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Regulator Issues $750,000 Notice Of Violation (NOV) To Retail Supplier That Would Require Return Of All Customers To Default Service If Adopted As Final

May 4, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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The Connecticut Public Utilities Regulatory Authority (Authority or PURA) issued a Notice of Violation and Assessment of Civil Penalty to Mega Energy of New England, LLC (Mega or Company) under which PURA would adopt, among other things, a $750,000 fine and which would require Mega to return all customers to standard service

The NOV does not represent final agency action and Mega may request a hearing to contest the Notice of Violation (NOV)

Mega Energy provided the following statement concerning the matter:

"Mega Energy is reviewing the notice and underlying facts and will be submitting a response in accordance with PURA procedures."

--- Statement from Mega Energy

The NOV would suspend Mega's license and also require Mega to pay restitution to all customers enrolled by a specific third-party vendor, in the amount of the difference between what the customers paid Mega and what they would have paid on the standard service rate

In the NOV, PURA stated, "the Authority has found evidence that Mega’s marketing contained unfair or deceptive marketing practices and has reason to believe Mega violated 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(j), 16-245s, and 42-110b."

In the NOV, PURA stated, "In the numerous Mega marketing calls reviewed by the Authority, the Authority found that Mega consistently failed to state the standard service rate at any time during the marketing transaction, as required by Conn. Gen. Stat. §16-245o(h)(3)

In the NOV, PURA states, "The rate in Mega’s calls consistently was 10.9 cents per kWh, which Mega most often phrases as 'only 10.9 cents,' implying it is a good rate. During the time frame in which these calls were made (late 2020 and early 2021), Mega’s rate would have been higher than standard service for either electric distribution company (EDC). The Authority has reason to believe that by not disclosing the standard service rate Mega deceived customers into accepting an offer that was substantially more than standard service."

In the NOV, PURA states, "While this practice is illegal at any time, it is also unethical, particularly during a pandemic, when many customers are struggling financially and cannot afford to pay more than standard service for their electricity."

In the NOV, PURA states, "Because Mega failed to state the standard service rate in its marketing, the Authority has reason to believe that Mega violated the Marketing Standards and Conn. Gen. Stat. § 16-245o(h)(2)(A). Suppliers are required to state the standard service rate so customers have a basis of comparison for the rate the supplier is offering. Most customers are unaware of the standard service rate and without the supplier stating it the customer cannot understand the value, or lack thereof, of the supplier’s offer. This is exhibited quite clearly in a call in which Mega tells a customer she is signing her up for a 10.9 cents per kWh rate and the customer says, 'Oh wow! Nice.' ... Had Mega also told the customer the price of standard service was 8.391 cents per kWh, and that she was actually paying more than standard service by enrolling with Mega, the customer might not have been so excited about Mega’s offer and might not have enrolled with Mega."

The NOV also alleges various violations of third party verification requirements.

Among other things, the NOV states, "The Authority’s Marketing Standards make it clear the agent must leave the call when the TPV begins and cannot remain on the line during the TPV. Despite this requirement, the Authority has reason to believe Mega’s agents remain on the line during the TPV. In multiple TPVs, if the customer has a question or answers negatively to the TPV agent’s question, the TPV then stops and the Mega agent rejoins the call. In these instances, the Mega agent clearly has been listening to the TPV because the agent knows exactly what the customer said in the TPV, explains the 'correct' answer to the customer, and begins another TPV."

The NOV states, "The evidence also indicates that Mega’s agents violated the Marketing Standards and Conn. Gen. Stat. § 16-245s by instructing customers not to ask questions during the TPV and to hold their questions until the TPV is finished."

One example cited in the NOV alleges that the agent informed the customer concerning the TPV process, "Don’t ask any questions to the verifier or they will be stopping your benefits on this call."

"As the Authority has stated, 'a customer that does not understand the transaction should not be engaging in a TPV that results in a contract.' ... A customer that has a question should still be engaged with Mega and should not be in the verification process. It violates the purpose of an independent verification if Mega puts off a customer’s questions until after the TPV because by that time the customer has already enrolled," the NOV states

The NOV states, "Moreover, pursuant to the Marketing Standards the TPV should not continue if the customer has a question, yet when a customer asked during the TPV if she would be paying 'lower for my kilowatt usage hour than I already am,' the TPV verifier told her she could not ask the question and continued with the TPV."

The NOV states that the actions of a specific agent, "are suspect."

