PSC Rules Retail Supplier Did Not Slam Customer Due to Customer "Ratifying" Agreement Through Inaction

The New York PSC has ruled that an ESCO did not slam a customer, who claims that the ESCO contract was signed by an employee unauthorized to sign such agreements, because the customer "ratified" the employee's actions by not rescinding the contract, and paying its bill for several months without complaint.

The case involves an agreement to supply Metro Eleven Hotels, which changed ownership shortly after the contract was signed. Specifically, on February 2, 2010, an employee of Metro Eleven, identified alternatively as an "assistant building superintendent" or "low-level custodian" depending on the pleading party, signed an electric and natural gas supply agreement with Just Energy, via wet signature and subsequent taped verification call. The employee certified that they were authorized to enter the agreement.

The property served by the account in question was under a contract for sale at the time the agreement was signed, and acquired by HHLP Duo One Associates LLC on February 10, 2010.

HHLP first complained to Just Energy in November 2010 that the contract was not signed by an authorized party, and filed a complaint with the PSC in January 2011.

Much of the case debated whether or not the employee had authority to sign the contract, including whether "apparent authority" met the Uniform Business Practice (UBP) standard for the, "customer's authorization to change providers."

However, the PSC found that it did not need to answer such question (though it did informally caution ESCOs on reliance on apparent authority, as noted below), because the case could be resolved through the common law doctrine of ratification. Ratification is a common law doctrine concerning agency. It applies, "when an agent acts outside the scope of his or her actual authority, but the agent's acts are later ratified by the principal and therefore attributable to the principal."

In short, the PSC found that, "HHLP ratified the customer authorization provided by the employee who signed the Agreement," and therefore no slamming occurred.

The PSC looked to the actions of HHLP after the agreement was signed. "HHLP's actions, both active -- it paid its monthly bill, including charges for service provided by Just Energy, for at least six months -- and inactive -- it did not voice any objection after receiving letters notifying it that its gas and electricity supplier had been switched to Just Energy, show that HHLP had ratified the customer authorization provided by the Metro 11/HHLP employee on February 2, 2010," the PSC concluded.

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"Pertinent to this case, in order for ratification to occur, the principal must have knowledge of the material facts and intend to ratify the agent's actions," the PSC said.

"In this case, HHLP had knowledge of the material facts. Con Edison sent letters to HHLP at the account's service address, which was also the billing address, notifying HHLP that its energy supplier had been switched to Just Energy. These letters were sent on February 23, 2010, and February 24, 2010, regarding gas and electric service, respectively. Additionally, once Just Energy actually began to provide HHLP's energy supply, on March 23, 2010, and April 1, 2010, for electric and gas service, respectively, Con Edison sent and HHLP paid at least six monthly bills," the PSC said.

"HHLP asserts that Just Energy's name does not appear until the fourth and final page of the monthly bills. However, HHLP ignores the fact that these bills refer to 'ESCO electricity supply charges' and 'ESCO gas supply charges' on the first page of the bill. HHLP similarly ignores the statement on the second page, under the heading 'Your supply Charges,' that its electricity is supplied by Just Energy, with 'Just Energy' in all capital letters. An identical statement appears on the third page, regarding gas supply. Finally, on the fourth page, the bill refers solely to the supply charges from Just Energy. The bill provides the material information regarding the gas and electricity supply agreements, namely the name and contact information for the supplier, as well as the per kWh and per therm commodity charge and the charge for the month. Thus, HHLP had knowledge of the material facts regarding the identity of its energy supplier and the terms pursuant to which its energy was supplied," the PSC said.

"HHLP must also have manifested an intention to ratify the action of its employee. Such intention can, of course, be explicit, however it need not be. As in this case, an intention to ratify the actions of an agent exists when such intention can be inferred from the principal's actions and failures to act. We infer HHLP's ratification of its employee's authorization to switch the energy supplier for HHLP's utility account primarily from HHLP's affirmative action in paying its bill, including the Just Energy charges on a monthly basis for at least six months," the PSC said.

