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PUC Staff Recommend That Retail Supplier Pay Forfeiture Of $775,000, Suspend Marketing

Staff Alleges Supplier's Flat Daily Rate Plan Is Not Permitted Under PUC Rules


October 14, 2020

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Copyright 2010-20 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com

Staff of the Public Utilities Commission of Ohio issued a report concerning an investigation of SFE Energy Ohio, Inc and Statewise Energy Ohio, LLC in which, among other things, Staff recommends that the companies pay a forfeiture of $775,000, pay certain restitution, and suspend all marketing until February 1, 2021, for alleged violations of the Ohio Adm.Code

SFE and Statewise provided the following statement to EnergyChoiceMatters.com concerning the matter:

SFE and Statewise are reviewing the allegations in the Staff Report. The companies take public health, compliance with the laws of Ohio, and their interactions with customers very seriously. SFE and Statewise have been proactive in addressing compliance and regulatory concerns, as outlined in the staff report, and the companies look forward to continuing to work with PUCO Staff and other parties to the proceeding to resolve any remaining concerns regarding the allegations in an appropriate manner.

-- Statement from SFE Energy and Statewise Energy

As first reported by EnergyChoiceMatters.com, PUCO had opened an investigation of the suppliers as a result of various allegations, including an allegation that an agent for SFE conducted a door to door sales call, shortly after such marketing was permitted to be resumed subject to health and safety conditions, while allegedly not wearing a mask. As alleged by Staff in the report, "On June 24 and 26, 2020, Staff received two videos that show a sales representative soliciting at a residential home on behalf of SFE Energy Ohio, Inc. (SFE Energy) making misleading and deceptive statements while not wearing a mask or other personal protective equipment (PPE)."

The Staff report includes additional new allegations, most notably including allegations that the companies' flat daily rate product is not permissible under the Commission’s rules

According to the Staff report, "SFE Energy and Statewise are affiliates. SFE Energy, Inc. is the parent company of both entities, owning 100% of SFE Energy and 51% of Statewise."

Concerning the daily flat rate plans, the Staff report alleges, "In 2018, the regulatory contact for the Companies reached out to Staff for guidance on what product offerings were permissible in Ohio. After discussion, Staff advised that flat daily rate contracts were not permissible under the Commission’s rules."

The Staff report alleges, "However, during the course of Staff’s investigation, Staff reviewed several contracts signed by customers as a result of a door-to-door enrollments and telephonic enrollment welcome packages with contract terms and conditions. These contracts listed several rate options and there were numerous gas and electric or single commodity contracts referencing a fixed daily rate with conditions on the usage limits for total CCF and/or kWh. After reviewing these contracts and documentation provided in association with Staff’s investigation, Staff determined that contracts for a fixed daily rate were submitted and accepted by the Companies. Staff found that not only did the Companies offer a product/rate structure that is not allowed under the Commission’s rules, but that the contracts failed to clearly explain, in understandable language, the actual rates customers would be charged. The contracts also failed to explain, in clear and understandable language, how the Companies calculate the overages that would be added to customer’s fixed daily rates or when those overages would apply."

Staff further alleged, citing an example of the daily flat rate contract, that, "In the electricity agreement summary section, it states that the electricity supply price of '$1.62/day is Your Daily price. See Section Pricing of the Terms and Conditions.' Under the pricing section in terms and conditions, there is no bullet point for a daily price or daily rate. Under the details for the Hybrid Plan, it states in part that 'In addition to the daily charge, You may be subject to an overage charge. If You have chosen the Single Family Home Hybrid Plan price, annual consumption above the maximum allotment, as determined at the time of enrollment, will be billed to You at the overage price as indicated in Your Agreement Summary.' The summary makes no mention of an overage charge, it does not state that the $1.62 per day is the rate for an annual allotment of kWh per year, nor does it inform the customer of what their annual allotment is. For these, and other reasons, Staff believes that the fixed daily rate contracts marketed and administered by the Companies are not in compliance with the Commission’s rules."

