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Regulator Issues Further Proposed Decision Which Would Impose $750,000 Fine On Retail Supplier

July 11, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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The Connecticut PURA issued a further proposed decision under which PURA would determine that a pre-recorded telemarketing message used by a subcontractor of an agent of Spark Energy, LLC violated certain statutes, and under which PURA would impose a civil penalty in the amount of $750,000 on Spark Energy

Specifically, PURA's further proposed decision would, "determine[] that Spark Energy, LLC (Spark or Company) has failed to comply with the provisions of Sections §§ 16-245(g)(2), 16-254o(h)(1), 16-245o(h)(2)(A), 16-245o(h)(3), 16-245o(h)(4), 16-245o(j) and 42-110b of the General Statutes of Connecticut (Conn. Gen. Stat.) by utilizing a pre-recorded message that: (1) never identifies Spark as the entity conducting the telemarketing, (2) represents to customers that the solicitation call is from an electric distribution company, (3) never explains the purpose of the sales call, which was to have customers enroll in a supply contract with Spark, and (4) misstates the electric distribution company’s current charges. Furthermore, the Authority finds that Spark did not directly train its third-party agents in contravention of Conn. Gen. Stat. § 16-245o(h)(1)."

The proposed decision would assess a civil penalty in the amount of $750,000 for violations of Conn. Gen. Stat. §§ 16-245, 16-245o and 42-110b.

The proposed decision would also direct Spark to maintain audio recordings of all telemarketing calls made by it or on its behalf by any third party and submit to periodic auditing of marketing by the Authority for a period of one year

The proposed decision does not represent final agency action.

The July 11 proposed decision follows an earlier proposed decision issued in April, and incorporates discussion of arguments made on oral argument and exceptions. There is no material change in the proposed decision's draft fine and directives versus the earlier draft (see our story on the earlier draft here)

The proposed decision states, "Through the complaints filed with the Authority’s Consumer Affairs Unit, the Authority determined that calls had been made on Spark’s behalf using a pre-recorded message ... 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 proposed decision states that Spark acknowledged that a subcontractor (hereafter, "non-contracted subcontractor") of one of Spark's contracted agents (hereafter, "agent") used an automated message when contacting potential customers. Spark did not authorize its agent to use the non-contracted subcontractor

The proposed decision 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 proposed decision states that Spark provided both a recording and transcript of the message below that 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!"

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 proposed decision states, "The pre-recorded message violates this statute. First, the message never identifies that it is from Spark as required by Conn. Gen. Stat. § 16-245o(h)(2)(A)(i). Second, 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, which violates Conn. Gen. Stat. § 16-245o(h)(2)(A)(ii). Third, 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 proposed decision states, "Likewise, the message violates Conn. Gen. Stat. § 16-245o(h)(3), which prohibits marketing that confuses a customer as to a bill’s total or the EDCs 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 proposed decision states, "Because the message misleads customers into believing it is from an EDC and confuses customers as to the EDC charges and purported savings, it is deceptive and violates Conn. Gen. Stat. §§ 16-245o(h)(4), 16-245o(j), and 42-110b. Conn. Gen. Stat. §16-245o(h)(4) states '[n]o entity, including an aggregator or agent of an electric supplier or aggregator, who sells or offers for sale an electric generation services for or on behalf of an electric supplier, shall engage in any deceptive acts or practices in the marketing, sale or solicitation of electric generation services.' Conn. Gen. Stat. § 16-245o(j) makes a violation of any part of Conn. Gen. Stat. § 16-245o a violation of the Connecticut Unfair Trade Practices Act (CUTPA), Conn. Gen. Stat. § 42-110b."

The proposed decision would find that Spark’s pre-recorded message meets the precendtial criteria for determining a CUTPA violation. "First, 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 or that the purpose of the call was for the customer to contract with a supplier. Second, it would have been reasonable for a customer to interpret the message as being from Eversource given its script, the fact that it mentions only Eversource, and the fact that it never mentions Spark. Third, 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 proposed decision states

The proposed decision states that Spark argued that it is not responsible for the non-contracted subcontractor's actions because Spark's agent was not allowed to employ a subcontractor.

The proposed decision 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.' This is a remedial statute meant to protect Connecticut consumers and should be interpreted in a manner consistent with its purpose."

The proposed decision states that its conclusions are not drawn under the framework that Spark had to know that the non-contracted subcontractor had been engaged or that the non-contracted subcontractor was engaged in specific behavior, but rather under the framework that once Spark contracted with an agent, Spark was liable for the agent's actions.

"Furthermore, it was incumbent upon Spark, as part of its responsibility to the Connecticut citizens to which it was marketing, to monitor [the agent] to ensure it acted within the terms of its contract," the proposed decision states

The proposed decision states that, "Spark failed to engage in any actions to live up to its responsibility, whether viewed under the standard of liability for CUTPA, negligence, or even intentionality. The record is clear that Spark chose not to monitor, audit or investigate its vendors’ compliance with Connecticut state law for a substantial period of time."

"The Authority is troubled by the way Spark repeatedly attempts to place the blame on anyone other than itself," the proposed decision states

The proposed decision states, "Spark attempts to place the blame on [non-contracted subcontractor] by positing the preposterous theory that [non-contracted subcontractor], without anyone’s knowledge or approval, began marketing under Spark’s name. The Authority notes Spark offers no proof to substantiate this speculation either and rejects such an implausible argument. It is highly unbelievable that [non-contracted subcontractor] would conduct free marketing for Spark if it could not get paid and had no ability to enroll customers."

The proposed decision states, "Despite its interrogatory responses, which were adopted as testimony at the hearing held on January 9, 2019, indicating 151,892 prerecorded messages were left on its behalf, see Tr. 1/9/19 p. 22-23, lines 16-25 and 1-24, Spark now claims its interrogatory responses have been 'corrected and refuted' to show not all of the 151,892 calls were made on behalf of Spark. Brief p. 7. The Authority finds that Spark’s attempt to change or revise the original evidence it presented about there being 151,892 prerecorded messages is not credible and is not substantiated by any other credible and reliable corroborating evidence. Spark failed to present any information on the record indicating that [agent] ever informed Spark of any number of calls other than the 151,892 indicated in its initial responses."

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

The proposed decision 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."

The proposed decision states, "Spark claimed that it attempted to achieve compliance in light of these complaints by terminating its relationship with [agent]. 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."

The proposed $750,000 consists of: $740,000 for what the proposed decision terms the "illegal" recorded messages, and $10,000 for what the proposed decision says is, "Spark’s repeated failure to directly train third-party marketers."

The proposed decision states that Spark’s 2017 Connecticut Gross Revenue was $41,722,187

Docket Number: 10-06-18RE02

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