N.Y. PSC Issues Show Cause Order to ESCO Over Licensed Use of Utility Brand

The New York PSC has issued a show cause order to Direct Energy to determine whether Direct Energy's use of the name NYSEG Solutions under a licensing agreement constitutes, "misleading or deceptive conduct."

After purchasing Energetix and NYSEG Solutions last year, Direct Energy retained the NYSEG Solutions brand and entered a licensing agreement with Iberdrola USA Solutions, Inc., an affiliate of utility New York State Electric & Gas Corporation (NYSEG), to use the NYSEG Solutions trade name.

Direct Energy's NYSEG Solutions marketing materials include the following statement as a footer: "'NYSEG Solutions' is a trademark of Iberdrola USA Solutions, Inc. and is being used pursuant to a license. Direct Energy Services, LLC is not affiliated with Iberdrola USA Solutions, Inc., its affiliates, or any public utility. Energy supply is provided by a Direct Energy company."

The PSC said that, "The use of the name 'NYSEG Solutions' by Direct in its marketing to customers may conflict with the intent of Section 10.C.4.a of our Uniform Business Practices, which prohibits ESCOs from engaging in 'misleading or deceptive conduct.'"

The PSC said that, among other things, the UBPs require that in marketing to customers, ESCOs and their representatives clearly explain that they do not represent the distribution utility. However, the PSC's stated concern with Direct Energy's use of the NYSEG Solutions brand is that it could lead customers to infer an affiliate relationship where none exists.

"At the inception of NYSEG-ESCO, this Commission did not prohibit its use of the name 'NYSEG Solutions,' even though that name is clearly a derivative of the name of NYSEG-Utility, because the two companies were affiliated. Consumers who noted the shared name and inferred an affiliation were correct. However, the entity currently marketing under the name 'NYSEG Solutions' is owned by Direct, and it has no affiliation with NYSEG-Utility. Direct's use of the name 'NYSEG Solutions' when it markets to customers could constitute 'misleading or deceptive conduct' in contravention of UBP Section 10.C.4.a insofar as consumers to whom Direct markets as 'NYSEG Solutions' may reasonably infer that they are being marketed to by a current affiliate of NYSEG-Utility," the PSC said.

"Consumers whose first impression is of the name 'NYSEG Solutions', may automatically assume they are dealing with an affiliate of NYSEG-Utility. Subsequently reading, or otherwise being informed, that 'NYSEG Solutions' and Direct are not affiliated with NYSEG-Utility may not undo that association. Thus, Direct's use of the 'NYSEG Solutions' name appears to undermine the goal of providing consumers with clear and accurate information embodied in UBP Section 10.C.4.a," the PSC said.

The PSC specifically ordered Direct Energy to show cause why the Commission should not: (1) determine that the definition of "misleading or deceptive conduct" in UBP Section 10.C.4.a includes the use of the name "NYSEG Solutions" by Direct when marketing to customers; and (2) prohibit Direct from marketing to customers using the name "NYSEG Solutions."

Direct Energy said that it is aware of the orders and is looking forward to working with the PSC on a resolution.

The PSC also issued a show cause order to New York State Electric & Gas Corporation directing NYSEG to show why the PSC should not conclude that the utility's Code of Conduct does not allow the use of the NYSEG name and logo by non-affiliates of the utility.

The PSC noted that the Code of Conduct states that there are no restrictions on affiliates "using" the NYSEG name, but the use by non-affiliates is not addressed.

The PSC said that, on its face, "[t]he definition of 'use' encompasses the 'long-continued possession and employment of a thing...' It should not include the sale or licensing of a 'thing' for 'use' by another."

Accordingly, NYSEG was directed to show cause why the Commission should not require that NYSEG undertake measures to protect the value of the NYSEG name and mitigate any customer confusion that has occurred or may occur regarding the affiliation of the utility and NYSEG Solutions.

"For example, NYSEG-Utility could have sent letters to its customers to whom Direct Energy could market using the 'NYSEG Solutions' name, explaining that: (a) the services marketed by Direct Energy are not provided by NYSEG-Utility, (b) such services are entirely optional with respect to continued utility service, and (c) the costs associated with such services are not supported in NYSEG-Utility's rates. NYSEG-Utility could also have utilized bill inserts to provide its customers with this information," the PSC said.

Cases: 13-M-0224, 13-M-0225