As to other alleged violations, the Staff report alleges that, "Between January 1 and October 1, 2020, the Commission’s call center received 69 customer contacts regarding SFE Energy’s provision of CRES and CRNGS and 100 contacts regarding Statewise, for a total of 169 contacts. The customer contacts were primarily customers enrolled via door-to-door marketing; however, some were related to telemarketing sales, including the solicitation of a PUCO staff member."

"Staff’s review of PUCO call center contacts and complaint investigations identified a pattern of misleading and deceptive sales practices in the solicitation and enrollment of customers using door-to-door and tele-sales channels, as well as systemic deficiencies in the Companies’ administration of contracts. Misleading and deceptive issues were consistent during the review of both SFE Energy and Statewise Energy contacts, and the Companies were using similar methods for marketing and contract administration," the Staff report alleges

"Staff determined that the majority of the sales calls provided by the Companies, in response to a data request, were in violation of Ohio Adm.Code 4901:1-21-05 and 4901:1-29- 05," the Staff report alleges

Among other things, the Staff report alleges that such sales calls showed that, "Sales representatives for the Companies did not make a clear offer for sale. Instead, very soon into the calls, customers were instructed to 'grab a copy of your electric/gas bill' and provide the representative with their account number(s) and told they are enrolling in the product stated."

Further, the Staff report alleges that in such sales calls, "Sales representatives requested the customer’s bill information before providing the customer with any rate offer or asking them if they wished to enroll with the company."

Regarding such sales calls, the Staff report alleges, "Other misleading statements included statements that the representative was following up on information that was sent to the customer about price protection to avoid the scheduled rate increases on the customer’s electric bills; informing the customer that they have selected a certain program option and providing program details to the customer without ever asking if the customer wishes to enroll or telling the customer what the rate would be; and referring to the services provided by the Companies as 'price protection.'"

"Although Staff did not find any egregious issues with the Companies’ sales scripts, it was clear that sales agents marketing on behalf of the two companies were not following them when soliciting Ohio consumers. In several of the investigations from customer contacts to the PUCO call center customers alleged sales agents promised lower rates and savings. Several customer contacts referenced promotions that were never realized, and referenced rate protection that would result in savings when in actuality the fees and high rates raised the monthly bill," the Staff report alleges

"Another issue with door-to-door representatives became evident when contacts referenced monthly fees and daily rate contracts. Originally, customers were told SFE Energy or Statewise was the cheaper option and there would be savings resulting from enrollment with a multi-year contract; however, once bills were received the recurring monthly fees resulted in higher rates than the bills prior to enrollment and if the customer was serviced under the default service," the Staff report alleges

"Staff believes it is important to acknowledge that a representative for the Companies reached out to Staff in March of this year regarding an issue that they discovered with a vendor marketing door-to-door for Statewise. After receiving several complaints from the PUCO’s call center, Statewise began an internal investigation into the vendor. Their investigation found that sales agents marketing on Statewise’s behalf were enrolling Ohio consumers without their consent, also referred to as 'slamming' customers. Statewise took immediate action and Staff was satisfied with their response. Therefore, Staff did not include those slamming complaints as part of this investigation," the Staff report said

"Staff also found other issues, including door-to-door enrollments where the Companies’ sales agent remained at the customer’s residence while the TPV was completed for both gas and electric supply, and telephonic enrollments where the sales representatives stayed on the phone call during the TPV process," the Staff report alleges

Staff sought an order requiring the companies to pay a forfeiture of $775,000

Staff also recommended that the companies be required to suspend all marketing until February 1, 2021 and until the companies have submitted an acceptable compliance plan to Staff

Staff said that PUCO should require the companies to immediately stop marketing, enrolling, and administering customer contracts that offer/charge customers a fixed daily rate. All customers currently being charged a fixed daily rate should be contacted by the companies and offered the choice of re-enrolling with the companies under a different program/rate plan, or being returned to their utilities’ standard offers without incurring any early termination fees from the companies, Staff said

Staff recommended that PUCO order the companies to provide restitution to those customers, with the amount as follows:

• Enrolled through door-to-door and telephonic marketing from November 1, 2019 to June 26, 2020;

• Customers who contacted the PUCO call center from January 1, 2020 to October 1, 202; and

• Customers who were charged under a Hybrid Plan or a fixed daily rate plan from September 18, 2018 to present.

