Retail Suppliers Concerned With "Overly Broad" Definition Of In-Person Solicitation In Draft Rules

Consumer Advocates Argue Narrower Proposal On Types Of Marketing Which Must Adhere To Disclosures Is Inconsistent With Statute

December 21, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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Parties have filed comments on proposals from Illinois Staff for amendments to Illinois Administrative Code Part 412 detailing the obligations of alternative retail electric suppliers (ARES), and a new Part 512 detailing the obligations of alternative gas suppliers (AGS)

Among other revisions, the latest Staff proposals incorporate requirements from Illinois Public Act 101-590, sometimes referred to as the HEAT Act (see details on the new law here)

In most instances, the proposed rules are identical for electricity and gas. Unless specifically noted to the contrary, any quote in this story which specifically references an ARES (or AGS) is equally applicable to an AGS (or ARES), and a second, mirroring quote is omitted for brevity.

In-person Solicitations

The Retail Energy Supply Association raised concern with Staff's proposed definition of "in-person solicitation".

Under Staff's draft, "in-person solicitation" is defined as, "any sale initiated or conducted when an ARES Sales Agent is physically present with the customer."

"This definition is overly broad," RESA said

RESA noted that the ICC's prior order which adopted the current version of the Part 412 rules had clarified that in-person solicitation does not include circumstances in which a potential customer cannot be enrolled, such as what is sometimes referred to as 'warm marketing' or 'friends and family marketing'.

RESA suggested adding language stating that, "However, in-person solicitation does not include any situation in which the interaction with an ARES Sales Agent cannot result in an enrollment of the customer with the ARES."

The Illinois Competitive Energy Association (ICEA), in separately filed comments, likewise urged the ICC to clarify that "solicitation" is an interaction where the customer is able to -- whether the customer chooses to or not -- enroll.

"ICEA also requests that the Commission clarify that in scenarios where the interaction is more formal but the customer cannot enroll without going through another channel. For example: An ARES/AGS Sales Agent is at a static booth but is only providing pamphlets with information on how to call (subject to 412.140 or 512.140) or to go online (subject to 412.160 or 512.160) to actually enroll. The written materials would almost certainly be marketing materials—regulated by 412.100 or 512.100 in addition to statute. However, that initial interaction where enrollment is not possible should not be governed by the in-person solicitation section when the customer will be provided with the full set of disclosures and confirmations as part of the actual solicitation and enrollment process they will necessarily have to complete in order to begin and then successfully finish the enrollment process," ICEA said

Sales Agent Definition

The Illinois Attorney General and the Citizens Utility Board opposed the Staff's proposed definition for "ARES Sales Agent".

Under Staff's draft, "ARES Sales Agent" means, "any employee, agent, independent contractor, consultant or other person who is engaged by an ARES to solicit customers to purchase, enroll in or contract for electric power and energy service on behalf of an ARES. ARES Sales Agent does not include any employee, agent, independent consultant, or other person whose services are retained or contracted by the customer."

The Staff draft defines an AGS "sales agent" as meaning "sales agent" as defined in Section 19-105 of the Act (220 ILCS 5/19-105), which defines sales agent as, "any employee, agent, independent contractor, consultant, or other person that is engaged by the alternative gas supplier to solicit customers to purchase, enroll in, or contract for alternative gas service on behalf of an alternative gas supplier." These disparate definitions ostensibly result, in part, from the ICC licensing electric brokers, but there being no licensing mechanism for gas brokers

The AG and CUB said that the second sentence of the two-sentence definition for "ARES Sales Agent" should be stricken, "because it is redundant and will only create confusion."

"This sentence states that, 'ARES Sales Agent does not include any employee, agent, independent consultant, or other person whose services are retained or contracted by the customer.' ... This second sentence is redundant because the first sentence of the definition sufficiently identifies those persons who would constitute ARES Sales Agents. No further clarification is provided by including this sentence, which confusingly describes a fringe scenario in which a customer, not an ARES, would retain a person to solicit service," AG and CUB said

In contrast, RESA said that, "Staff’s definition of 'ARES Sales Agent' makes it clear that an ARES Sales Agent does not include a person whose services are retained or contracted to by the customer, not the ARES."

RESA noted that, "As of May, 2020, there were 431 Agents, Brokers, and Consultants ('ABCs') in Illinois. Most of these ABCs work for customers, not suppliers. This is an important distinction. RESA agrees with the Commission Staff’s definition."

Definition Of Marketing Materials

Consumer advocates and retail suppliers disagree on what materials constitute " marketing materials" under the draft rules, and would be subject to additional disclosure requirements

The HEAT Act excludes goodwill and institutional advertising from various disclosure requirements. Under Staff's draft, "goodwill and institutional advertising" means, "any advertising either on local or national basis designed primarily to bring the ARES's name before the general public in such a way as to improve the image of the ARES or to promote the ARES or the industry."

The term "marketing materials" is not defined in the Staff draft rules

However, the Staff draft rules do propose that, "All marketing materials, including, but not limited to, electronic marketing materials, in-person solicitations, and telephone solicitations, related to the prices, terms and conditions of retail sale of electric power and energy shall contain information that adequately discloses the prices, terms, and conditions of the products or services and shall disclose the utility electric supply Price to Compare ('PTC') statement in subsection (b) of this section."

Notably, the above-stated disclosures must only be provided in marketing materials which relate to the, "prices, terms and conditions of retail sale of electric power..." [or natural gas]

The AG and CUB said that Staff’s proposed rule concerning marketing materials for electricity, "wrongly limits the statutory provision in contravention of the legislative intent and language of the HEAT Act."

