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FirstEnergy Advisors Files Supplement To Ohio Broker Application With Details On Use Of Shared Service Employees

April 3, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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Suvon, LLC d/b/a FirstEnergy Advisors and FirstEnergy Home ('FirstEnergy Advisors') has filed a supplement to its pending application for an Ohio electric broker/aggregator license to include additional information under sections relating to "Experience & Plans" and "Summary of Experience", which includes new details concerning treatment and use of shared service employees was first to report on January 20 that FirstEnergy Advisors was seeking a broker/aggregator license (see story here)

As previously reported, various stakeholders including NOPEC, the OCC, retail suppliers, and brokers have raised various concerns with FirstEnergy Advisors' application, with NOPEC and OCC alleging that the commonality of management and control among FirstEnergy Advisors, and the FirstEnergy Ohio distribution utilities, "is a per se violation of R.C. 4928.17(A), which requires that a competitive retail electric supplier be 'fully separated' from its regulated utilities (story here). Retail suppliers have also objected to FirstEnergy Advisors' use of the FirstEnergy brand name

FirstEnergy Advisors has said that its structure and name comply with applicable corporate separation rules and statutes (see story here)

In the newly filed supplement to the application, FirstEnergy Advisors included the following narrative under the section "Experience & Plans", which includes new details concerning treatment and use of shared service employees

Exhibit B-2 "Experience & Plans"

"Since April 2019, Suvon, LLC DBA FirstEnergy Home has been engaged in selling home energy repair service programs, home connections for cable and internet, home repair services and home security systems as outlined in Exhibit A-13. Suvon, LLC DBA FirstEnergy Home has provided contracted services to customers via telephone and its website. Suvon, LLC DBA FirstEnergy Home utilizes a full-service call center for customer calls and complaints and provides customer billing statements for its plans and services.

"For its broker and aggregation service in Ohio, Suvon, LLC DBA FirstEnergy Advisors (the 'Company') has the support of individuals with significant experience in contracting with customers, providing contracted services, providing billing statements, and responding to customer inquiries and complaints. Combined, these individuals have over 40 years of experience and knowledge providing energy services to residential, commercial and industrial customers in Ohio. The Company will draw on this experience as it begins contracting with customers in Ohio. The Company has established and will service a toll-free telephone number for customer inquiries and complaints and is also prepared to respond to customer inquiries and complaints in accordance with the Commission’s Rules.

"For commercial, mercantile and industrial customers, the Company will present a Letter of Authorization ('LOA') and/or a Letter of Exclusivity ('LOE') that authorizes the Company to obtain information and help customers during interactions with the local distribution utility and retail suppliers. With regards to governmental aggregation, the Company will enter into agreements with communities that enable the Company to work alongside communities on every aspect of the governmental aggregation process, including but not limited to:

• "Facilitating public meetings;

• "Drafting the Plan of Operation and Governance;

• "Preparing, administering and evaluating requests for proposals;

• "Filing Commission applications and reports; and

• "Informing communities of industry trends.

"The Company will rely on typical shared services, such as human resources, accounting, information technology, fulfillment and legal. Shared service employees will bill and account for their time appropriately when supporting the Company. Proper cost allocation is also ensured through a Cost Allocation Manual (CAM) that is created and maintained with clear documentation of how costs are allocated the utility and its affiliates and between regulated and nonregulated operations. The direct costs of services provided by the Company will be directly assigned by activity, project, program, or cost center to the Company, which is a non-utility subsidiary of FirstEnergy Corp. Indirect costs for products or services provided by FirstEnergy Service Company to the Company will be allocated in accordance with FirstEnergy’s CAM, which prescribes the appropriate methodologies for allocating costs among utility and non-utility subsidiaries. All direct and allocated costs of the Company will be maintained and identified on the legal entity books and records of the Company, which is separate and distinct from the utility affiliates. The cost allocation process is audited annually by an independent third party. There is also an internal annual review of the CAM to ensure that costs are being properly allocated.

"To ensure that the Company does not have access to any information about the transmission or distribution systems that is not available to nonaffiliated competitors, employee access to information and information systems is restricted based on FERC employee classification. Sales or customer-facing services will be performed by individuals classified as marketing function employees working on behalf of the Company. Employees with market employee classifications do not have access to transmission or distribution systems, facilities, or related information. Marketing and regulated employees do not have access to each other’s market useful information systems. The access restriction is ensured through a limitation on both physical access and information technology access. Access is consistently reviewed and monitored in accordance with FirstEnergy corporate policy. See Corporate Separation Plan pp. 3-4 (discussing employee classification system and structural safeguards to prevent improper access to customer data), p. 7 (making customer information available on a nondiscriminatory basis). The Company will maintain all customer-specific information in a dedicated database or system, accessible only by certain employees and protected by Company-approved cybersecurity tools. Annually, all employees are required to review and certify his or her understanding of Ohio’s Corporate Separation Rules. In addition, employees are regularly required to take information technology and FERC Standards of Conduct training.