• Restitution provided by the Companies should be provided by refunding or crediting the customers with the difference of what the customers were charged by the Companies (including any monthly fees, overages, service charges, and early termination fees), and what the customers would have been charged for the same usage under the customer’s electric distribution and/or natural gas utility's default rate, Staff said

Staff said that PUCO should prohibit the companies from transferring any customer contracts to another entity until all affected customers have been provided notification and restitution.

Staff specifically alleged violations of the following provisions:

• In re the Proper Procedures and Process for the Commission’s Operations and Proceedings During the Declared State of Emergency and Related Matters, Case No. 20-591-AU-UNC, (Emergency Case), Entry (June 17, 2020) at ¶15, which states in part that 'we find that door-to-door solicitation of CRES and CRNGS may resume, subject to all relevant requirements and best practices issued by the Ohio Department of Health and any relevant local health authority.'

• The Ohio Department of Health’s operating requirements for Consumer, Retail, Services & Entertainment, available at https://coronavirus.ohio.gov/static/responsible/Consumer-Retail- Services.pdf, which requires, among other things, 'all employees to wear facial masks * * * .'

• Ohio Adm.Code 4901:1-21-03(A) 'Competitive retail electric service (CRES) providers shall not engage in unfair, misleading, deceptive or unconscionable acts or practices related to, without limitation, the following activities: (1) Marketing, solicitation, or sale of a CRES. (2) Administration of contracts for CRES (3) Provision of CRES, including interactions with consumers.'

• Ohio Adm.Code 4901:1-29-03(A) 'A retail natural gas supplier ['CRNGS'] or governmental aggregator shall not engage in unfair, misleading, deceptive, or unconscionable acts of practices related to, without limitation, the following activities: (1) Marketing, solicitation, or sale of a competitive retail natural gas service. (2) Administration of contracts for such service. (3) Provision of such service, including interactions with consumers.'

• Ohio Adm.Code 4901:1-21-05(C) 'No CRES provider may engage in marketing, solicitation, or sales acts, or practices which are unfair, misleading, deceptive, or unconscionable in the marketing, solicitation, or sale of a CRES. Such unfair, misleading, deceptive, or unconscionable acts or practices include, but are not limited to, the following: (8) Advertising or marketing offers that: (a) Claim that a specific price advantage, savings, or guarantee exists if it does not. * * * (c) Offer a fixed price for CRES without disclosing the cost per kilowatt hour and all recurring and nonrecurring charges. * * * (h) Lead the customer to believe that the CRES provider is soliciting on behalf of or is an agent of an Ohio electric utility when no such relationship exists.'

• Ohio Adm.Code 4901:1-29-05(D) 'No retail natural gas supplier or governmental aggregator may engage in marketing, solicitation, sales acts, or practices which are unfair, misleading, deceptive, or unconscionable in the marketing, solicitation, or sale of a competitive retail natural gas service. Such unfair, misleading, deceptive, or unconscionable acts or practices include, but are not limited to, the following: (8) Advertising or marketing offers that (a) Claim that a specific price advantage, savings, or guarantee exists if it does not. '

• Ohio Adm.Code 4901:1-21-05(C)(10) prohibits a CRES provider from offering 'Engaging in any solicitation that will lead the customer to believe that the CRES provider is soliciting on behalf of or is an agent of any entity other than the CRES provider.'

• Ohio Adm.Code 4901:1-29-05(D)(5) prohibits CRGNS providers from 'Engaging in any solicitation that leads the customer to believe that the retail natural gas supplier or governmental aggregator or its agent is soliciting on behalf of or is an agent of any entity other than the competitive retail natural gas supplier or governmental aggregator.'

