Retail Supplier Opposes Stipulation Between PUC Staff And Another Supplier To Resolve Investigation Proceeding, Seeks Modifications

December 4, 2019

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

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Interstate Gas Supply has filed a brief opposing a stipulation between 2019, Verde Energy USA Ohio, LLC and Staff of the Public Utilities Commission of Ohio

As exclusively first reported by EnergyChoiceMatters.com, under the stipulation, that would resolve an investigation into various alleged sales and marketing violations, Verde Energy would pay a forfeiture of $675,000, and withdraw from Dominion East Ohio’s Monthly Variable Rate (MVR) program for a period of one year, in addition. See full details of the settlement here

Verde Energy provided the following statement concerning the matter, "Verde Energy is committed to continuing to work with Staff of the Public Utilities Commission of Ohio and agrees with the Staff’s resolution to this matter."

In its brief, IGS alleged, "Verde’s alleged abuses reflect poorly upon the company, its parent, Spark Energy Holdco, LLC ('Spark'), Spark’s affiliates, and the Ohio competitive retail supply community as a whole."

In its brief, IGS alleged, "The Stipulation simply does not contain enough specificity to ensure that Verde is sufficiently deterred from engaging in future misconduct. The Stipulation also does not resolve IGS’ concerns regarding allegations that Verde’s telephonic and door-to-door sales agents willfully and deliberately made certain misrepresentations to poach IGS’ customers."

While the stipulation provides that Verde Energy will submit an action plan for compliance at least ninety (90) days prior to resuming marketing and customer enrollment in Ohio (it had previously voluntarily ceased marketing activity), IGS alleged that, "the Stipulation fails to include specific operational and managerial changes that Verde must implement to ensure that it does not repeat the alleged misconduct."

"The Stipulation falls short of resolving all the issues Staff identified in its investigation and Staff Report because it does not expressly define the corrective action Verde must undertake to reenter the Ohio competitive market," IGS alleged

"To cure its deficiencies, IGS recommends that the Commission modify the action plan provision to require Verde to describe with specificity the operational changes it will undertake to resolve the allegations contained in the Staff Report," IGS said

"For example, Verde should be required to identify the third-party vendors it plans to use to market its products and services in Ohio upon its reinstatement, and to disclose whether those vendors engaged in any sales and marketing behaviors that violated state law and administrative rules in Ohio and/or other markets. Verde should also be required to describe, in detail, its plan to train, monitor, and review the sales, marketing, and enrollment behaviors of its third-party vendors, as well as its plan to address and resolve any alleged vendor misconduct. A detailed description as to how Verde intends to collect and retain all consent documentation (e.g. third-party verification recordings, signed contracts and natural gas acknowledgement forms, etc.) to verify customer enrollments should also be provided," IGS said

IGS further said that Verde should be prohibited from resuming sales and marketing activities in Ohio absent commission approval of Verde's action plan.

"IGS contends that given the scope and severity of the allegations set forth in the Staff Report, the Stipulation should be modified to expressly require Verde to obtain Commission approval of its action plan prior to resuming its sales and marketing activities in Ohio," IGS said

IGS further said, "The Commission Staff should also consider the corporate behavior of Spark’s affiliates48 in Ohio and other markets when evaluating Verde’s action plan. The Staff Report provides that shortly after Spark acquired Verde in July 2017, PUCO Staff received a surge in customer contacts related to Verde. Staff investigated those contacts, as well as the behavior of Spark affiliates in other markets, and determined that Spark’s 'management and ownership of [Verde] has degraded the company’s adherence to Ohio requirements . . . .' The allegations of similar misconduct against Spark-owned companies in other states served as aggravating factors to support Staff’s conclusion that Verde lacks the managerial capabilities necessary to comply with the Ohio Administrative Code and provide adequate service to customers."

IGS further said, "Indeed, on nine different occasions various Commissions, consumers, and State Attorneys General formally alleged that Spark affiliates engaged in misconduct in seven different states. Two of those proceedings involved Spark’s affiliate, Major Energy Electric Services, LLC ('Major'). In 2016, the Maryland Public Service Commission ordered Major to pay fines totaling three-hundred thousand ($300,000) dollars stemming from its adjudicated misconduct. A little more than three years later, the Illinois Attorney General and Major entered into a consent decree that provided, among other provisions, that Major would issue $1.95 million dollars in customer refunds to resolve allegations of misconduct. Major, however, continues to offer retail electric and natural gas products to consumers in Maryland, Illinois, Ohio, and other markets."

IGS alleged that, "The foregoing demonstrates that monetary penalties alone are insufficient to deter Spark affiliates from replicating its misconduct in other markets. A review of the behavior of Spark’s affiliates in other markets also makes clear that the issues Staff identified in its investigation and Staff Report are not exclusive to Verde. Rather, Verde’s dubious sales, marketing, customer enrollment and retention practices are systemic and appear to plague the bulk of Spark’s affiliates. Given the pattern of alleged misconduct that Spark’s affiliates seem all too willing to engage in, IGS questions whether Verde can comply with the Commission’s rules upon reentry into the Ohio competitive market. As Staff implied in its Staff Report, the acts of one Spark entity are sufficient to implicate the acts of another. Accordingly, Commission Staff should also consider the corporate behavior of Spark’s affiliates in Ohio and other markets when evaluating Verde’s action plan."

PUCO Staff filed a brief in support of the stipulation and said that the stipulation meets the Commission’s test for review of stipulations

PUCO Staff said that the provisions of the settlement noted above, along with required customer re-rates and refunds, will benefit both Ohio ratepayers and the public interest.

Verde also submitted a brief in support of the stipulation, stating that the stipulation benefits Ohio consumers and the public interest

Verde noted that the $675,000 civil forfeiture under the stipulation would be, to date, the largest civil forfeiture ever assessed by the Public Utilities Commission of Ohio against a competitive energy supplier in the state

Verde's brief addressed opposition from the Ohio Consumers Counsel to the stipulation (IGS did not file testimony in the case).

Verde said in its brief, "In opposing the comprehensive settlement between Verde Energy and Staff, OCC produced no evidence demonstrating that these three prongs have not been met in this case. Instead, OCC for the most part regurgitated information and evidence already included or referenced in the Staff Report, which the Staff knew about when entering into the settlement with Verde Energy. OCC also sponsored two witnesses to oppose the settlement, one of whom misconstrued the plain terms of the proposed settlement in crafting her opposition (Barbara Alexander) and the other whom advocated a 'presumed guilty' standard to judge Verde Energy (James Williams). The cross-examination of both of these OCC witnesses revealed significant shortcomings with their direct testimony."

Verde said "Ultimately, OCC opposes any settlement that is less than the full recommendations outlined in the Staff Report. However, accepting OCC’s proposition would undermine the very purpose of a negotiated resolution, which is to arrive at a compromise that is acceptable to both sides in lieu of continued litigation. Moreover, the settlement agreed to by Verde Energy and Staff is severe and consequential. The settlement represents a significant financial impact on Verde Energy, not only from the standpoint of the largest settlement payment ($675,000) by a competitive supplier in Ohio history (excepting, perhaps, the PALMco settlement) and customer restitution of over $1.068 million, but also from the significant loss of market share and resulting loss of revenue due to the 18-month marketing stay imposed by the settlement. In addition, the Joint Stipulation as a whole acts as a deterrent for future alleged violations of Ohio rules regarding the marketing and enrollment of customers in Ohio. The settlement should be approved by the Commission as agreed to by Verde Energy and Staff."

Case 19-0958-GE-COI

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