NASUCA 2011 1

HOW TO REGULATE COMPETITIVE ENERGY

SUPPLIERS

Barbara R. AlexanderConsumer Affairs Consultant83 Wedgewood Dr.Winthrop, Maine 04364 (207)395-4143E-mail: barbalex@ctel.net

NASUCA 2011 2

FEDERAL-STATE JURISDICTIONELECTRIC AND GAS

STATE JURISDICTION OVER DISTRIBUTION UTILITIES AND RETAIL SALES TO CUSTOMERS

NO FERC ROLE IN RETAIL CONSUMER PROTECTION OR QUALITY OF SERVICE

FEDERAL TRADE COMMISSION: UNFAIR TRADE PRACTICES BUT DEFER TO STATE LICENSING AUTHORITY IN MOST CASES

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EXISTING CONSUMER PROTECTION LAWS

EQUAL CREDIT OPPORTUNITY ACTFAIR DEBT COLLECTION PRACTICES ACTFAIR CREDIT REPORTING ACTUNFAIR TRADE PRACTICES ACT (STATE AND FEDERAL)

TELEMARKETING AND CONSUMER FRAUD AND ABUSE PREVENTION ACT

FTC COOLING OFF RULE: right of rescission on door-to-door sales

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CONSUMER PROTECTION IN COMPETITIVE MARKETS

THIS IS NOT “DEREGULATION”! MANDATORY DISCLOSURES: TERMS OF

SERVICE; PRICE; BILLS ANTI-SLAMMING AND ANTI-CRAMMING

RULES UNFAIR TRADE PRACTICES: MARKETING LICENSING OF SUPPLIERS MARKET POWER AND REMEDIATION UNIVERSAL SERVICE AND OTHER PUBLIC

BENEFIT PROGRAMS

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PRICE AND CONTRACT TERM DISCLOSURE MODELSDISCLOSURE IS KEY IN A COMPETITIVE MARKET: Regulator must decide when and how disclosures are made

TRUTH IN LENDING ACT UNIFORM DISCLOSURE OF INTEREST RATE AS ANNUAL PERCENTAGE RATE BY ALL CREDITORS TO ALLOW FOR COMPARISON SHOPPING

LABELS AT POINT OF SALE FOOD: NUTRITION CONTENT SECURITIES ENERGY EFFICIENCY LABELS

NASUCA 2011 6

ELECTRICITY FACTS LABEL

PRICE AND KEY PRICE-RELATED TERMS—Is there an “APR” for energy price?SUPPLY MIXEMISSIONSAdopted in similar format for Massachusetts, Maine, New Jersey, Ohio, Illinois, Texas

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TERMS OF SERVICE DISCLOSURES

Plain LanguageKEY CONTENTS MUST BE MANDATED:

KEY PRICE DISCLOSURES: must require fixed or variable price terms (e.g., variable rate mortgage)

ITEMIZATION OF ALL SERVICESOTHER FEES—EARLY TERMINATION FEESDEPOSIT; INTEREST RATE; RETURN POLICYCOLLECTION POLICIESRIGHT OF RESCISSION AND HOW TO EXERCISE RIGHT

COMPLAINT POLICYPROBLEM: Timing of disclosures; fine print: most consumers ignore these documents!

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MONTHLY BILL

AT THIS POINT THE CUSTOMER IS CONTRACTUALLY BOUND.

WHO IS ISSUING THE BILL? {Utilities don’t monitor this information…..]

Does the price on the bill match the price in the disclosure statement?

Are charged unbundled and presented in a understandable manner?

Are fees and charges itemized?

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REGULATION OF COMPETITIVE SUPPLIERS BY COMMISSION

STATE JURISDICTION:•Contract and consumer protection law: Attorney General ?•Licensing and revocation is key•Billing (by utility; by marketer; by both)•Marketing conduct; advertising•Change in Terms notices•Dispute resolution•Mandatory disclosures•Enforcement: penalties; customer restitution

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SUPPLIER DEFAULTS Contracts with customers are voidable at

supplier option, often to detriment of customers A NY natural gas supplier declared bankruptcy

after collecting up to 12 mos. in prepaid service (Iroquois)

New Power (Enron, et. Al.) Dominion Energy Solutions dropped 8,500

customers in PA in August 2011 and used smart meter usage information to find those who use energy at peak times

