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Retail Supplier To Pay Up To $10 Million Under Settlement With Attorney General, Change Marketing, Pricing Practices

December 30, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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Starion Energy, Inc., certain of its principals, and Massachusetts Attorney General Maura Healey (AGO) have entered into a settlement agreement, based on a Memorandum of Understanding (MOU) under which Starion would pay up to $10 million and undertake various changes to its marketing and pricing practices to resolve a civil action brought by the AGO against Starion

The settlement, which has been approved by a federal bankruptcy court, would provide that Starion would pay $10 million, except that $2 million of such total would be forgiven if Starion complies with the terms of a consent judgment to be entered in Massachusetts Superior Court in connection with the AGO's civil action.

The settlement would fund restitution to Massachusetts residential customers, and also reflects civil penalties and potentially funding for other programs

An initial payment would consist of $6 million in restitution

A second payment of $1 million would consist of $250,000 in civil penalties and fees, $250,000 in restitution, and $500,000 to the AGO, who shall distribute the money with the express condition that the money be used to fund or assist in funding programs or initiatives designed to assist Massachusetts consumers with paying or lowering their energy bills or similar charitable endeavors.

A third payment, at the end of 2021, would consist of $1 million in restitution

Under the MOU, Starion would agree to cease certain sales practices. "Those include representing 'rate reductions' in conjunction with variable rate products, or representing 'rate reductions' in conjunction with fixed rate products in comparison to a basic service rate or a rate offered through a municipal aggregation, unless such rate reductions are guaranteed during term of the contract, failing to disclose Starion’s 'account management fee' during initial sales presentations, and making 'ringless voicemails' or any other form of recorded message device to Massachusetts consumers," the MOU states

The MOU, applicable to Massachusetts residential customers only, provides that, for three years, Starion will not solicit or enroll any new variable rate residential customers.

Additionally, the MOU includes the following provisions concerning service to low-income customers, or a period of three years. Low-Income is defined by the utility class codes (National Grid R-2, NSTAR R-2 and R-4, and WMECO R-2 and R-4).

Current Low-Income Customers:

      1. Variable rates will be adjusted to the utilities’ basic service fixed rate with an annual true-up; and

      2. Send notice to offer a 6 month fixed-to-fixed/no cancellation fee/annual true-up product and 6 month fixed-to-fixed/green/no cancellation fee/annual true-up product (new product offering)

Future Low-Income Customers:

      1. Variable rates will be adjusted to utilities’ basic service fixed rate with an annual true-up; and

      2. New low-income products will be listed on the MA Rate Board and Starion’s website.

For a period of three years, for all Starion variable rate customers, Starion would undertake the following:

i. Send current variable rate customers notice of all other fixed offers that Starion has available;

ii. Re-send notice of such offers semi-annually; and

iii. Notices will include language that there is no penalty to switch to another product or to cancel.

iv. Starion and the AGO will negotiate a reasonable 'rate cap' for current Massachusetts residential variable customers that would take into account market trends.

For three years, Starion would send a notice to each variable rate customer at least 15 days before a rate increase of 25% or more.

Starion and the AGO acknowledge and agree that this MOU and nothing stated therein shall constitute any admission of fact, law, or liability by any party in regard to any matter that is raised or could be raised in connection with the civil action The Commonwealth of Massachusetts v. Starion Energy, Inc., et. al., CA No. 2018-3199-H, currently pending in Suffolk Superior Court in Massachusetts, as well as a Chapter 11 proceeding with a docket number of 18-12608-MFW and an accompanying adversary proceeding captioned Starion Energy, Inc. et. al. v. Commonwealth of Massachusetts, et al., Adversary Case No. 18-50932-MFW, currently pending in the United States Bankruptcy Court for the District of Delaware.

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