• Ohio Adm.Code 4901:1-21-06(B)(1) 'CRES providers are prohibited from knowingly enrolling PIPP and arrearage crediting program customers.'

• Ohio Adm.Code 4901:1-29-06(C) 'A retail natural gas supplier or governmental aggregator is prohibited from enrolling a potential customer that has failed to discharge, or enter into a plan to discharge, all existing arrearages owed to or being billed by the incumbent natural gas company including those customers enrolled in the percentage of income payment plan plus program (PIPP plus).'

• Ohio Adm.Code 4901:1-21-04(A)' Each natural gas company (for records retention related to competitive retail natural gas services), each retail natural gas supplier and each governmental aggregator shall establish and maintain records and data sufficient to: (1) Verify its compliance with the requirements of any applicable commission rules. (2) Support any investigation of customer complaints.'

• Ohio Adm.Code 4901:1-29-08(B)(5) 'Each retail natural gas supplier or governmental aggregator shall retain records of customer complaints, investigations, and complaint resolutions for two years after the occurrence of such complaints and shall provide such records to the staff within three business days of request.'

• Ohio Adm.Code 4901:1-21-06(D)(1)(h)(ii) The independent third-party verifier must confirm with the customer that the sales agent has left the property of the customer. The sales agent is not to return before, during, or after the TPV process.

• Ohio Adm.Code 4901:1-29-06(D)(6)(b)(ii) the independent third-party verifier must confirm with the customer that the representative of the retail natural gas supplier or governmental aggregator has left the property of the customer. The representative of the retail natural gas supplier or governmental aggregator is not to return before, during, or after the independent third-party verification process.

• Ohio Adm.Code 4901:1-21-06(D)(1)(j) requires a CRES provider to leave the premises of a customer when requested to do so by the customer.

• Ohio Adm.Code 4901:1-29-05(E)(3) requires a CRGNS provider to leave the premises of a customer when asked to do so by the customer.

• Ohio Adm.Code 4901:1-21-08(B)(5) 'Each CRES provider shall retain records of customer complaints, investigations, and complaint resolutions for one year after the occurrence of such complaints and shall provide such records to the staff within three business days of request.'

• Ohio Adm.Code 4901:1-21-11(A) states, in relevant part, that 'In their administration of such contracts, CRES providers are prohibited from engaging in unfair, deceptive, misleading, and unconscionable acts and practices.'

• Ohio Adm.Code 4901:1-29-10(A), which states in part that 'In its administration of such contracts, a retail natural gas supplier or opt-in governmental aggregator is prohibited from engaging in unfair, deceptive, misleading, and unconscionable acts and practices.'

• Ohio Adm.Code 4901:1-29-05(A)(1)(a) 'The cost per Ccf or Mcf, whichever is consistent with the incumbent natural gas company's billing format, for natural gas supply, if the product is based on a per-unit price or, for flat-monthly rate offers, a specific listing of the rate to be charged per month for the duration of the contract.'

• Ohio Adm.Code 4901:1-21-12(B) which states in part that 'All CRES provider contracts with residential and small commercial customers shall include, but not be limited to, the following information (to be stated in clear and understandable language): (7)[f]or fixed fixed-rate offers, such information shall, at minimum, include the cost per kilowatt hour for generation service, and, if applicable, transmission service.'

• Ohio Adm.Code 4901:1-29-11(J) which states that contracts must include an itemized list and explanation of all prices in clear and understandable language and all fees associated with the service such that: (1) For fixed-rate offers, such information shall, at minimum, include: the cost per Ccf or Mcf, whichever is consistent with the incumbent natural gas company's billing format, for competitive retail natural gas service, if the product is based on a per-unit price, or for flat-monthly rate offers, a specific listing of the rate to be charged per month for the duration of the contract; the amount of any other recurring or nonrecurring retail natural gas supplier or opt-in governmental aggregator charges; and a statement that the customer will incur additional charges for the incumbent natural gas company's services.'

Case 20-1216-GE-COI

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