Md. OPC Requests Inquiry into Independent Contractor Licensing Question, Plus Review of Consumer Protection Regs

The Maryland Office of People's Counsel recommended that the Maryland PSC, "open a generic inquiry into the question [of] whether independent representatives require separate broker licenses," due to the rise of network marketing and similar models by competitive energy suppliers and brokers. OPC's recommendation was made with respect to both the electric and natural gas retail markets, and was prompted by the application of Utility Choice International for broker licenses for each commodity (see earlier coverage and Staff comments on independent contractor issue).

Furthermore, regardless of whether such independent contractors should be licensed, OPC said that the increasing use of a network or direct marketing model relying on independent representatives, "signals the need to evaluate whether the existing supplier consumer protection regulations are sufficient to address consumer protection issues raised by such a model."

"In sum, OPC believes that it is important at a minimum for the Commission, the Office of Attorney General, OPC - but most important, for residential customers - that clarity be provided as to the relationships among the various business entities involved in supplying competitive electricity and gas to residential customers (for example, a customer may have relationships with 4 businesses in this model: Independent Representative; Broker; Supplier and Utility). Furthermore, it is imperative that the customer understand who is working for whom when approached by a broker or an independent representative. An inquiry or new rule-making proceeding would be an appropriate vehicle," OPC suggested.

OPC characterized these marketing models as relying on the recruitment of other "members" through existing familial, friends, and neighbor networks of existing members to act as independent representatives. "OPC employees have received telephone solicitations and email referrals to join companies (not Utility Choice International) as 'home-based' independent representatives, and have observed similar recruitments in print. There is some concern by OPC that the emphasis in these types of solicitation models can be as much, if not more, on recruiting or enrolling 'representatives,' as on the underlying energy supply services that are being provided to residential consumers," OPC said.

In the meantime, OPC asked that Commission Staff make uniform inquiries to all broker applicants to determine whether a network marketing model, "or similar model involving independent contractors," will be used by the broker. Furthermore, OPC recommends that the Commission state in its letter orders approving broker licenses that the brokers are, "fully responsible for the marketing, soliciting and contracting activities of any independent representatives used by the broker."