The NOV states, "Worse still, Mega agents berated customers for asking questions during a TPV and causing the TPV to stop. For example, in [one example], during the 35 minute call the agent became increasingly agitated with the customer as the customer had questions during TPVs and caused multiple TPVs to stop. At one point the Mega agent came back on during a TPV and told the customer, 'I told you 5000 times that you have to say ‘no’ to that question.' The customer said, 'I can’t understand what she is saying,' and Mega’s agent replied unsympathetically, 'Then you have to listen carefully.' By the end, the agent curtly told the customer, 'This is your very last time, ok, very last time. If you do [anything] you will be disqualified from the benefit… This is your last time and after this I’m not responsible for disqualifying you from the benefits. I’m not responsible. This is your last time.' ... Customers should not be made to feel it is wrong to ask questions regarding a contract into which they are entering. The Authority has reason to believe that had Mega’s agents fully explained the transaction prior to the TPV the customer would have understood and not continued to have questions during the TPV."

The NOV states, "In many of his calls he asks the customer if they have more than one floor in their house and then makes the customer perform a TPV for each floor of their house, causing customers to perform multiple TPVs when signing up only one account ... Although the customer’s address and phone number are contained in these TPVs, as noted, the customer’s name and account number are not. Agent [] continues this requirement of multiple TPVs even when a customer explains to him repeatedly that they have a single family home with only one meter, telling the customer the TPV will read the address as 'Floor 2.' ... Agent [] even seeks out floors where they do not exist, asking one customer who said her house was single-story if she had a basement. When she replied she did Agent [] had her conduct a TPV for the basement too."

The NOV states, "The Authority has reason to believe it further violates the purpose of an independent TPV if Mega instructs the customer how to answer the questions, yet throughout the recordings the Authority heard Mega’s agents telling customers what questions the TPV agent was going to ask and how to answer them."

The NOV states that, "the record has numerous examples of Mega’s marketing violating Conn. Gen. Stat. § 16-245o(h)(2)(a) by not explaining the purpose of the solicitation and Conn, [sic] Gen. Stat. § 16-245o(h)(3) by implying the customer must choose a supplier."

The NOV states, "The Authority has reason to believe the pattern of all of Mega’s telemarketing calls violate Conn. Gen. Stat. §§ 16-245o(h)(2)(A), 16-245o(h)(3), and the Marketing Standards: the agent initially says he or she is an energy consultant with Mega Energy, asks if they are speaking with the individual authorized to make changes to the electricity account, asks if the customer is receiving government assistance or has solar panels, then tells or congratulates the customer that they are 'qualified' for Mega’s 'price protection' and they should 'go and grab a pen and paper' to write down their 'new fixed rate.'"

"In no call did Mega begin by stating that Mega was not associated with the EDC or that the purpose of the call was to change the customer’s electric supplier," the NOV states, citing a prior PURA order which requires, "When conducting outbound telesales calls to all residential customers or potential residential customers, each Electric Supplier shall begin by immediately stating: (A) that they represent the full name of the Electric Supplier conducting the call; (B) that the purpose of the call is to switch the customer’s electric supply service to the full name of the Electric Supplier conducting the call; and (C) that such Electric Supplier does not represent and is not affiliated with the customer’s local utility company."

The NOV states, "The Authority also has reason to believe that by stating the customer needs to 'verify' their utility account number rather than 'provide' their account number, it implies that Mega already knows the customer’s account number. This adds to a customer’s confusion that the transaction must occur or is sanctioned by the EDC, and that Mega has the same information regarding the customer as their EDC does."

Of note, the NOV states, "In every call, Mega’s agent tells the customer their 'new fixed rate' before the customer agrees to contract with Mega. In fact, in all of the calls Mega’s agents instruct the customers to write down their new fixed rate and the supplier it is with before even asking the customer if they want to switch suppliers. This progression through a call implies that the customer must switch suppliers. It is to no avail that Mega later asks the customer if they want to enroll with Mega; by the time the agent reaches that question, which should occur at the beginning of the phone call, the agent has already instructed the customer that Mega is their supplier giving them their new 'fixed rate.' Because Mega does not explicity [sic] state the purpose of the marketing call, and because it is not until late in the call that Mega asks the customer for permission to enroll them and tells them Mega is not affiliated with the EDC, after Mega’s agent has already told the customer they are enrolling, the call implies that the customer must enroll with Mega. A quick, and sometimes hardly-understood, question regarding assent to enroll three minutes into a marketing call cannot overcome the confusion Mega’s agent has already sown with the customer."

Also of note, the NOV states, "The Authority has reason to believe that Mega deceives customers through its marketing and has misrepresented the price a customer is paying to other suppliers. For example, in [example], the customer attempts to explain to the agent that he has a new supplier and will be paying 7.9 cents per kWh. The agent then tells the customer that he is paying the old supplier rate of 9.9 cents per kWh, plus the new rate of 7.9 cents per kWh. ('You are paying both charges right now.') As the customer continues to question the agent’s confusing explanation, the agent proceeds to explain to the customer that Mega’s rate of 10.9 cents per kWh is far better than the 18 cents he is paying with his current supplier, and the agent tells the customer, 'There is no rate of seven cents in the whole U.S.,' and that the rate the other supplier has offered the customer is a variable rate. According to the agent, Mega is calling the customer to 'fix that problem' on his bill. The customer remains confused and insists on receiving a number at which to call Mega so he can investigate what Mega’s agent has told him. In reply to this, the Mega agent tells the customer he can 'just call Eversource then.'"

