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PSC Stays Recent Order Which Had Required Retail Supplier To Return Customers Enrolled Via Telesales To Default Service
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The Maryland PSC has granted a stay of its recent order which had, among other things, required that SmartEnergy Holdings, LLC
d/b/a SmartEnergy (“SmartEnergy” or the “Company”) return its customers enrolled through telesales to default service and which had ordered certain customer refunds
As first reported by EnergyChoiceMatters.com, the PSC found that SmartEnergy failed to comply with the Maryland Telephone Solicitations Act's (MTSA) contracting requirements for contracts based on telephone solicitations, with the PSC finding, based on the specific facts of this case, that SmartEnergy's at-issue enrollments did not qualify for an exemption from the MTSA requirement that contract made pursuant to a telephone solicitation be reduced to writing and signed by the customer
See more details on the PSC's findings and order here
SmartEnergy has appealed the PSC's order in Montgomery County Circuit Court, and sought a stay pending such appeal
The PSC granted a stay subject to terms similar to those proposed by SmartEnergy
Specifically, under the stay:
• Continuing a current prohibition, SmartEnergy is prohibited from adding or soliciting new customers
in Maryland until the earlier of a further order of this Commission or until the conclusion
of any appeals taken by SmartEnergy or any other party responding to SmartEnergy’s
Petition for Judicial Review
• SmartEnergy shall cause to be filed with the Commission proof of additional financial security in the amount of
$2.5 million -- in the form of a surety bond, irrevocable letter of credit or other facility --
that guarantees remittance of funds to the Commission to satisfy customer refunds (if
any) directed by the Commission pursuant to the prior order
• The additional financial security directed by the Commission in this
Order shall remain in place until the conclusion of any appeals taken by SmartEnergy or
any other party responding to SmartEnergy’s Petition for Judicial Review
SmartEnergy has said that the additional security of $2.5 million -- an amount proposed by SmartEnergy -- is higher, as of January 2021, than the cost to SmartEnergy to refund all customers enrolled during the complaint period.
In seeking a stay, SmartEnergy had said, "SmartEnergy, among other things, will
suffer irreparable harm if the stay is denied, and other parties will not be substantially harmed by
the stay, and the public interest will be served by granting the stay." SmartEnergy
said in a filing that it is likely to prevail on the merits of the appeal.
SmartEnergy said in a filing with the circuit court, "Based on a novel, specious, and wholly incorrect extension of current law,
SmartEnergy, a retail energy business in Maryland committed to providing 100% renewable
energy, would have to return, re-rate, or refund thousands of customers in a matter of days. Unless
this Court grants a Stay, SmartEnergy would lose all of its Maryland business, be required to pay
out approximately $6 million in unwarranted refunds, irreparably damage its creditworthiness,
damage its shareholder investments, and potentially have its financial support withdrawn, all
before even having an opportunity to argue its case before a neutral, independent judicial body."
"Competitors are keenly aware of the business opportunity that
the Commission wrongfully created: competitors are already contacting SmartEnergy to demand
that it drop its customers by April 6, 2021," SmartEnergy said in the court filing
In a court filing, SmartEnergy said that, under the MTSA, a "telephone solicitation" is defined as "the attempt by a merchant to sell or lease consumer goods, services, or realty to a consumer
located in this State that is: (1) [m]ade entirely by telephone; and (2) [i]nitiated by the
merchant."
In a court filing, SmartEnergy said, "SmartEnergy's client-acquisition model is simple: the Company sends
postcards to potential customers, and interested customers voluntarily choose to call the Company
to inquire about its services. SmartEnergy does not make outbound telephone sales, but rather,
only accepts inbound customer calls in response to postcard advertisements."
"Under a plain
reading of the statute, an 'attempt to sell' initiated by anyone other than the merchant would, by
definition, not qualify as a 'telephone solicitation.' Moreover, the Commission's own Consumer
Affairs Division sent SmartEnergy letters reflecting the very same interpretation of the MTSA and
the Commission's own website warned customers that if they call suppliers, solicitation rules do
not apply. In every instance-until now-the plain reading of the statute controlled," SmartEnergy said in a court filing
SmartEnergy in the court filing said, "The present Order is a classic example of the Commission attempting to
create or rewrite unambiguous legislation. The Commission, in ignoring binding precedent, forced
its own judgment over that of the General Assembly and rewrote and extended the clear-cut two-factor
test to offer an alternative mechanism for an 'attempt to sell' to qualify as a 'telephone
solicitation.' According to the Commission, when 'in-bound calls' to the Company are 'initiated
by the Supplier using allegedly false and misleading direct mail advertising, and where it was only
during the call that the customer was made aware of all terms and conditions of the Supplier's
service,' the MTSA shall apply."
"Even with the Commission's wholesale rewrite of Maryland law,
SmartEnergy's actions do not fit the bill: either (1) the attempt to sell includes the postcard, in
which case the solicitation is not 'made entirely by telephone'; or, (2) the attempt to sell
includes only the telephone call, which in this case was 'initiated' by the consumer and not
SmartEnergy. In fact, the Commission even acknowledges that, in its view, 'SmartEnergy
initiated the attempt to sell' not by telephone, but by sending postcards," SmartEnergy said in the court filing
In an affidavit filed with the court, the CEO of SmartEnergy said, "During the complaint period, the company enrolled over 34,000
Marylanders, and the PSC received only 34 complaints from these consumers. The Maryland PSC
keeps a watch list of retail electric suppliers with a high ratio of complaints, and SmartEnergy has
never been on that list. We also have an A+ rating with the Better Business Bureau. Consumers
and the outside world are quite happy with the service we provide, yet The Order would have a
substantial deleterious effect on our Goodwill."
In an affidavit filed with the court, the CEO of SmartEnergy said, "SmartEnergy has a purpose-built structured financing package provided by
a Fortune 50 energy company. The Order may cause a series of events that would result in the
company having its financing withdrawn, and the company cannot operate without this credit
facility."
In an affidavit filed with the court, the CEO of SmartEnergy said, "When SmartEnergy received financing, we provided a material number of
warrants as part of our global agreement. Additionally, we agreed to numerous debt covenants
that, if triggered, threaten severe damage to the company's well-being and its shareholders'
investment. The Order as drafted is likely to have the effect of causing such events to unfold."
PSC Case 9613
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In Seeking Stay, Supplier Said That PSC's Order Could Have Caused Supplier's Financing To Be Withdrawn
April 9, 2021
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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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