Consumers' Counsel Opposes Settlement Under Which Retail Supplier Would Sell Ohio Book, Exit Market
OCC Seeks Immediate Return Of Customers To Default Service
September 5, 2019 Email This Story Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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The Office of the Ohio Consumers’ Counsel submitted testimony to the Public Utilities Commission of Ohio opposing a proposed settlement between the PALMco Power companies (Indra Energy) and PUCO Staff under which, among other things, PALMco would sell its Ohio book of customers and cease operating in the state
The settlement had been exclusively first reported by EnergyChoiceMatters.com (story here). The settlement would resolve various allegations against PALMco, including allegations from PUCO Staff that PALMco was engaged in, "unfair, misleading, deceptive and unconscionable marketing, solicitation, and sales acts and practices when PALMco committed to provide customers with 'competitive' and 'the best' rates, when in reality, PALMco charged customers quadruple the price to compare."
Under the stipulation, prior to expiration of its current certificates, PALMco would exercise good faith efforts to assign all remaining Ohio customer contracts to an unaffiliated third-party supplier, in accordance with a bona fide transaction for value.
The stipulation provides that the funds realized from any transaction associated with the assignment of customer contracts will be used by PALMco to satisfy the following obligations, in order of priority, as follows:
• PALMco will re-rate all gas and electric customers who enrolled between 10/1/18 and 11/30/18 and who were not previously re-rated. Re-rate means PALMco will calculate the difference between the rate it charged to the customer and the rate the customer would have paid to the applicable utility under the utility’s standard service offer or default rate, and refund or credit the difference to the customer. The Signatory Parties estimate that the total cost to re-rate all such customers will be approximately $800,000.
• If the funds realized from a transaction exceed the amount of the total refund obligation described in Paragraph (a) above, then 50% of the remaining funds shall be paid to the State of Ohio as a forfeiture. The forfeiture is subject to a cap of $750,000
In testimony opposing the settlement, a witness for OCC said, "The
Settlement’s provisions leave open the very real possibility that thousands of
customers harmed by PALMco’s actions will not be made whole."
"Under the terms of the Settlement if PALMco does not sell
its customer contracts or does not receive at least $800,000 for the sale of its
customer contracts, then some number of customers will not receive full
restitution. For example, if PALMco decides that it is easier and less costly to cut
its losses in Ohio and simply conduct a “fire sale” and sell its customer contracts
for a nominal amount or if it is unable to obtain at least $800,000 from the sale,
then customers could be left with only partial restitution or no restitution at all," a witness for OCC testified
OCC's witness further said, "And, at this point, it is important to recognize that there is a very real possibility
that PALMco could receive less than $800,000 for sale of its customer contracts."
Information concerning the specific nature of the contracts were redacted in a public filing
However, OCC's witness stated, "These contracts likely will not have substantial value to other marketers because the
purchasing marketer will have no assurance of retaining the customers long
enough to recoup its costs of acquiring them."
"Another issue that could diminish
the value of a sale of PALMco’s business is that some substantial portion of
customers may either return to their local utility’s standard service offer ('SSO')
or choose another competitive electric and/or natural gas marketer for their
service after being informed that PALMco is exiting the Ohio market.
Competitive electric and natural gas marketers interested in purchasing
PALMco’s customer contracts will no doubt factor this potentially large customer
exodus into the purchase price they will offer to PALMco," OCC's witness said
"[T]here is nothing in the
Settlement, or anywhere else in the record in this case, that provides for full
restitution to all of the customers harmed by PALMco’s actions if PALMco is
unable to sell the customer contracts or if the sale price is less than the estimated $800,000," OCC's witness said
Furthermore, OCC's witness noted that the settlement addresses specific classes of customers (those enrolling during certain time periods, and those who had filed complaints), with OCC's witness stating, "the Settlement is completely silent about all other variable rate
customers who enrolled with PALMco outside of the periods identified in the
Settlement and have not complained to the PUCO. And there are more of these
customers than there are customers who have received or may receive restitution
in the future."
"Given the known
violations of Ohio law and the PUCO’s rules, customers should not have to
complain to the PUCO in order to receive restitution for overcharges by PALMco.