The NOV states, "In other calls, Mega can be heard explaining to the customer that the call regards a 'customer assistance program' for which only certain customers are qualified ... (the agent specifically states that he believes the customer is a senior citizen and implies this qualifies him for the 'program'). The agent then tells the customer that they need to 'apply the benefits' to the customer’s bill ... Further, when the Mega agent tells the customer he will be paying a $0 monthly service fee with Mega, the customer asks what he is paying now, to which the Mega agent purports to look it up and then tells the customer he is paying 'almost 14.75 cents per kWh' and 'now it is going to be 10.9,' which the agent explains will save the customer 30-35% on his bills ... The customer then asks if this is one of those providers that raises their rates and asks what happens after twelve months. Mega’s agent never answers ... When the agent later asks for the customer’s email address the customer states that Eversource has it on file, to which the agent asks the customer if he can please 'confirm' it again and tells the customer 'we are not that department.' ... A reasonable customer hearing such a reply would incorrectly assume Mega was affiliated with Eversource."

The NOV states, " This particular call is concerning regarding the outright dishonesty displayed by the agent. The customer, an elderly woman, asks multiple times in multiple ways, 'You’re not taking me off of Eversource?' to which Mega replies, 'Not at all. Nobody can change you.' The customer later states, 'I think I’m getting too deep with you. I don’t know if you are really Eversource. I mean, I’m still with Eversource, am I not?' to which Mega replies again, 'Nobody can change the company.' The customer asks, 'Are you putting me with another company?' and Mega replies, 'No, ma’am.' Mega then later tells the customer, 'The only difference is you are going to pay some lower and better fixed rate.' The customer states multiple times that she is confused, and then specifically says, 'You have me confused as to Mega Energy. I don’t know what that is.' Mega responds, 'This is the program name actually. You don’t need to worry about that.' It is abundantly clear that this customer does not understand what an electric supplier is and is unable to knowingly enter into this contract with Mega, yet the agent proceeds for twenty-seven minutes trying to contract with this customer. The Authority has reason to believe practices like these violate Conn. Gen. Stat. § 16-245o and the Marketing Standards."

Of note, the NOV states, "The Authority also believes that telling the customer they 'qualify for a fixed rate program' and offering them 'price protection' deceives the customer regarding the transaction. Customers receiving standard service are already on a fixed rate program that is price protected (i.e., fully regulated by the Authority). Phrases such as these are used consistently throughout all of Mega’s marketing calls reviewed by the Authority and are deceptive on their own. When coupled with Mega’s failure to state the standard service rate, they become even more confusing to customers, leading customers to believe they have qualified for a benefit rather than a rate higher than they would pay with standard service. Further, this violation is compounded by the blazing speed with which Mega’s agents often explain that Mega is not affiliated with the EDC."

The NOV alleges violations relating to the notice of the rescission period, stating, "Throughout the calls Mega consistently fails to explain the three-day rescission period to customers. Worse, Mega incorrectly tells customers that the EDC will send them a confirmation and they have seven days from receipt of that to rescind the contract."

The NOV states, "the record indicates Mega violated Conn. Gen. Stat. § 16-245o(h)(1) and the marketing standards by not properly monitoring and training its agents."

The NOV states, "The information gathered throughout this investigation gives the Authority reason to believe that one of the causes of Mega’s deceptive marketing is that Mega consistently does not bother to enforce the Marketing Standards. For example, the Marketing Standards require a TPV to be discontinued if the customer asks a question, but the record indicates examples of this policy being violated. The Marketing Standards require the agent to state the standard service rate, but Mega’s agents do not. As noted above, Mega’s own auditing did not cite to these violations or others the Authority found throughout Mega’s marketing. Without either the ability or the will to police itself, Mega’s marketing mirrors that of other suppliers found in violation of Conn. Gen. Stat. § 16-245o and the Marketing Standards."

The NOV states that Mega’s Connecticut gross revenue in 2019 was more than $3,000,000.

As noted above, the NOV would provide that Mega’s electric supplier license is suspended for five years and further order that, "Mega must immediately return all customers to standard service and issue a correspondence to those customers indicating they are being returned to standard service because Mega no longer maintains a valid Connecticut electric supplier license."

If Mega’s license is reinstated after its suspension, Mega will be subject to auditing of all its marketing for two years from the date it resumes marketing, the NOV provides

Docket No. 13-03-09

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