"As an unregulated entity, the Company does not and will not have control over what access is provided to any competitive provider—including the Company itself. Therefore, the Company will not be able to obtain any preferential treatment. The Company also notes that Ohio Administrative Code 4901:1-37-04 (D)(10) requires the electric utility to ensure that all nonaffiliated competitors have comparable access to products and services and that affiliates do not get preferential treatment. The Company has not and will not seek treatment different from nonaffiliated competitors. That is not only ensured by Ohio law, it is also an essential element of the Corporate Separation Plan. See Corporate Separation Plan, p. 7 (prohibiting improper disclosure of information to an affiliate).

"The Company will also ensure that shared representatives and/or employees are clearly disclosing who they are representing. Annually, every employee is required to review FirstEnergy business practices and certify their awareness and understanding of the Ohio Corporate Separation Rules and commit to adherence to them. A provision of this certification is the requirement for all shared representatives and employees to clearly disclose on whose behalf they are making representations. Corporate Separation Plan, p. 9 ('Shared representatives or shared employees of the Companies and affiliated electric services company will clearly disclose upon whose behalf their public representations are being made when such representations concern the entity's provision of electric services.') Employees also annually take FERC classification training further reinforcing the need to clearly disclose whom they are representing. Participation in annual training is strictly monitored and employees are required to be compliant. Non-compliance with training requirements may result in an adverse employment action, including termination of employment. In addition, in Company marketing and advertising material, the following disclosure, or one very similar, will be made:

"Suvon, LLC, d/b/a FirstEnergy Advisors, is an unregulated subsidiary of FirstEnergy Corp. Suvon, LLC d/b/a FirstEnergy Advisors, is not the same company as FirstEnergy Corp. The prices of Suvon, LLC, d/b/a FirstEnergy Advisors, products and services are not regulated by the state utility commissions. You do not have to purchase any product and/or service from Suvon, LLC, d/b/a FirstEnergy Advisors, in order to receive the same regulated services from FirstEnergy Corp.’s regulated electric utilities – Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, West Penn Power Company, Pennsylvania Power Company, Metropolitan Edison Company, Jersey Central Power & Light Company, Monongahela Power Company, the Potomac Edison Company, and American Transmission Systems, Incorporated."

"To ensure that anticompetitive subsidies are not flowing from a noncompetitive retail electric service to a competitive retail product or service, no financial mechanism exists by which subsidies can flow from the Ohio operating companies to the Company. The Company is a separate and distinct corporate entity from all affiliates and the parent, FirstEnergy Corp. The Company maintains its own books and records, separate accounting and has separate insurance. The Company is a member of a separate unregulated money pool. FirstEnergy Corp. designs internal controls over financial reporting to provide assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with Generally Accepted Accounting Principles (GAAP). These internal controls over financial reporting include policies and procedures that provide assurances transactions are recorded in accordance with GAAP, expenditures are authorized by management and assets are used as authorized. The effectiveness of all internal controls over financial reporting are audited annually by PricewaterhouseCoopers LLP, an independent registered public accounting firm. In addition, the Corporate Separation Plan prohibits such subsidies. Corporate Separation Plan p. 8 ('The Companies will ensure effective competition by . . . avoiding anticompetitive subsidies flowing from a noncompetitive retail electric service to a competitive retail electric service'). In addition to its corporate policies, the Company will abide by the Code of Conduct, will not receive any unfair competitive advantage from a regulated entity, and at all times will act in compliance with R.C. 4928.17."

In the newly filed supplement to the application, FirstEnergy Advisors included the following narrative under the section "Summary of Experience", noting that marketing function employees are restricted from access to regulated information.

Exhibit B-3 "Summary of Experience"

"Suvon, LLC DBA FirstEnergy Advisors (the 'Company') has no experience providing aggregation services. However, the Company has the support of individuals with significant experience providing energy brokering and aggregation services to build an energy brokerage and aggregation business in Ohio. Combined, the Vice President of Sales and the Director of Sales have over 40 years of experience and knowledge providing energy sales and service to residential, commercial and industrial customers. The Director has over 10 years of experience working in the residential, commercial and industrial electric retail sales and marketing space, managing contracts and providing customer service to over 2 million customers in Ohio, Pennsylvania and Illinois. In the last 10 years, the Director has bid on and contracted with over 300 communities, serving over 14 TWHs of contracted electric load both directly and indirectly (through agents) to individual and aggregated residential and business customers across Ohio. The Director has extensive experience gathering and analyzing data to develop requests for pricing and negotiating contracts with communities and suppliers.

"In addition, other individuals supporting the Company, including a Sales Representative and Sales Consultant, have experience evaluating customer energy usage, creating Requests for Proposals, and addressing customer and community inquiries and complaints. Each of these customer-facing employees are classified as marketing function employees and are restricted from access to regulated information."

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