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DOOR TO DOOR AND TELEMARKETING SALES

MAJOR SOURCE OF CUSTOMER COMPLAINTS MISREPRESENTATION OF IDENTITY TAKE ADVANTAGE OF CUSTOMER IGNORANCE HARD SELL; MISREPRESENTATION OF PRICE AND

TERMS OF SERVICE Multi-layered marketing organization

ENERGY AMERICA (CENTRICA): Investigations in five states

UNITED GAS MANAGEMENT (PA, GA) TEXAS: ENERGY AMERICA $750,000 FINE ENERGY SAVINGS CORP., NOW JUST ENERGY (NY, IL) HORIZON POWER & LIGHT (DE)

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DISCONNECTION VS. CANCELLATION OF CONTRACT

MOST STATES STRICTLY REGULATE DISCONNECTION OF SERVICE; VIEWED AS DISTRIBUTION FUNCTION FOR REGULATED CHARGES

UNDER MARKETER PRESSURE, THIS PROTECTION HAS BEEN ERODED

MANY STATES NOW ALLOW DISTRIBUTION UTILITIES TO BILL AND COLLECT SUPPLIER CHARGES AND DISCONNECT FOR NONPAYMENT OF THESE UNREGULATED CHARGES: PA, MD, IL, OH, MA, CT

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LICENSING/CERTIFICATION

The Commission’s authority in this regard is tied directly to statutory language:

FINANCIAL AND TECHNICAL CAPABILITYSCREEN FOR BAD ACTORS (BOTH INDIVIDUALS

AND ENTITIES)HOOK FOR CONSUMER PROTECTION

ENFORCEMENTCONSUMER PROTECTION BOND: CUSTOMER

PREPAYMENTS OR DEPOSITSREVOCATION; SUSPENSION

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REGULATION OF CONTRACT TERMS: CONTRACT OF ADHESION

RIGHT OF RESCISSIONCOLLECTION COSTSRIGHT TO PAYMENT ARRANGEMENT; MEDICAL EMERGENCYREGULATION OF LATE FEES; EARLY CANCELLATION FEESMINIMUM/MAXIMUM CONTRACT TERMAUTOMATIC RENEWAL CLAUSES WITHOUT NOTICE

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CHANGE OF SUPPLIER

MOST STATES DO NOT REQUIRE WET SIGNATURE, BUT ALLOW ELECTRONIC AND ORAL AUTHORIZATION, WITH THIRD PARTY VERIFICATION (Note: who hires the 3rd party and how are they paid?)

STRICT ENFORCEMENT; CUSTOMER RESTITUTION

COMPLAINTS ABOUT SLAMMING PREVALENT WITH DOOR-TO-DOOR MARKETING

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DISPUTE RESOLUTION

ONE-STOP COMPLAINT HANDLING AT THE COMMISSION

COMMISSION JURISDICTION; COORDINATE WITH ATTORNEY GENERAL

ANALYSIS OF COMPLAINTS: RELATE TO LICENSING AND UNFAIR TRADE PRACTICE RULES

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ENFORCEMENT; ACCESS TO BOOKS AND RECORDS

ACCESS TO BOOKS AND RECORDS STATUTORY AUTHORITY FOR ADMINISTRATIVE FINES LICENSE REVOCATION AND SUSPENSION CUSTOMER RESTITUTIONSUBSTANTIAL INCREASE IN PENALTIES, UP TO $10,000 PER DAY PER VIOLATIONSTAFFING IMPLICATIONS FOR COMMISSION

•INVESTIGATORS•ATTORNEYS WITH SKILLS IN CONSUMER

PROTECTION LAW

SUMMARY OF KEY ISSUES

SUPPLIER LICENSING: Is this filing out a form or review of prior conduct? bond or security?

DISCLOSURES: Facts Label; Terms of Service; how and when are disclosures required?

CUSTOMER AUTHORIZATION: what forms of customer consent; what evidentiary record? Role of utility?

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SUMMARY (Continued) SUPPLIER MARKETING CONDUCT:

advertising; teaser rates; hidden fees; renewal terms

DOOR TO DOOR AND TELEMARKETING: additional regulatory oversight; potential for fraud is high

SUPPLIER EXIT COMMISSION ENFORCEMENT:

customer restitution allowed? Penalties and revocation of licenseNASUCA 2011 19