Texas Retail Provider To Pay $250,000 Under Settlement With PUC Staff, Addressing Alleged Use Of Move-Outs For Disconnection For Non-Pay, And Other Issues

September 14, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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Direct Energy, LP (Direct Energy), on behalf of itself as well as its affiliates First Choice Power, LLC and Bounce Energy, Inc. would pay $250,000 under a settlement with Staff of the Public Utility Commission of Texas to resolve alleged violations of 16 Texas Administrative Code (TAC) § 25.474, concerning selection of retail provider (Direct Energy and First Choice Power); 16 TAC 25.475, concerning information disclosures to residential customers (First Choice Power); and 16 TAC § 25.483, concerning disconnection of service (Bounce Energy).

Direct Energy issued the following statement concerning the settlement: "We are pleased to have worked with Commission staff on this matter and come to an amicable resolution."

The settlement states, "This Agreement represents a compromise of claims and allegations, and the execution of this Agreement does not admit the truth or accuracy of any such disputed claims."

Disconnections - Bounce Energy

The settlement states that 16 TAC § 25.483(a) provides that if a REP chooses to have a customer’s electric service disconnected, it shall comply with the requirements of 16 TAC § 25.483. 16 TAC § 25.483(c) states that a REP having disconnection authority may authorize the disconnection of a customer’s electric service after proper notice and not before the first day after the disconnection date in the notice for failure to pay any outstanding bona fide debt for electric service owed to the REP.

The settlement states that, "Between the period of April 1, 2018 and December 31, 2018, Bounce Energy maintained a policy to mitigate customers from evading payment and receiving continued service by submitting fraudulent payments (Policy)."

The settlement states that, "Under the Policy, Bounce Energy processed move-outs, instead of disconnections, to immediately terminate service to customers who had two consecutive payments either reversed as NSF by the bank or reversed by the customer themselves. Direct Energy asserts this process was implemented solely as a matter of efficiency and to avoid customers from evading payments and was not intended as a circumvention of the rules."

The settlement states that, "According to the Policy, upon a second consecutive reversed payment, Bounce Energy personnel would determine whether the customer was trying to evade payment. If the payment reversal was due to an error or a duplicate payment, Bounce Energy would not disconnect the customer. However, if the reversal was due to non-sufficient funds in the customer’s account, a move-out was processed without notice to the customer and the customer was disconnected."

The settlement states that, "During the course of its investigation, Staff identified 83 instances in which Bounce Energy customers were disconnected according to this Policy."

The settlement states that, "Staff asserts that by following this Policy, Bounce Energy violated 16 TAC § 25.483(c) by disconnecting customers’ electricity without proper notice."

The settlement states that, "Because Bounce Energy no longer exists [*], there is no possibility of Bounce Energy committing similar violations in the future. Neither Direct Energy, which absorbed Bounce Energy’s customer base, nor any other Direct Energy affiliate uses the same Policy that Bounce Energy formerly used." *editorial note: Bounce Energy specifically no longer exists as a certificated Texas retail electric provider

Letters of Authorization - Direct Energy

The settlement states that, to ensure a customer has provided informed consent, 16 TAC § 25.474(e) requires that, for written enrollments, the switch or move-in request of an applicant must be authorized and verified, and that the REP shall obtain that authorization and verification from the applicant. Additionally, 16 TAC § 25.474(e)(9) requires a REP to provide a customer a copy of the signed letter of authorization immediately after the customer provides a signature.

The settlement states that, "Prior to the summer of 2018, Direct Energy’s retail sales personnel exclusively offered prepaid plans. During the summer of 2018, Direct Energy began to offer postpaid electric service plans for the first time at retail, storefront locations."

The settlement states that, "During this transition, Direct Energy’s software system was not modified to correctly capture the different rule requirements associated with postpaid, written enrollments. As a result, 287 customers did not receive a letter of authorization per 16 TAC § 25.474(e)(9)."

The settlement states that, "Staff asserts that, without signed letters of authorization on file, Direct Energy is in violation of PURA §§ 17.004(a)(1) and 39.101(b)(2), as well as 16 TAC § 25.474(e), because it cannot provide proof that the customers authorized the switch requests."

To mitigate the occurrence of similar violations in the future, Direct Energy has updated its software to account for and follow the appropriate rules when enrolling customers in postpaid electric service plans.

Letters of Authorization - First Choice Power

The settlement states that, "Additionally, like Direct Energy, First Choice Power began marketing postpaid electric service plans at retail, storefront locations for the first time during the summer of 2018."

The settlement states that, "First Choice Power’s failure to accommodate the differing rules between prepaid and postpaid plans led to First Choice Power not providing letters of authorization for 2,067 customers."

The settlement states that, "Staff asserts that without signed LOAs on file, First Choice Power is in violation of PURA §§ 17.004(a)(1) and 39.101(b)(2), as well as 16 TAC § 25.474(e) because it cannot provide proof that the customers authorized the switch requests."

Similar to Direct Energy, First Choice Power has updated its software to account for and follow the appropriate rules when enrolling customers in postpaid electric service plans.

Inaccurate Information to Customers - First Choice Power

The settlement states that 16 TAC § 25.475(c)(1)(A) also provides customer protection by stating all written, electronic, and oral communications by a REP, including, but not limited to, websites and terms of service, shall be clear and not misleading.

The settlement states that, "First Choice Power’s terms of service provided customers with a link to an online list of authorized pay stations based on the customer’s location, identified by zip code. An authorized pay station was identified as a location at which a customer may pay his or her bill and have the payment post to the account the day of the payment. Payments made at non-authorized pay stations may be delayed a day or more before they post to a customer’s account."

The settlement states that, "However, the provided link returned a list of pay stations which erroneously included both authorized and non-authorized locations. Customers who used the list could reasonably infer that all listed pay stations were authorized by First Choice Power, and that payments made at any of the listed locations would be posted to their account without additional delay."

The settlement states that, "Staff asserts that First Choice Power violated PURA § 17.004(a) and 16 TAC § 25.475(c)(1)(A) by providing customers with unclear and misleading information through its terms of service."

To mitigate the occurrence of similar violations in the future, First Choice Power has updated its training materials to ensure its call center agents are adequately trained to communicate to customers and provide clear guidance on authorized versus unauthorized payment locations. Additionally, First Choice Power has updated its website to differentiate authorized from unauthorized locations and include appropriate language concerning potential delays in posting. First Choice Power also included an insert in customers’ bills that ran for two consecutive billing cycles that described the differences between authorized and unauthorized payment locations and potential delays in posting to customers’ accounts as a result of using an unauthorized payment location.

Docket 51277

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