Retail Supplier Alleges PSC Staff Accepting "Unsupported" Allegations By Customers In Instances Where Entire Sale Interaction Is Not Recorded (Supplier Notes No Rule Requiring Such Recording)

Supplier Alleges "Ambiguous And Seemingly Arbitrary" Interpretations Of Rules By PSC Staff

Supplier Knocks Staff Practice Of Searching For "Ever-Changing Technical Violation" When Complaint's Initial Allegations Are Not Supported By Evidence

February 28, 2023

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Reporting by Paul Ring • ring@energychoicematters.com

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In an answer to a complaint by Staff of the Maryland PSC, SFE Energy Maryland, Inc. ('SFE' or the 'Company'), SFE alleged that Staff has applied, "ambiguous and seemingly arbitrary interpretations of COMAR contract requirements," and also alleged that the PSC's Consumer Affairs Division (CAD) is accepting "unsupported allegation[s]" of customer complainants in cases where the supplier has not recorded the entirety of the sale interaction

See background on the Staff complaint here

SFE said that it had already in early 2022 implemented various corrective measures that address the matters raised in the Staff complaint

SFE said that the majority of the customer complaints cited by Staff occurred before SFE undertook such corrective actions. SFE said that all but seven of the interactions serving the basis of the Complaint occurred prior to SFE’s enhanced compliance measures.

SFE voluntarily undertook such corrective actions because such actions were being implemented by Statewise Energy Maryland LLC (Statewise), and SFE and Statewise have common ownership. Statewise undertook the measures as the result of a settlement with PSC Staff

For example, SFE said that it "fully complied" with Statewise Settlement requirements that the sales agreement must include terms and conditions immediately followed by a signature portion which must be separate from the contract summary.

"Specifically, in the electronic version of the agreement, SFE created a single PDF document which contained only the terms and conditions of the agreement followed by the signature page," SFE said

However, SFE alleged that CAD still found that such contract format was not compliant with COMAR

SFE alleged, "Despite this compliance, CAD and Staff still determined that the format was invalid in complaint 00035931, finding that the signature page 'is considered your electric and gas Contract. However, this Contract does not include all of the material terms and conditions.'"

"This confounding interpretation required CAD to actively, ignore the terms and conditions directly preceding the signature page, leading to the conclusion that compliance requires the terms and conditions and signature portion of the agreement to consist of a single page," SFE alleged

"When SFE contacted Staff to attempt to find a resolution or insight on the seemingly implausible interpretation, Staff failed to respond," SFE alleged

"SFE submits that its strenuous good faith efforts to operate in full compliance are substantially frustrated by Staff’s seemingly arbitrary interpretation of COMAR and its failure to communicate with SFE thereon," SFE alleged

SFE also alleged that CAD is accepting "unsupported allegations" of misrepresentation

In one example complaint cited by SFE, SFE alleged, "CAD held that despite SFE’s best efforts to the contrary, deceptive enrollment practices occurred based on solely on unsupported allegations and contrary to the actual evidence presented."

With respect to the complaint, SFE alleged, "In response to the complaint, SFE submitted to CAD a copy of the signed contract, along with the electronic TPV ('eTPV') in which the customer confirmed that the sales representative presented him with an SFE badge and business card, that he understood the representative was not with the utility, that savings were not guaranteed, and confirmed signing the contract. Furthermore, SFE submitted that the customer completed a quality assurance call in which they confirmed signing the contract. Significantly, the customer remained under the contract for approximately 9 months (~285 days) and appears to have requested cancellation only after failing to realize the cost savings they hoped for. Upon request, SFE promptly cancelled the customer’s contract and waived the early termination fee as a customer service gesture. It was only after SFE denied reimbursement of costs in excess of utility rates that the customer submitted the complaint to CAD."

SFE further alleged, "In another complaint, CAD found misrepresentation had occurred based on the customer’s assertion that SFE’s sales representative misrepresented themselves at first contact. The customer stated they believed the representative was from their utility and did not understand a transfer had occurred despite confirming knowledge that the representative was not the utility and that they were entering the contract on both the TPV and quality assurance call. Upon review, CAD found the enrollment was valid, but determined misrepresentation occurred, again, based solely on the customer’s unsupported allegation, which directly contrasted evidence presented."

