People's Counsel Seeks Order Limiting Retail Supplier To Charging No More Than Default Service Rate, Requests Nearly $1 Million Fine

July 16, 2019

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

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The Maryland Office of People's Counsel has requested that the Maryland PSC issue an order providing that Smart One Energy, LLC may not charge any of its customers a rate in excess of the default service rate, as OPC also sought a $950,000 fine on Smart One Energy, LLC

OPC's request was made in a show cause proceeding against Smart One Energy, LLC

As previously reported by EnergyChoiceMatters.com, in response to an initial complaint filed by Staff, Smart One Energy had stated that it, "acknowledges that it did not obtain 'wet signatures' in accordance with the Competitive Gas Supply Regulations," for several telephonic sales (see our story on Smart One Energy's response here)

As previously reported, Staff of the Maryland PSC have requested that the Commission issue a fine of $170,000 to Smart One Energy, LLC ("Smart One" or "SOE") for such behavior

As has been previously reported by EnergyChoiceMatters.com, the Maryland Telephone Solicitation Act requires that customers of various industries solicited via telephone must sign a written agreement to create a valid contract. While there are certain exceptions to the wet signature requirement, none of the exceptions are generally applicable to cold calling.

OPC said in its comments that, "SOE does not claim that the telephone solicitations were exempt from the requirements of the Maryland Telephone Solicitation Act ('MTSA'), and the record does not support any exemptions."

OPC said that MTSA states that without an executed contract, any purported customer agreement during a telephone solicitation is not enforceable, and therefore, any enrollment is not authorized

OPC therefore alleged that, "all SOE enrollments are in violation of Commision [sic] regulations and Maryland law and relief must be provided to all affected consumers."

OPC reported that, in the past five years, SOE has served approximately 17,159 residential customers.

OPC said that, "During the period January 20, 2016 to June 7, 2019, CAD [the PSC's Consumer Affairs Division] received 63 complaints against SOE, in addition to the three identified in the Staff Complaint."

"The Commission should require that the Company immediately cease charging any of its existing customers any rate higher than the utility rate until the Company can demonstrate that it has a valid contract with the customer," OPC said

"Additionally, the Commission should require the Company to issue refunds of the rate differential to all customers it has charged rates higher than the utility rate without a valid contract," OPC said

OPC further recommended that the Company should be required to notify all of the Company’s customers of the Company’s violations, provide an offer of a contract and contract summary for execution, and provide an opportunity to switch suppliers or return to the utility.

Citing sales transcripts, OPC also alleged various other violations of applicable Maryland rules. OPC sought the maximum civil penalty for each of the alleged violations in three customer enrollments that engendered the proceeding. This amounts to a civil penalty of $950,000, OPC said

OPC urged the Commission to expand the scope of the proceeding beyond the three customer complaints cited in the show cause order

OPC alleged that, "A review of the SOE sales calls makes clear that they are deceptive, fail to provide information required by the Commission and consumer protection laws, and mislead the customers by offering a discount the Company does not actually provide."

OPC urged the PSC to, "expand the inquiry to include all of the Company’s practices and procedures, and set the matter for discovery and a full evidentiary hearing."

OPC alleged that SOE's telephone sales script stated that the customer was, "qualified to get up to 10% discount for 2 months on your gas supply charges FROM SMART ONE ENERGY. AND MOVING forward you will be on a variable plan from the next meter reading date." [sic]

OPC alleged, "The Company did not provide this discount to customers ... the Company charged rates higher than the utility rates from the first month."

As an example, OPC cited a customer in the WGL service area who was billed for gas supplied by SOE from December 2016 to October 2017. The customer was charged $0.89 per therm for supply for each billing month during that time. OPC said that, in contrast, during that time period, Washington Gas supply charges ranged from $0.4222 per therm to a high of $0.6450 per therm

OPC also alleged that SOE representatives created an impression that they were calling on behalf of the utility

To the extent the PSC declines to expand the scope of the proceeding, OPC asked that the PSC clarify that such a determination does not preclude OPC or other parties from pursuing a complaint or investigation on behalf of customers other than the three complainants specified in the Staff Complaint.

In comments filed with the PSC responding to OPC's comments, Smart One Energy, LLC said that it was not contesting the facts alleged in the PSC Staff complaint, and opposed the relief sought by OPC as outside the scope established by a procedural order

Smart One Energy said that, with liability uncontested concerning the original Staff complaint, and based upon the Commission's procedural order, SOE's understanding is that an upcoming hearing is for the purpose of being heard on the appropriate licensure, penalty and remedial actions based upon the uncontested facts for three specific customers referred by the Consumer Affairs Division.

Smart One Energy proposed the following penalty and remedial actions:

• Penalty: SOE would be penalized the total of $170,000 as proposed by Staff. "Although the $80,000 ($10,000 per year of licensure) strays beyond the allegations in the original complaint, Staff's proposal is not unreasonable under the circumstances," SOE said

• Notice and Termination Opportunity: Within thirty (30) days SOE would send notice to all current customers summarizing the contractual terms and providing them with a 30 day window to cancel service and receive a refund of the difference between standard offer service and the rate charged (if any)

• Non-Solicitation: SOE will not solicit any new customers under any circumstances until and unless the Commission has approved all aspects of SOE's solicitation policies, procedures, documents, etc.

• Commission Report: SOE will provide a further update to the Commission summarizing the results of its notice and follow-up with customers within 60 days of the mailing of the information to customers.

Regarding OPC's sought relief, SOE said, "Because OPC has strayed well beyond the scope of the Complaint, its requested relief also grossly exceeds that which is before properly before the Commission. Beyond this, OPC's demanded penalty far exceeds anything that the Commission has ever ordered against a supplier, without any serious attempt to justify why SOE deserves a penalty so much higher than any other supplier has ever received."

"[I]in requesting that SOE be limited to charging the standard offer rate, OPC ignores the fact that the Commission does not regulate the prices charged by suppliers. Md. Code. Ann. §7-509(a). Accordingly, the Commission lacks the authority to order the Company 'to immediately stop charging any customer any rate that is higher than the prevailing utility rate for natural gas ... ' SOE believes that its proposed remedy of providing notice and opportunity for cancellation adequately addresses the concerns regarding prior regulatory compliance," SOE said

Replying to SOE's comments, OPC said, "SOE is wrong to assert that the Commission does not have the authority to order it to cease charging customers more the utility rate. Such as order would fall under the 'other remedy' and 'refund or credit' provisions of Section 7- 507(k)(1)."

"If SOE is not willing to prevent further harm to consumers by charging these customers no more than the utility rate as suggested by OPC or the Commission chooses not to impose that remedy, then the unauthorized enrollments need to be reversed. The Commission should exercise its authority to suspend SOE’s license. This will result in the consumers it has enrolled being returned to the utility service," OPC said

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