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Regulator Issues $1.5 Million Fine To Retail Supplier, In Final Order

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

Decision Sets Standard Under Which TPVs Are Invalid

July 31, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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A final decision from the Connecticut PURA imposed a $1.5 million fine on Liberty Holdings, LLC [sic] (Liberty or Company) and prohibits Liberty from accepting new residential customers and/or marketing to residential customers via any means other than online enrollments for six months

Notable to the wider market is that the final order concludes (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 final order states 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)(7), 16-245o(j), 16-245s, and 42-110b," by engaging in the following actions:

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 unfair and deceptive marketing, including but not limited to the violations listed above.

Discussing Liberty's defenses, the order 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 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 final order 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[.]"

The final order states, "In some calls, the customer never hears Liberty’s name, an undeniable violation of the law. 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 final order 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 [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 final order cites as an example the following:

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 final order states, "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 Authority recognizes that Liberty’s agent began this particular call by stating he was 'an energy consultant with Liberty Power,' but he did not say that Liberty Power does not represent an EDC, repeatedly mentioned Eversource, and said the gift card would be mailed with the Eversource bill, implying the gift card was from Eversource. Furthermore, when questioned, the agent hesitated and answered using Eversource’s name, not Liberty’s, again implying Liberty was affiliated with the EDC. This demonstrates one of the many difficulties with Liberty’s telemarketing as demonstrated by the sales calls in the record of this docket: rarely does any sales call comply with every aspect of the law."

The final order states, "In another [call], the customer states, 'You know, I do business with Eversource. I don’t want to change,' to which 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 final order states, "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 final order states, "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 final 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 final order states, "Liberty argues that the statute places no temporal requirements on when the agent must indicate she is calling on behalf of Liberty. 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.. [sic] 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 final order states, "Liberty argues that 'to the extent a Marketing Representative deviates from Liberty Power’s script ... that deviation is a discrete issue.' 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 final order 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. 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 final order states, "Liberty’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 final order states, "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. See e.g., Response to Interrogatory CA-36, Re-Filed Attachment H-1, Lines 19-30 ('[W]e were just notifying you that as of your next meter reading, your account's gonna get a new low rate and that would have price protection for the next 24 months. Uh the reason we were contacting you was so that we can verify your information, so everything gets supplied to the correct account.')."

The final order states, "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)."

The final order states, "Liberty also argues the statute applies only to written communications. The statute makes no such distinction. Instead, it provides a blanket requirement that a supplier must disclose the EDC’s current charges when the supplier is advertising or disclosing the prices of electricity and, when advertising in writing, the supplier has further obligations. It tortures the consumer protection statute to read a disclosure requirement into only written advertisements but not into verbal ones."

The final order states, "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.' . 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 final order states, "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 final order states, "Liberty argues, quite unbelievably, that it did not know the correct standard service rate. The Authority will not entertain an argument from a supplier that it is unaware of the publicly-noticed standard service rate. 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.' 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 final order states, "Furthermore, Liberty indicates to customers that they are paying a 'higher rate,' without ever questioning the rate the customers are paying. 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 final order states, "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 final 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 final order cites the following example:

Liberty: ...Like I told you, after stating your name just reply all the questions with a simple Yes or No to get your confirmation number. You can start the verification.

Customer: Oh my God, I got somebody else. I don’t feel right.

Verifier: Hi my name is [redacted].

Liberty: Just give me will be done in just 1 minute, you can start the verification.

The final order states, "The customer indicated that she was not comfortable and thus the enrollment should have stopped. Instead, Liberty’s agent pushes the customer to continue with the process."

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

The final 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, [customer name]?

Customer: Yes.

Liberty: Honey, it’s me [agent name] Back on the phone with you all they simply want [customer name], 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 final order 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."

Consistent with its findings in similar cases, and with a draft order (see discussion of draft order here), PURA affirmed that suppliers must "directly" train sales agents per the statute and cannot rely on third parties to conduct training

The final order 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 final order states, "Liberty entered into 26,217 contracts containing early termination fees in excess of fifty dollars[.]"

The final order states, "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. Liberty’s contracts did exactly that. An early termination fee of greater than fifty dollars (in this case, double that amount) would affect a customer’s calculus of whether or not they should terminate a contract. That Liberty never charged a customer more than fifty dollars misses the point. Liberty could not possibly know how many customers chose not to terminate their contracts early because their contract indicated an illegal termination fee. It would frustrate the purpose of the statute to hold that Liberty could enter into contracts providing for illegal termination fees as long as it did not actually charge those fees to customers."

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

The final order 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 $8,320,00028, and would be even greater if the Authority assessed a $10,000 penalty for every violation contained in this record. Additionally, the Authority could impose further penalties for the 26,217 contracts containing an excessive termination fee and for Liberty not directly training its agents."

After the marketing prohibition described above is complete, PURA will audit Liberty's marketing for one year. The Authority directed 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.

The final order states, "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."

Docket 06-12-07RE07

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