Notably, SFE alleged, "In so finding, CAD stated that because there was no recording of the first contact with the customer to prove otherwise, CAD would rest its findings on the unsupported allegations of the customer."

SFE alleged, "It is critical to note that there is no statutory or regulatory requirement that a sales representative must record first contact with a customer. SFE fully complied with the actually applicable requirements and validly enrolled the customer, which CAD nonetheless found to be in violation based on unsupported allegations and against conflicting evidence."

SFE also alleged instances in which CAD found that the complainant's specific allegations were not supported, but CAD found SFE's contract invalid for reasons not raised by the customer complaint

SFE criticized Staff's alleged practice in which Staff concludes that the customer did not support their specific allegation but nonetheless Staff "searches the record" to, "find some ever-changing technical violation to determine the sale invalid," such as the above-described contract formatting interpretations

As an example, SFE alleged, "Remarkably, Staff also cites to a complaint under subsection C which was filed almost six years after the cancellation of the contract at issue. In CAD No. 00033012, the customer alleged in 2021, an unauthorized enrollment in a contract dating to 2015 which was subsequently cancelled 3 months later. CAD passed on the customers allegations and instead found the contract invalid for failure to obtain a contract signed in writing. The delay of the complaint in and of itself intimates impropriety, notwithstanding Staff’s unfortunate efforts to assert a short lived contract dispute which had run its course some 6 years in the past."

"Regardless of the agency’s policy background mandates regarding customer protections, it is unfair and inconsistent with 'good faith' to convert an invalid complaint into a COMAR violation," SFE said

"This is especially so against the good faith backdrop of SFE’s (unanswered) requests for clarification on CAD’s contract concerns and its voluntary outreach to CAD regarding complaint trends," SFE alleged

"The growing trend of supplier litigation around contract formation issues suggests a rulemaking approach is both warranted and necessary to address this issue," SFE said

"SFE would wholeheartedly participate in such a process," SFE said

Turning back to its compliance history, SFE said that, "The overwhelming majority of the customer complaints cited in the Complaint arose prior to the Settlement and SFE’s subsequent implementation of the enhanced compliance measures. By SFE’s count, the complaint alleges 54 complaints which arose from 47 customer interactions, 40 of which arise from customer interactions prior to the Settlement becoming effective on January 10, 2022."

"SFE, in all of its business efforts, maintains the highest level of regulatory compliance and customer satisfaction, and holds itself to the highest consumer protection standards through cutting edge consumer protection protocols which exceed Commission regulations. Furthermore, SFE strenuously maintains robust and comprehensive training, oversight, and compliance mechanisms. This is evidenced by SFE’s significantly low complaint record [number redacted by SFE in public filing] in comparison to its total sales activity," SFE said

More specifically addressing the actions SFE voluntarily undertook starting in January 2022 due to the settlement approved by the PSC with respect to SFE's sister company Statewise, SFE said its actions included the following:

• Enhanced enrollment authorization measures: SFE modified its TPV to permit only account holders of record to enroll and trained its sales representatives to confirm the customer is the authorized account holder by reviewing a copy of the utility bill, which they are only permitted to review after a customer agrees to proceed with enrollment. Furthermore, SFE has fully implemented EDI transactions or other written communication with the utility to confirm the customer is the authorized account holder. See Exhibit G. In circumstances where the utility data indicate the enrolling customer is not the account holder of record, the sale is cancelled.

• Ensuring Contract Form and Cancellation Notice Compliance: SFE implemented changes to comply with these requirements by providing the customer a separate PDF contract summary; a consecutively paginated document with the terms and conditions, including a signature block at the end of the terms and conditions that is provided as one PDF document to ensure the consumer knows it is a single document and therefore a complete contract; and the appropriate Notice of Cancellation paragraph appears in close proximity to the signature block and the full Notice of Cancellation is provided with appropriately filled in fields. See Exhibit H and Exhibit N.

