Pennsylvania ALJ Denies Complaint Over Variable Rate Disclosure, But Suggests Review of Language due to Customer "Confusion"

An initial decision from a Pennsylvania ALJ would deny a customer complaint against Ambit Northeast, LLC d/b/a Ambit Energy concerning variable rate disclosures, but would refer the language back to PUC Staff, as the customer's confusion, "may indicate a need to review the approved disclosure language." (C-2013-2357863)

The complaint concerns a customer who signed up for an Ambit variable rate product which was listed on PA Power Switch with an introductory rate. Specifically, the complainant checked Ambit's advertised variable rate on the PA Power Switch website for six months, and noted that it had not changed. "Therefore, he believed the variable rate was pretty steady, and he telephoned the company in December, 2012 to make Ambit his generation supplier," the initial decision notes.

The rate listed on PA Power Switch was 6.84 cents per kWh, but was only applicable for the first month of service. In the customer's second month of service, a rate of 7.39 cents per kWh applied.

The complainant alleged that Ambit violated 52 Pa.Code §§ 54.3(1); 54.5(a), (c)(2); 54.7(a); and 54.43(1)(f) by hiding an introductory rate without explaining the variable rate process and sought that Ambit should be enjoined from further violations.

According to the initial decision, "Complainant testified that in February, 2013, the PaPowerSwitch website still had 6.84 cents listed for Ambit on its website. Complainant also looked up Ambit's website and found a 6.84 cents introductory rate offer on the website ... He further testified that the disclosure statement on Ambit's website does not state an introductory rate. It only shows the lower rate."

However, the initial decision finds that, "As part of Ambit's licensing process, it submitted a customer disclosure statement for review and approval by the Commission's Bureau of Consumer Services. Ambit is still using the same disclosure statement approved by Commission Staff. The disclosure statement and terms of service statement are located on Ambit's website and a customer must confirm he/she has read the statements before signing up for the service online. The statements are also mailed as part of a welcome packet to new customers. The welcome packet sent to Complainant clearly stated, 'A variable rate product shall commence for a one month term.' It also states that it will automatically renew for successive one month periods unless cancelled. Under the 'Pricing and Payment' section, it states that the rate will be disclosed at the time of enrollment and if the variable rate plan is selected, then the price for the initial term will be shown at the time of enrollment, and thereafter, rates are subject to change at the discretion of Ambit Energy."

The initial decision further notes that while the PA Power Switch site did not list two rates for the variable plan (one for an introductory price and another for a standard variable price), the PA Power Switch website, "directs prospective customers to check the EGSs' websites for more information regarding plan specifics."

"Ambit advertised its Keystone Select Variable Rate Plan on its website, and stated that the variable rate plans can vary from month to month based upon commodity costs and market conditions and that the rate quoted was an introductory offer for new Ambit energy customers effective for the first billing cycle only, and this information would have been available to Complainant at the time he contracted with Ambit," the initial decision concludes

"Complainant had adequate notice of a variable rate for the second month in the disclosure statement Complainant received as part of a welcome packet from Respondent in January, 2013. Complainant has also failed to prove Respondent deceitfully or fraudulently marketed its product to Complainant or other customers. The Commission's Bureau of Consumer Services (BCS) approved the language in Respondent's disclosure statement and the offer is consistent in its website, terms of service, and disclosure statement. Therefore, no civil penalty is warranted in this case as I find no violation of any regulations or Commission orders," the ALJ concluded.

However, the ALJ notes that, "Complainant was confused by language preapproved by the Commission's Bureau of Consumer Services in the disclosed terms of agreement. Complainant also misinterpreted information posted on the Commission's PaPowerSwitch website. Accordingly, I shall direct a copy of this decision be delivered to BCS as well as the Commission's Office of Competitive Market Oversight, so that they may be aware of customer confusion as this may indicate a need to review the approved disclosure language."

The PUC, in recently adopting new product terms for use in the electric market, did address the use of introductory prices, and said going forward that, "In the case of an Introductory Price, the disclosure statement prominently informs the consumer that the initial price being offered is an Introductory Price. The disclosure specifies the per kWh Introductory Price and the number of billing cycles that the initial Introductory Price will be in effect ... If it is a Variable Price, the disclosure statement will include the conditions of variability, on what basis prices will vary and the limits on price variability."