generation supply issued by the Commission. As a result of this internal investigation, Liberty Power terminated the vendor's contract with Liberty Power, and voluntarily reported the incident and Liberty Power’s action plan to OCMO on July 18, 2016.

The settlement states that, during this time period, the vendor contacted 921 potential residential Pennsylvania customers and 533 of the contacted customers were enrolled by Liberty Power to receive electric generation supply provided by Liberty Power

The settlement states that Liberty Power first became aware of a potential issue with customer enrollments submitted by the vendor on June 10, 2016 following receipt of a consumer complaint, which prompted Liberty Power to conduct an internal investigation of the issue.

Liberty first made 176 attempted "welcome" phone calls to customers, but Liberty Power was only able to successfully speak to five (5) customers, all of whom requested to cancel receiving electric generation service provided by Liberty Power.

The settlement states that, after the results of the "welcome" call process revealed that Liberty Power likely did not have accurate telephone contact information for the customers enrolled by the vendor, Liberty Power mailed letters on August 26, 2016, to all then-currently active accounts enrolled by the vendor as of that date, which totaled 270 accounts

The settlement states that, following Liberty Power’s efforts to make "welcome" calls and contact customers by letter, eighty-five (85) customers requested to be dropped as customers of Liberty Power and/or complained of being "slammed."

The settlement states that, of these eighty-five (85) customers, fifty-six (56) customers had been enrolled with Liberty Power to receive the Company’s electric generation supply service. The accounts of the other twenty-nine (29) customers were in the process of being switched to Liberty Power, but Liberty Power terminated the order to switch prior to the time that electric generation supply from the Company would have flowed to the customers. The impacted residential customers were located in the Metropolitan Edison Company, PPL Electric Utilities and PECO Energy Company service territories.

Following its internal investigation, Liberty Power refunded a total of $27.64 to customers who filed Formal Complaints at the Commission. The refunds were based on comparison of the Liberty Power electric generation supply charge versus the applicable electric distribution company’s (EDC) price-to-compare (PTC).

The settlement states that, upon review of data requests responses provided by Liberty Power to I&E, I&E concluded that it appeared that approximately seven (7) agents of the vendor were allegedly, "involved in a scheme to enroll customers with electric generation supply provided by Liberty Power without proper customer authorizations."

The settlement states that I&E alleged that the vendor's sales representatives, "fabricated documents and audio verifications to conceal that the customers, in fact, did not consent to switch to Liberty Power."

The settlement states that customers were often unaware that their electric generation service was in the process of being switched until receiving a confirmation letter from the customer’s local EDC.

The settlement states that Liberty Power’s policies prohibit slamming and require sales agents to act lawfully and in accordance with Liberty Power’s Code of Conduct. The settlement states that Liberty Power has a quality assurance program where third-party verifications are reviewed and field visits are performed. The settlement states that, during the course of Liberty Power’s internal quality control program, the operations of the vendor appeared to be consistent with Liberty Power’s requirements. The settlement alleges that the vendor's, "fraudulent and unlawful conduct circumvented Liberty Power’s policies and procedures."

The settlement states that although the vendor and not Liberty Power is alleged to have caused the unauthorized enrollments, Liberty Power bears responsibility for fraudulent, deceptive or other unlawful marketing acts performed by its agent pursuant to 52 Pa. Code §§ 54.43(f) and 111.3(b).

Settlement Terms

The $82,800 civil penalty under the settlement represents the following: Fifty-Six Thousand Dollars ($56,000) for the fifty-six (56) customer accounts that were physically switched to and received electric generation supply from Liberty Power; Five Thousand Eight Hundred Dollars ($5,800) for the twenty-nine (29) customer accounts where the process of switching to Liberty Power had been initiated but not completed; One Thousand Dollars ($1,000) for the non-quantifiable and unknown number of customers who may have been potentially affected by the unauthorized switching conducted by Liberty Power’s agent; and Twenty Thousand Dollars ($20,000) for Liberty Power’s inclusion of an 'Energy Only Rate' on Liberty Power’s disclosure statements and marketing materials

Additionally, Liberty Power will provide to each of the customers, who had one or more of the fifty-six (56) accounts physically switched to Liberty Power, a refund for the entire electric generation supply portion on the customers’ bills for the first two (2) billing periods that the customers were switched to Liberty Power, pursuant to 52 Pa. Code § 57.177(b).

In a statement in support of the settlement agreement included with the agreement, Liberty Power states, "Although allegations of unauthorized switching and unlawful sales and marketing are of a serious nature, the facts present here do not evidence either willful fraud or misrepresentation on the part of Liberty Power. Rather, Liberty Power’s internal processes quickly revealed a problem with an independent agent leading Liberty Power to swiftly engage in an investigation of the agent, termination of the contract with the agent, remedial action with the impacted customers and a voluntary decision to self-report the incident to OCMO staff."

In a statement in support of the settlement agreement included with the agreement, Liberty Power further states, "Regarding the allegation of unlawful sales and marketing actions, no customers raised any complaints with Staff regarding a misunderstanding of Liberty Power’s charges. Despite this, Liberty Power changed its enrollment and disclosure documents effective February 10,2017 -- twenty days after being first informed about I&E’s concerns. Since that time, Liberty Power’s documents set forth only one price which includes all relevant components of the commodity price charged to include GRT. Liberty Power also revised its documents to consistently refer to a 'fixed rate' and is agreeing to pay $20,000 to address the concerns raised by I&E related to this allegation."

Docket M-2019-2568471

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