Claim: New York PSC Staff Told ESCO Use of Non-Affiliate Utility Brand With Disclaimer Was OK Until Generic Proceeding Convened on Utility Trade Name Issues

A New York ESCO has stated that it was told by Staff of the New York PSC that the sharing of a brand name with one of the state's regulated utilities was permissible, with disclaimers approved by Staff, until such time as the Commission initiated a generic proceeding on the issue of the use of utility trade names by non-utility entities.

Specifically, NYSEG Solutions, Inc. (NSI) and Direct Energy Services, LLC said in response to a show cause order from the PSC that, PSC Staff, in December 2012, approved "on an interim basis" a disclaimer to be used by NYSEG Solutions, reflecting that it was no longer affiliated with the utility NYSEG (having been purchased by Direct Energy).

Furthermore, Direct Energy alleged that, "DPS Staff had previously assured NSI and Direct Energy that this interim period would continue until the Commission convened a generic proceeding to investigate all uses by ESCOs of the trade names and trademarks similar to those used by utilities regulated by the Commission."

No such generic proceeding has yet been instituted by the PSC. Instead, the PSC issued show cause orders to Direct and NYSEG Solutions, as well as the utility NYSEG, directing the companies to show why the use of the NYSEG brand by a non-affiliate of the utility does not violate the uniform business practices' prohibition on "misleading or deceptive conduct."

See prior story for details on show cause order

"DPS Staff has provided no explanation to NSI and Direct Energy of its apparent decision to go back on its agreement in the meetings and correspondence described above not to oppose NSI's use the NSI Marks in any marketing materials, provided the agreed-upon disclaimers were included, until the Commission instituted a generic proceeding as discussed above," Direct Energy said.

"It therefore came as a complete surprise to NSI and Direct Energy when the Commission issued the Show Cause Order on July 19, 2013," Direct Energy said.

"Based solely upon [] speculative statements – and with no citation to any supporting evidence and no discussion whatsoever of the measures previously agreed to by DPS Staff, Direct Energy and NSI to address these concerns or the need for a broader generic inquiry – the Commission ordered NSI and Direct Energy to show cause why the Commission should not find NSI's use of the NSI Marks in marketing ESCO services to be 'misleading or deceptive conduct' in violation of section 10.C.4.a of the UBPs and prohibit NSI and Direct Energy from using the NSI Marks in future marketing of ESCO services in New York State," Direct Energy said.

As to the specific allegations in the show cause order, Direct Energy said that the PSC has provided no evidence of customer confusion from the licensed use of the NYSEG Solutions name, and Direct Energy noted NSI's low complaint rate as evidence of the absence of customer confusion. "NSI has received no consumer complaints whatsoever claiming confusion with respect to the source of the ESCO services provided by NSI," Direct Energy said.

Direct Energy further said that the PSC's restriction of the use of the NYSEG Solutions name would contravene the Lanham Act. The use of the NYSEG Solutions brand is commercial speech protected by the First Amendment, Direct Energy said.

Separately, NYSEG, the utility, said that its code of conduct does not prohibit the licensing of the NYSEG name to a non-affiliate.

Also of note are concerns Staff had with generic marketing language in NYSEG Solutions' collateral materials -- meaning concerns not related to its trade name and which could apply to any ESCO. Specifically the PSC expressed concern with the manner of the use of the term "local" by an ESCO, as well as the manner for a citation to a low complaint rate.

See related story today for more on PSC Staff's generic concerns over marketing language:

Related: New York Staff Raises Concern with ESCO's Use of Term "Local," Cite to Low Complaint Rate in Marketing Materials

Case 13-M-0224