Many customers may not even be aware that they were overcharged," OCC's witness said
"In addition to this unfairness to consumers, there is the
bad result that PALMco could profit from the sale of its business despite what the
PUCO Staff found to be PALMco’s building of that business on deception of
Ohio consumers," OCC's witness testified
"PALMco gets to keep one-half of the proceeds from the
sale of its customer contracts that exceed the initial $800,000 reserved for
restitution to customers enrolled between October 1, 2018 and November 30,
2018 who have not yet received restitution. As discussed above, in order to pay
full restitution to customers and the full forfeiture provided in the Settlement
PALMco would have to sell the customer contracts for $2.2 million. At the $2.2
million mark, PALMco will have fully met the Settlement’s proposed $750,000
forfeiture and it will have retained $750,000 for itself. PALMco will keep 100%
of all proceeds above $2.2 million. This means, so long as PALMco sells its
customer contracts for more than $800,000, it will gain proceeds from the sale
and potentially profit from deceptively acquiring customers," OCC's witness said
OCC's witness further said, "the Settlement provides that PALMco will continue serving its existing
customers and accept customer contract renewals until it completes the sale of the
customer contracts or the expiration dates of its current PUCO certifications. As
a result, PALMco will continue to receive the profit margin that is built into the rates that it is currently charging customers until the date that sale of its contracts
is completed or its certification expire."
OCC's witness said that PALMco’s customers should be immediately switched to their utility’s default service. OOC's witness said that PUCO should order PALMco to immediately make restitution to, "all customers
harmed by its unlawful actions without any contingency provision related to the
sale of its customer contracts."
"The PUCO should not be swayed by any claims that PALMco lacks the resources
necessary to make full restitution to aggrieved customers. There is no evidence in
the record of this case that PALMco lacks sufficient resources to fully
recompense all customers harmed by its unlawful actions. The PUCO should
order full restitution to customers even if PALMco must liquidate its assets in
order to do so," OCC's witness said
"If the PUCO decides to adopt the Settlement, then it should modify it to impose a
minimum 'exit fee' that would apply to PALMco to cover any shortfall between
the amount it receives from sale of its customer contracts and the amount
necessary to make full restitution to customers," OCC's witness said
Another witness for OCC cited five regulatory actions taken against PALMco and/or other suppliers with affiliated or a degree of common ownership by various state regulators and/or attorneys general, with OCC's witness alleging that, "it appears that PALMco views state sanctions against it
as a mere cost of doing business instead of as a cause for reform of its bad acts."
OCC's witness further recommended that, "the PUCO order full restitution to all customers harmed by PALMco, assess a
substantial forfeiture to PALMco, and rescind PALMco’s operating
certificate/license so that it cannot ever again participate in the Ohio retail
A witness for PUCO Staff filed testimony in support of the settlement, stating, "The Stipulation, as a package, benefits consumers and the public
interest, and represents a just and reasonable resolution of all issues in
The witness for PUCO Staff said that the stipulation is in the public interest for, among other reasons, the
• "PALMco will not renew its competitive retail electric
service (CRES) or competitive retail natural gas service
(CRNGS) certificates with the Commission and, therefore,
will no longer operate in the State of Ohio. This will
benefit consumers and the public interest because it will
eliminate the potential for future customer harm resulting
from the marketing, solicitation, sale, provision or
administration of contracts for CRES and/or CRNGS by
PALMco to customers."
• "Those customers who enrolled with PALMco between
December 1, 2018 and April 15, 2019 have received an
adjustment to the rate charged by PALMco. The
adjustment represents the difference between the rate
PALMco charged and the rate the customer would have
paid to the applicable utility under the utility’s standard
service offer or default rate, resulting in a refund for the
customers. The total cost of these refunds was
• "PALMco has provided refunds to customers who
registered informal complaints with the Commission and
will continue to provide refunds in response to such
informal complaints, regardless of when the customer
enrollment occurred. As of July 26, 2019, the total cost of
these refunds was approximately $55,000."
• "PALMco will use the proceeds of any assignment of its
remaining customer contracts to provide adjustments and
refunds to all customers who enrolled with PALMco
between October 1, 2018 and November 30, 2018, and
who have not previously received a refund. The estimated
cost of such customer refunds would be approximately
• "PALMco will not enroll any new residential or small
commercial customers for the remaining term of its
existing CRES and CRNGS certificates. This benefits the
public interest because it ensures that no new customers
will be harmed."
• "PALMco will pay a forfeiture of up to $750,000."