Regulator Imposes $1 Million Fine On Retail Electric Supplier
Regulator Says Supplier's Actions Harmed Retail Market, Competitors
May 29, 2020 Email This Story Copyright 2010-20 EnergyChoiceMatters.com
Reporting by Paul Ring • email@example.com
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Updated: Details from the dissent of Commissioners Bocanegra and Oliva has been added in the story below
The Illinois Commerce Commission imposed a penalty of $1 million on LifeEnergy, LLC, as the ICC found LifeEnergy in violation of Sections 412.170(e), 412.210(b), and 412.120(g) of the Commission’s rules
Section 412.170(e) relates to agent training requirements. Section 412.210(b) sets forth the rescission period. Section 412.120(g) relates to verification process limitations
Additionally, LifeEnergy agreed to refunds totaling approximately $34,000, based upon the difference between what the customer paid to LifeEnergy and what the customer would have paid to their default supplier, and agreed to surrender its alternative retail electric supplier license.
As previously reported by EnergyChoiceMatters.com, the proceeding concerns an investigation by the ICC of LifeEnergy's alleged failure to comply with Part 412 of the Commission's rules, as Staff alleged that LifeEnergy violated Section 412.120(g) because certain enrollments were not appropriately verified as required by the rule. Staff alleged that it had identified multiple instances of the company’s sales agents approaching customers and attempting a second TPV during the 24-hour waiting period prescribed by Section 412.120(g) which prohibits such contact. Staff also alleged that the company did not properly train its agents. See our prior story for a full discussion of the allegations
In a news release, the ICC summarized the violations as follows: "In its Final Order, the Commission found that LifeEnergy harmed Illinois residential consumers and the competitive retail electric market. Although LifeEnergy voluntarily forfeited its certificate of service authority to operate in Illinois and agreed to refund affected customers, the Commission chose to assess the penalty against the Company, because LifeEnergy allowed agents to market and sell to Illinois customers on its behalf without having received proper training and did not file the necessary reports to the ICC to certify that its sales agents had been trained by the May 1, 2018 deadline. In addition, the ICC identified multiple instances of sales agents approaching customers repeatedly within a 24-hour period, a prohibited act, and found that the Company failed to timely process customer requests to rescind enrollments."
As first reported by EnergyChoiceMatters.com, a proposed order from an ALJ had recommended not imposing a fine on LifeEnergy, apart from the refunds; however, the ICC, in a 3-2 vote, found that a monetary penalty provided by Section 16-115B(2) of the Act is also necessary
The ICC said in its order that, "LifeEnergy admits that it violated sections 412.170(e), 412.210(b), and 412.120(g). LifeEnergy Reply Brief on Exception at 1, 8-9 ('That LifeEnergy has admitted to violating portions of Part 412 of the Commission’s rules governing ARES cannot be reasonably doubted'), and 19 ('The Proposed Order correctly finds that LifeEnergy has admitted it violated the three Part 412 provisions'). LifeEnergy states that because it has taken responsibility for all alleged rule violations and agreeing to exit the Illinois retail energy market permanently, making it impossible for them to commit future violations, the Commission should not impose any additional penalties on the Company. LifeEnergy Reply Brief at 2. The Commission does not agree."
"The Commission is charged by statute to ensure customers are fully and accurately informed on the material content of a prospective offer in a solicitation made by a RES, and that they also understand the true nature of the transaction being contemplated: that a RES will take over as the provider of their electric supply. 220 ILCS 5/16-115B, 16-117(a). The Commission has made clear that Part 412 is vital to the Commission’s mission of ensuring this takes place and ultimately protecting Illinois consumers and the retail market. See First Notice Order, 6, Illinois Commerce Commission on Its Own Motion: Amendment of 83 Ill. Adm. Code Part 412 and 83 Ill. Adm. Code Part 453, Docket No. 15-0512 (September 22, 2016) ('It is up to the Commission to ensure ... that customers receive adequate protections against fraud and abuse' by adopting amendments to Part 412). The Commission amended Part 412 in 2017 in an effort to strengthen the Commission’s rules and consumer protections. The Commission provided a six-month period following the approval of the rule, allowing all RES time to come into compliance. Therefore, the Commission is concerned that LifeEnergy engaged in marketing to Illinois consumers while out of compliance with the rules, especially since LifeEnergy offers no reasonable basis or excuse for its conduct," the ICC said
"The Commission agrees with Staff and CUB that the Company’s lack of adherence to the Commission’s Rules not only affect its own customers but the entire electric supplier marketplace. Companies of any size that fail to comply with the Commission’s rules for RES operating in the state are operating at a competitive advantage to other companies in the market. The Commission agrees that ensuring RES agents are trained on the Commission’s Rules and properly inform customers about contract terms is paramount. Moreover, properly trained agents ensure customers understand the terms of the sales contract as described by the sales agent. RES compliance with Part 412 is of the utmost importance," the ICC said
"The Commission also agrees with Staff and CUB that the Company not only harmed Illinois consumers and benefited from the individuals enrolled using methods contrary to Illinois rules and regulation, but also harmed the Illinois retail market. The record shows Company’s intentional, deceptive, and misleading behavior in the Company’s marketing and sales practices. Such practices harm LifeEnergy’s competitors by giving the Company an unfair advantage in acquiring customers and also harm the public’s perception of the retail energy market as a whole. The Commission agrees with Staff that it is essential that if a RES fails to comply with applicable rules, the Act calls upon the Commission to apply a penalty to ensure that the market is adequately protected for both consumers and RESs that are operating lawfully," the ICC said
In terms of the amount of the penalty, the ICC said in its order that, "The Commission finds Staff’s approach reasonable in calculating the penalty based upon each day of no-compliance or each enrollment as an individual occurrence. With respect to violations of Sections 412.170(e).and 412.120(g), a day of non-compliance appears to capture the violation of the Act more effectively and true to the intent of the Act in terms of penalizing the prohibited behavior (e.g. marketing without proper training, or improper managerial practices), rather than the consequences of such prohibited behavior (enrolled customers). During such day, an untrained agent may market to multiple customers, and regardless of whether any particular customer is enrolled, the marketing and solicitation to a customer without proper training is a violation of itself. Similarly, improper managerial practices can have multiple consequences, that can manifest in many different ways, whether on a day such practices persisted or later. Whether any specific result of such practice can be captured, a sanctioned managerial practice of disregarding the Act and Commission Rules is of itself a prohibited behavior that calls for penalties."