Notably, for electricity, the Heat Act struck language limiting disclosures to only those marketing materials, "which make statements concerning prices, terms and conditions of service..." [notably the natural gas statute was not amended in the same manner and retains the prior 'prices...' limitation]

As such, AG and CUB said that, "Staff’s proposed Section 412.100(a) wrongly adds back into the rule the limiting language which the legislature removed through the HEAT Act."

"[T]he General Assembly amended Section 16-115A(e)(i) of the PUA such that an ARES’ obligation to disclose prices, terms, and conditions is no longer limited to only instances where marketing materials 'concern[ ]' or 'relate[ ] to' prices, terms, and conditions. In effect, the amended language of the HEAT Act widens the scope of marketing materials that trigger ARES’ obligation for price, terms and conditions disclosure. But Staff’s inclusion of the phrase, 'related to the prices, terms and conditions,' in that part of its proposed rule would directly contradict the legislative intent reflected in the amended statutory provision, effectively undoing the very change the General Assembly made to the law," AG and CUB said

AG and CUB would strike from Staff's proposal the limitation stating that only marketing materials, "related to the prices, terms and conditions," must adhere to the enumerated disclosures

RESA said that Staff's proposal, "makes the appropriate distinction."

"Absent the disclosure of the ARES’ price for a particular offer there is nothing to which to compare to the electric utility’s rate so the disclosure of a 'PTC' in this context, for example an advertisement that simply refers customers to a website to review product offers, makes no sense," RESA said

RESA did propose that Staff add clarifying language to a following subpart affirming this approach

Direct Mail

The AG and CUB oppose Staff's proposed disclosure requirements for direct mail.

"Staff’s [direct mail] draft rules would obligate a supplier to disclose only three items: its (1) legal name, (2) business address, and (3) its toll-free number and the same for the Commission’s Consumer Services Division. In short, Staff’s draft rules would enable ARES and AGS to circumvent no less than twelve of fifteen disclosures listed in Sections 412.110 and 512.110 [Minimum Contract Terms and Conditions]," the AG and CUB said. Among the 412.110 disclosures not required in a direct mail piece are those related to the charges for service (including a host of disclosures thereunder, such as variable warnings, etc.), length of contract, rescission period notice, uniform disclosure statement, and more

Staff had said in support of its proposal that, "The draft rules acknowledges, however, that not every piece of direct mail is in fact a solicitation; ARES and AGSs regularly send direct mail pieces to customers which are intended to induce the consumer to seek additional information via the AGS website or through a telephone call. Additionally, some of these mailings can be relatively physically small (as, for example, a post card), limiting the amount of information that can reasonably and legibly be included on them."

The AG and CUB said that, "Staff’s approach, however, is fundamentally flawed in that it acknowledges one possible issue, post cards or a two-sided mailer, to excise from the draft rules every way the rules attempt to ensure that consumers are fully informed about the services and products ARES and AGS solicit them to purchase ... Staff’s draft rules presume that all direct mail is either physically small or on a single double-sided mailer. This is just patently untrue ... The direct consequence of Staff’s flawed approach is contravention of the plain legislative intent of the HEAT Act."

The AG and CUB propose that all Sections 412.110 and 512.110 [Minimum Contract Terms and Conditions] disclosures shall be made in direct mail pieces, "unless the direct mail is a single-sided or double-sided one-page mailer that does not require an envelope and does not make any reference or statement about prices, terms, or conditions in which case such direct mail shall include at least the disclosures required in Section 412.110 (a), (b) and (n)."

Disclosure Of Price To Compare In Variable Rate Notices & Supplier Rate Histories

The Staff draft would require the utility's current price to compare (or utility gas supply cost) to be disclosed by the supplier as part of: 1) the required 20% variable rate increase notice; and 2) the required disclosure of variable rate history (including rollover variable rates)

RESA opposed these proposals as beyond the requirements of the HEAT Act

"Staff’s Proposed Rules add a requirement that ARES disclose the PTC in both the notice required by Subsection 412.165 (e) and the one-year history of variable products required by Subsection 412.165 (h). RESA opposes these proposals. First, they go beyond the requirements of the HEAT Act," RESA said

Additionally, RESA said that the comparison of the ARES’ price to the electric utility’s default price is not an apples-to-apples comparison because the ARES’ price may be for a premium product. "In addition, the electric utility’s supply rates are subsidized by its distribution rates so, again, this is an unfair comparison," RESA said

"[W]ith respect to Subsection 412.165 (h), a one-year history of the ARES’ variable rates is not a predictor of future rates, nor is it relevant to the current PTC," RESA said

In separately filed comments, CleanChoice Energy, Inc. likewise said, "Disclosing the current PTC alongside historical pricing information is a clear example of an apples-to-oranges comparison. A customer examining a variable rate from a year ago should not be comparing that rate to the current PTC. Encouraging a customer to engage in that comparison by requiring the inclusion of the current PTC with that historical pricing data seems tantamount to encouraging the customer to misunderstand the relevant pricing data or to assume a non-existent correlation between historical and current rates. CleanChoice does not support a rule that seems likely to facilitate misunderstanding."

"The HEAT Act establishes clear circumstances when the PTC disclosure is required (i.e., in certain marketing materials). This is not such a circumstance. The PTC disclosure is long and detailed, and requiring its inclusion in non-marketing materials or in multiple places throughout the customer experience does not provide a meaningful benefit to customers, risks confusion, and creates an inappropriate regulatory burden on ARESs," CleanChoice said

Docket No. 17-0857, 20-0457

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