Regulator's Staff Recommend Denying Retail Supplier's License Due To Several Personnel's Prior Roles At Supplier Which Exited Market With Unpaid RPS Obligations
March 26, 2021 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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The Office of Education, Outreach and Enforcement (EOE) of the Connecticut Public Utilities Regulatory Authority recommended that PURA deny the electric supplier license application of SmartestEnergy U.S. LLC (SEUS) due to, as alleged by EOE, "SEUS' management team’s demonstrated lack of managerial capability."
In brief, EOE alleges that certain management of SEUS are, "team members [that] had previously managed BlueRock Energy (BRE)," with EOE alleging that such SEUS team members, during their time at BRE, were, "aware of, and complicit in, BRE’s failure to meet its outstanding RPS obligations," as BRE exited the Connecticut market as a supplier with unmet RPS obligations of about $4 million
SmartestEnergy provided the following statement concerning the matter:
"SmartestEnergy was surprised to receive the Connecticut Public Utility Regulatory Authority ('PURA') Staff’s recommendation, having received no questions on the matter. We feel sure that this is simply a misunderstanding, since the managers referred to had resigned from BRE well before the delinquency referenced. The question at hand, however, is whether SmartestEnergy has the managerial capability to meet Connecticut’s licensing standards. SmartestEnergy has built an extremely strong management team that has more than 100 years of experience with some of the world’s strongest companies, including SmartestEnergy Ltd, Marubeni Corporation, Shell Energy and Ernst & Young. SmartestEnergy is confident that its management team meets Connecticut’s license standards, and we look forward to working with PURA to resolve this issue."
--- Statement from SmartestEnergy
SmartestEnergy is seeking a Connecticut electric supplier license to serve commercial and industrial customers
EOE alleged that SEUS's Senior Vice President, James Cifaratta, previously served as Senior Vice President at BRE from October 2016 to April 2019
EOE alleged that SEUS's Vice President of Finance, Megan Quill, previous served as Vice President and Controller of BRE from May 2018 to April 2019
EOE alleged that, "By Correspondence dated February 28, 2019, BRE notified the Authority that it was withdrawing from ISO-NE, was no longer serving customers in Connecticut, and intended to relinquish its electric supplier license. In response, the Authority informed BRE that it must meet its Connecticut licensing and renewable portfolio standards (RPS) requirements and must maintain a bond until the Authority approved its request to relinquish its license."
EOE alleged, "By correspondence dated February 18, 2020, the Authority informed BRE that it was delinquent in complying with licensing requirements, including its failure to pay $4,584,609 in RPS obligations for 2017 and 2018. The Authority requested that BRE provide documentation of compliance. BRE did not submit the requested information. On March 24, 2020, the Authority issued a Notice of Violation and Assessment of Civil Penalty (NOV) against BRE. BRE did not respond to the Authority’s NOV. On September 23, 2020, the Authority revoked BRE’s Connecticut electric supplier license for its failure to fulfill its mandatory RPS obligations as described above. BRE failed to pay its RPS obligation, ignored the Authority’s communications about its delinquencies, and displayed a failure of financial and managerial capabilities. Ultimately, BRE’s negligence and mismanagement left Connecticut ratepayers responsible for approximately $4.25 million in costs associated with its failures. The Authority has reason to believe BRE’s management, members of which now serve as part of SEUS’ 'seasoned management team,' contributed to BRE’s failures and eventual license revocation."
EOE alleged, "From October 2016 to April 2019 James Cifaratta served as BRE’s Senior Vice President. Mr. Cifaratta led BRE’s operations organization during this time. Mr. Cifaratta’s resume notes that he 'assisted with transition and winddown of operations after customer contracts were sold.' It is the Authority’s belief that Mr. Cifaratta, in his role of Senior Vice President, was aware of, and complicit in, BRE’s failure to procure sufficient renewable energy certificates (RECs) to meet its outstanding RPS obligations, or to have sufficient capital remaining to cover its alternative compliance payments (ACP) if it could not meet its RPS obligations. BRE would have purchased RECs to fulfill its 2017 RPS obligations in 2017 and 2018, and RECs to fulfill its 2018 RPS obligations in 2018 and 2019. As senior management at BRE during these time periods, Mr. Cifaratta should have been aware of BRE’s inability to comply with Connecticut’s licensing obligations."
EOE alleged, "From May 2018 to April 2019 Megan Quill served as BRE’s Vice President and Controller. She led BRE’s accounting and finance areas, assessed BRE’s financial risks, collaborated with other departments to implement strategic plans, created and tracked BRE’s financial objectives, and ensured that BRE’s finance and accounting reporting were compliant with all legal and regulatory requirements, including those in the industry. It is the Authority’s belief that Ms. Quill, in her role of Vice President and Controller, was aware of, and complicit in, BRE’s failure to meet its outstanding RPS obligations. As stated above for Mr. Cifaratta, Ms. Quill’s role at BRE indicated she should have been aware of, and in her case responsible for managing, the financial condition that led BRE to leave the state of Connecticut with more than $4 million ACP shortfall. Like Mr. Cifaratta, Ms. Quill would have held her position at BRE during the time when BRE should have been purchasing RECs to fulfill 2017 and 2018 RPS obligations or should have retained sufficient capital to pay its ACP in lieu of purchasing RECs."
EOE said that BRE’s $250,000 bond the state was forced to collect was an insufficient recompense for the outstanding RPS obligations.
"The Authority cannot allow such mismanagement to be rewarded with another Electric Supplier license," EOE alleged
"Based on the lack of managerial capability exhibited by two senior members of its key management team while serving in similar roles at BRE, the Authority concludes that SEUS has not demonstrated sufficient managerial capability, as required under Conn. Gen. Stat. § 16-245, to operate as an Electric Supplier in Connecticut and denies SEUS’ application," EOE alleged, in recommending that PURA deny the application
While recommending denial for the reasons stated above, EOE concluded that SEUS does possess the financial and technical capabilities for licensure.