• Ensuring No Appearance of Misrepresentation: SFE sales representatives provide all customers with a business card at the point of sale with the Company logo which reads, 'SFE Energy is NOT the utility.' See Exhibit I. Furthermore, the customer is now required to read this statement aloud during the TPV process, which also affirmatively requires the customer to confirm their understanding that SFE is not the utility.

Since adopting these measures, SFE said that it, "has seen a remarkable drop in customer complaints of approximately [number redacted by SFE in public filing] percent."

"Significantly, all but seven of the interactions serving the basis of this Complaint occurred prior to the Settlement and SFE’s enhanced compliance measures. As an indication of the efficacy of these enhanced measures, in one of the few complaints alleging misrepresentation after the Settlement and implementation thereof, CAD found in favor of SFE on that issue, favorably noting SFE’s enhanced compliance measures. See CAD No. 00036860, Closing Letter ('I find that your enrollment is valid.'). Therefore, Staff has already gained the benefit of enhanced regulatory obligations on SFE without the necessity of bringing the Complaint," SFE said

SFE said that it reached out to the Director of CAD via email on November 11, 2022, to follow up on a call received by SFE’s attorney on October 28, 2022, from the Office of Staff Counsel inquiring about a recent observed increase in the complaint rate of SFE.

"During the call, SFE reviewed the findings of its report, which revealed the recent spike in consumer complaints was an aberration," SFE alleged

"Based on its investigation, SFE believed that most of the enrollments underlying the complaints were compliant with Commission rules, and a few were due to unique factual circumstances, human error and the recent volatility in energy commodity pricing. Of the 23 complaints received from July 1 2022-November 30, 2022, as of the date of the meeting SFE had received 16 'final decision letters' from CAD, half of which were in SFE’s favor," SFE alleged

"In response to the increased complaint activity, SFE also undertook further remedial measures. Specifically, SFE retrained sales representatives, and scheduled field shadowing to ensure that the sales representatives are abiding by the applicable COMAR regulations and SFE’s policies," SFE said

"At all times through the instant complaint review process with CAD, SFE was forthcoming with all necessary and requested information per its comprehensive complaint review process. See Exhibit F. Pursuant to its complaint review policy, it provides customers and CAD with all documents comprising the sale and agreement as well as the third party verification ('TPV'), as well as any documented communication with the customer and the SFE investigation report. See Id. Furthermore, regardless of the merits of the complaint or CAD determination, SFE in virtually all instances provided the relief requested by the customer as a good faith gesture of customer service," SFE alleged

"Of the 136 complaints asserted by Staff in the Complaint, the exact number found in favor of SFE is somewhat difficult to calculate given Staff’s error in calculating the number of complaints found against SFE. See § VIII(A), Infra. However, based on the numbers provided in the complaint, at least 80 complaints were found in favor of SFE," SFE alleged

"Of the remaining, Staff allege a broad sweep of violations -- which, in a majority of instances, are unrelated to the substance of the initial customer complaints," SFE alleged

SFE said that 10 of the 16 complaints relating to minimum contract requirements all occurred prior to the Statewise Settlement and SFE’s implementation of the enhanced compliance measures described above

"SFE holds itself to robust, comprehensive consumer protection and compliance standards in accordance with all regulatory requirements. SFE is proud of its efforts to acknowledge and implement progressive compliance reforms beyond that which is required of the Company. The evidence shows that the vast majority of SFE’s customers are satisfied with the products and services offered, and the complaints at issue in this matter represent only [number redacted by SFE in public filing] of contracts executed by SFE between January 1, 2020 and September 30, 2022. This extraordinarily low volume of complaints leads to the conclusion: that SFE’s comprehensive training, oversight, and compliance mechanisms are working as designed. The small percentage of complaints are handled through internal monitoring, auditing, training, and employee counsel and discipline protocols on par with the best practices in the industry in both form and application. Because the complaints and matters at issue have been satisfied and resolved, the Complaint should be dismissed. SFE always strives for continual improvement to its business practices and is more than willing to work collaboratively with Staff to make any additional and appropriate clarifications or adjustments as are deemed necessary," SFE said

Case 9690

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