Notice of Violation Would Require Retail Supplier To Drop Customers To Default Service, Impose $1.5 Million Fine -- EnergyChoiceMatters.com

Notice of Violation Would Require Retail Supplier To Drop Customers To Default Service, Impose $1.5 Million Fine

Alleges Supplier's Agent Conducted Door-to-Door Marketing During Prohibition On Such Marketing During Pandemic

March 16, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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The Connecticut Public Utilities Regulatory Authority (Authority or PURA) issued a Notice of Violation and Assessment of Civil Penalty (NOV) against Residents Energy, LLC (Residents or Company), in which the Authority seeks to fine Residents in the amount of one million five hundred thousand dollars ($1,500,000), and suspend Residents’ electric supplier license for eighteen months pursuant to Conn. Gen. Stat. § 16-245(k) and § 16-245o(k), under which Residents' current customers must be returned to standard service

The NOV does not represent final agency action, and Residents has a right to a hearing to contest the NOV

A Company Spokesperson for Residents Energy provided the following statement concerning the matter:

"We believe the allegations by the Public Utilities Regulatory Authority (PURA) do not accurately portray the facts on the ground. We look forward to working with PURA during this phase to show that Residents Energy’s strict Compliance policies and procedures indeed guided its actions in good faith and in accordance with State Rules and Regulations."
--- Statement from Company Spokesperson for Residents Energy

Among other things, the NOV alleges that a vendor of Residents Energy violated PURA's order in Docket No. 14-07-20RE01 prohibiting door-to door marketing during the pandemic

The NOV alleges, "Despite being clearly aware of this prohibition on door-to-door marketing," a Residents’ vendor began engaging in door-to-door marketing on behalf of Residents in August 2020

"The Authority has reason to believe that Residents violated the ban on door-to-door marketing during the pandemic, violated Conn. Gen. Stat. §§ 16-245 and 16-245o by not properly monitoring and managing the marketing activities of its vendors, violated the Marketing Standards’ requirement to record all door-to-door marketing, violated Conn. Gen. Stat. § 16-245o by marketing in a location with clearly-posted signs prohibiting trespassing, and violated Order No. 14 of its licensing decision by not filing its reports on a quarterly basis," the NOV alleges

Conn. Gen. Stat. § 16-245o(h)(1) states, "Any third-party agent who contracts with or is otherwise compensated by an electric supplier to sell electric generation services shall be a legal agent of the electric supplier."

The Authority has elaborated on the requirements of § 16-245o(h)(4) in its Marketing Standards, stating, "Suppliers currently are required to have mechanisms in place for ongoing monitoring of their marketing, whether conducted in-house or by third-party vendors..."

The NOV alleges that, based on the evidence in the record, there is reason to believe Residents was not properly monitoring a vendor and as a result did not discover that the vendor was conducting door-to-door marketing until notified by the Authority. The NOV alleges, "Residents admitted that it had not conducted any auditing of either of its Connecticut vendors."

The NOV alleges, "Compounding its violation of conducting door-to-door marketing despite the prohibition, Residents violated the Marketing Standards by not recording the door-to-door marketing it did perform. Pursuant to Section H of the Marketing Standards, 'Each Electric Supplier shall record the entirety of all inbound and outbound telesales calls and door-to-door marketing lasting thirty seconds or longer with all residential customers or potential residential customers, and shall retain such recordings for three years after the date such recording was made.' Docket No. 14-07-20RE01, Decision, Exhibit B, p. 12. In response to EOE-19, Residents admitted, 'Residents did not record any sales transactions undertaken by [vendor] at non-tabletop locations.'"

"The lack of recordings is particularly concerning given the content of some of the complaints. Multiple complaints indicated [vendor] agents stated they were from the electric distribution company (EDC). Residents’ Customer Complaint Logs dated January 26, 2021, p. 4 and 7 (third and fourth quarter logs). Multiple customers complained that the agent told them signing up would lower their bill but it did not. Id. at p. 7. Multiple customers stated the agent would not leave them any information about their enrollment. Id. One customer indicated the agent told her the rate would be $0.07 but it turned out to be $0.0997 after she enrolled, and another indicated the rate turned out to be more than described. Id. Equally concerning, one customer indicated the agents were going throughout his building and some of his neighbors 'do not speak English well and were just signing because the agents were telling them they were with their' EDC. Id.," the NOV alleged