"As explained above, the utility bill sent to HHLP specifically stated that its energy supplier was Just Energy and the costs of that supply. For six months, HHLP paid these bills without objection. HHLP suggests that that this should not be held against it because these 'six or seven invoices' were paid during the transition between the closing on the hotel sale and Hersha's assumption of full management of the hotels.' However, we are not persuaded that the payment by a nonresidential customer with many resources of at least six invoices, occurring over the course of six months, should be set aside because the hotel changed owners two months before the first bill in question," the PSC said.

"Additionally, as we noted above, Con Edison sent two letters to the address on file with Con Edison as the account's billing and service address. These letters notified HHLP that its electricity and gas supplier would be switched to Just Energy. Each letter ended with a statement telling the customer that if it 'did not agree to be enrolled' with the ESCO, or now wished 'to cancel [its] enrollment,' the customer 'must notify us' and the ESCO immediately," the PSC said.

"The UBP requires that the utility send these letters as a protection for customers against slamming. The purpose is for slammed customers to call the utility when they receive one of these letters. As explained above, the intention to ratify an agent's actions can be found when the principal fails to respond when notified of an agent's actions. Accordingly, HHLP's silence after having received these letters is an indication that it intended to ratify the customer authorization to switch energy suppliers," the PSC said.

"Moreover, utility customers have a responsibility to pay attention to utility communications. For example, the Commission has repeatedly held that utility notification, through letters or brochures, to customers of the need to inform the utility if they meet specified criteria for transfer to a potentially beneficial rate properly limits a customer to prospective billing at a desired rate. Because the customer was notified that it had to request the rate, the utility is not reqired [sic] to treat the belated request for the rate as if it had been made earlier," the PSC said.

"In this case, HHLP was put on notice by Con Edison's February 2010 letters that the utility had received a request to change the electricity and gas supplier for the specified account to Just Energy, and that HHLP should contact the utility and the ESCO if HHLP had not made those requests or wished to cancel them," the PSC said.

"It is not necessary here to infer ratification solely from the receipt of such letters and a customer's failure to respond with an objection. HHLP's failure to respond to the February 2010 letters, combined with its subsequent payment of at least six monthly utility bills including supply charges from Just Energy without objection, fully support our inference of an intention to ratify the employee's actions," the PSC said.

"We find that, as a result of HHLP's ratification of the customer authorization for the switch in energy suppliers provided by its employee, Just Energy did not slam HHLP," the PSC said.

While the issue of whether the employee of Metro 11/HHLP had actual or apparent authority to provide a customer authorization on behalf of Metro 11/HHLP to switch energy suppliers was not determinative to the case, the PSC did caution ESCOs from relying on apparent authority

"With regard to the issue of apparent authority, Just Energy appears to rely solely on the statements, both written and oral, of the Metro 11 employee who signed the Agreement to show that the employee had the apparent authority to provide the customer authorization on behalf of Metro 11/HHLP. However, Just Energy, and other ESCOs, should be aware that, in a case alleging slamming, if the determination turns on whether or not the signatory to an agreement has apparent authority to provide the customer authorization required by the UBP, the signatory's statements alone will not support a finding that the ESCO obtained customer authorization for a switch," the PSC said.

The PSC also affirmed in its decision that 16 NYCRR Parts 12 and 13 do not provide for non-residential customers to utilize the PSC consumer complaint procedures to resolve disputes with ESCOs. "Contrary to the October 21, 2011 letter denying an informal hearing, there is no exception for complaints of nonresidential energy customers that they were slammed by an ESCO. The resolution of such disputes is governed by the provisions of the contract between the non-residential customer and the ESCO," the PSC said.

However, the PSC said that, "[t]he Department and this Commission remain committed to reviewing and resolving non-residential customer allegations of slamming. OCS, as the office within the Department with personnel and facilities suited to receiving complaints, will continue to receive and keep records of such complaints. When customers allege slamming, OCS will refer such complaints to other staff who will review the allegations outside of the Part 12 Consumer Complaint Procedures. Where appropriate, staff may bring slamming allegations made by nonresidential customers to us for resolution."

Case 12-M-0113