"In considering the mitigating and aggravation circumstances, the Commission recognizes the Company’s willingness to refund its customers. The Commission also recognizes that the Company commenced agents training within six (6) days of receiving the NOAV, which the Commission considers to be reasonable. However, the Commission is not persuaded that such behavior was entirely a good faith effort to mitigate violations, rather than a business decision in the effort to make its assets more marketable and less exposed to liability in its sales negotiations with NRG. Moreover, the Commission is not convinced by LifeEnergy’s argument that it has taken responsibility for all of the alleged violations and acted in good faith by agreeing to refund customers and by surrendering its certificate. LifeEnergy Reply Brief at 2, 22. This appears to be far from accurate. While the Commission does not agree with LifeEnergy’s assessment of penalties, the Commission accepts LifeEnergy’s representation that it will fully and voluntarily refund its customers," the ICC said
"Therefore, the Commission finds LifeEnergy in violation of Part 412 and concludes that in addition to the customer refund agreed by the Company, a monetary penalty provided by Section 16-115B(2) of the Act is also necessary. Based on the evidence in the record, the appropriateness of the penalty to the size of the business and the gravity of violations, the Commission assesses a penalty of $1,000,000 (one million), on the highest end of the range suggested by Staff. The Commission finds such penalty justified, considering the harm caused to the Illinois consumers and the retail electric market as a whole. In determining the appropriateness of the penalty to the size of the business, the Commission takes into account not just the customers that LifeEnergy was able to enroll, but also all the customers that were marketed to in Illinois, as well as all other customers in Illinois that the Company could have marketed to under its Certificate of Service Authority. This penalty is not to 'punish' or 'make an example of' LifeEnergy. The penalty enforces the Act and the Commission’s Part 412 rules, which envision an efficient and fair operation of the retail market, protection of Illinois consumers and fair competition. No market can exist without a fair competition. When the General Assembly restructured Illinois’ power industry, it entrusted the Commission with an important task of safeguarding Illinois customers against precisely the behaviors that gave rise to this docket. The Act calls upon the Commission to establish rules and enforce them in a way that ensures that customer protection and fair competition safeguards are in place. Thus, it is the duty of the Commission in this docket to make sure that these safeguards are functioning properly," the ICC said
From the bench, ICC Chairman Zalewski stated, "LifeEnergy not only harmed Illinois consumers by using methods contrary to Illinois rules and regulations, but also harmed the Illinois retail market. This is not what competition is supposed to be about."
Commissioners Bocanegra and Oliva dissented
Bocanegra and Oliva's dissent would have found and concluded that LifeEnergy
violated Section 412.170(e) for failing to timely file and train their agents for a period of
55 days at a rate of $10,000 per violation for a total of $1,100,000.00.
However, Bocanegra and Oliva's dissent would have found that LifeEnergy did not violate 412.120(g) and 412.210 because LifeEnergy, "was
not afforded due process and notice of such alleged violations."
"The NOAV, Staff Report and Initiating Order did not provide required notice of alleged violations of 412.120(g) and 412.210. In addition, we believe that LifeEnergy did not ‘waive’ or ‘admit’ by failing to file an answer, failing to respond to data requests or avowing to violations generally in its briefing," the dissent said
"Notably, the NOAV does not detail LifeEnergy’s apparent violation of 412.310, which had also been filed after May 1, 2018. Likewise, the NOAV makes no mention of alleged violations of 412.120(g) and 412.210," the dissent said
"Staff ... alleged for the first time in its testimony that LifeEnergy violated 412.120(g) twice and that it violated 412.210 once," the dissent said
"We are also not persuaded that LifeEnergy admitted to 412.120(g) and 412.210 violations by not responding to Staff’s requests. In its Brief on Exceptions, Staff urges the Commission to find that LifeEnergy offered no evidence or argument on some claims “throughout the course of hearings and initial briefing.” Staff BOE at 3, 23. As to initial briefing, again, we take exception to the notion that unverified, unsworn legal arguments advanced by retained counsel for a party in briefings amounts to admissions or waivers. Next, Staff’s blanket assertion that LifeEnergy responded to some but not all of its requests or findings is unsupported by the record. Staff fails to sufficiently articulate which of its requests were not addressed. The evidence does include LifeEnergy’s testimony that it responded to Staff’s requests regarding the informal complaints, LifeEnergy’s efforts to comply with 412.170(e) and lastly, its communications with ORMD. We would conclude that these items amount to an insufficient basis to implicate admissions," the dissent said