"If a vendor is so unscrupulous that it is willing to conduct door-to-door marketing when it is prohibited during a pandemic, then it is reasonable to assume many, if not all, of the allegations in the complaints are true. If these complaints are correct, they indicate violations of Conn. Gen. Stat. §§ 16-245(c), 16-245(g)(2), 16-245o(f)(2), 16-245o(h)(1), 16-245o(h)(2), 16-245o(h)(3), 16-245o(h)(4), 16-245o(h)(5), 16-245o(h)(7), 16-245o(j), 16-245s, 16-245t, 16-245u, and 42-110b, as well as the Marketing Standards. They also call further into question Residents’ training and monitoring of its agents if its agents use such deceptive tactics to enroll customers," the NOV alleged

The NOV further alleged, "Conn. Gen. Stat. § 16-245o requires door-to-door marketing to adhere to municipal and local ordinances for solicitations. The information submitted by Residents indicates that Residents marketed at 75 and 107 Martin Luther King Drive in New Britain, Connecticut. Response to EOE-6, p. 370-71. These apartment buildings are located within walking distance from the Authority’s office and members of the EOE staff have verified that the apartment buildings have clearly-visible 'No Trespassing' signs on the doors at the entrances to the apartment buildings. As a result, the Authority has reason to believe that Residents not only illegally conducted door-to-door marketing during a pandemic, but ignored the signs on the apartments and marketed at locations in which it was prohibited from marketing."

In seeking the penalties described above, the NOV alleges, "The gravity of these violations is severe. Because Residents did not properly monitor its marketing, third party vendors were going door-to-door to customers’ homes during a global pandemic. This is not only in defiance of the Authority’s prohibition, but it exhibits gross disregard for public wellbeing in favor of Residents’ desire to enroll customers – even worse, to enroll customer at prices greater than standard service at a time when so many customers are struggling financially due to the pandemic."

The NOV alleged, "Residents has cancelled the enrollments and rerated customers enrolled by [vendor]. While this is effective mitigation, it is just that – a solution after the violation occurred. Moreover, it is mitigation caused not by Residents’ own monitoring, but by CAU and EOE alerting Residents to [vendor's] door-to-door marketing. There is no evidence in this docket to indicate Residents would have solved, or even paid attention to, this problem without the Authority’s intervention. There is ample evidence to indicate Residents knew of [vendor's] door-to-door marketing in September 2020; did not audit [vendor] after receiving the September complaint; did not begin its investigation of [vendor] until November 2020; did not terminate [vendor] immediately, but instead postponed marketing due to the pandemic and allowed [vendor] to create a plan to better monitor itself; and has nothing in place to prevent this from occurring with another marketer in the future. Auditing and vendor monitoring plans are only as good as their implementation, which Residents demonstrated in this instance did not occur. Promising to perform better in the future rings hollow when compared with past performance."

The NOV alleged, "When the Authority granted Residents’ electric supplier license, it noted its concern with allegations against Residents in other states. In Pennsylvania Residents had settled a complaint regarding illegal marketing to low income customers. Residents was, at the time of the Decision, under investigation in Massachusetts. [The Massachusetts investigation remained confidential throughout and the Authority was unable to determine its full content]."

"Based on its continued difficulty ensuring its marketing vendors comply with the law, the Authority has reason to believe customers in Connecticut, and Residents, would be best served by Residents’ exit from the market for an extended period. This will allow Residents time not only to ensure that the monitoring plans it has on paper are complete, but to actually implement those plans in the other jurisdictions in which it remains licensed to ensure those plans work in practice," the NOV alleged

"Both Conn. Gen. Stat. §§ 16-245(k) and 16-245o(k) permit the Authority to suspend a supplier’s license if the Authority finds that the supplier has violated § 16-245 or § 16-245o. As detailed above, the Authority finds that Residents has violated these legal requirements, and finds that a suspension of Residents’ electric supplier license for eighteen months from the date this Notice of Violation (NOV) becomes final or from the date of the final decision regarding this NOV, whichever is later, is appropriate. This suspension will allow Residents time to ensure its practices align with its written policies and that it has the ability to sufficiently monitor its marketing before resuming business with Connecticut customers. Residents cannot serve customers while its license is suspended and will need to return its current customers to standard service. Residents will need to inform those customers via their preferred method of communication that its license has been suspended and it is returning them to standard service. Residents must notify the Authority when all of its current customers have been transitioned to standard service. When the suspension has ended, Residents may petition the Authority to reinstate its license. Residents will need to include in that petition evidence that it has not encountered marketing or other violations in other jurisdictions during the suspension and evidence that it has procedures in place to prevent violations, such as the ones in the present case, from occurring again," the NOV alleged

Docket No. 19-08-21

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