Tel: 804.864.1100

Tel: 804.864.1100

For Retail Energy Suppliers – Compliance Matters

(Originally posted at LinkedIn.com)

If you’re a retail electricity or natural gas supplier and you think no one will ever file a complaint against you, or that no state commission will ever ring you up with a show cause order – just stop it now. While you can’t control complaints filed against your company, you can control how closely your company adheres to laws regarding marketing to, contracting with, enrolling, and serving customers. In other words, you can significantly reduce the risk of complaints.

In the past few years, Maryland, Pennsylvania, Delaware, D.C., and others have started or completed the process of revising their consumer protection rules, adding numerous requirements for retail suppliers who do business in those jurisdictions. Is your company adhering to these new rules? Has your company researched various applicable state statutes in areas such as telemarketing and door-to-door marketing to ensure that you’re compliant?

We get it. Resources devoted to compliance can be costly and certainly don’t produce revenues. But compliance will allow your company to avoid the even greater expense of responding to more and more complaints and, inevitably, participating in a show cause proceeding and enduring the bad press that comes with it. So consider compliance a necessary evil and You Gotta Do It.

Since we’re involved all the time with clients facing compliance requirements, we have developed a quick-hit list of items you should assess internally to ensure your company’s compliance. This is Part 1, which focuses on the retail supplier’s contract with the customer. In Part 2, which we’ll publish next week, we’ll cover items relating to marketing. In the interim, if you have any questions, you are welcome to call one of our energy regulatory lawyers at (804) 864-1100.

The below items are not listed in any particular order, and rules vary by state, but you’ll get the idea.

What’s in your contracts?

Most states have a list of material terms and conditions that must be included in the contract. They include all fees and charges, early termination fees, how the customer and the supplier may terminate the contract, the duration of the contract, renewal procedures, and so forth. Maryland and Pennsylvania require specific contract language for variable-priced contracts, and as of this writing Delaware is about to join them.

What’s this Contract Summary thingamabob?

Many states now require the supplier to summarize the contract in a table or box, similar to what you see in communications from your credit card company. There can be rules identifying which specific provisions must be summarized. Rules also address when you must provide the summary during the different marketing and enrollment channels (telemarketing, door-to-door, internet, etc.). The summary is a useful tool to assist customers in understanding the most material of the material contract terms.

Do I have to notify variable price customers every month about the next month’s price?

In Maryland and soon in Delaware, you will need to provide the customer with access to the next month’s rate at least 12 days before it becomes effective. If you don’t know the price, you must provide an estimate, and your actual price cannot exceed your estimate. The goal here is to allow customers to see their next month’s price. If they don’t like it, they can switch to a different provider before the new price becomes effective. This new rule works in conjunction with changes in law that allow customers to switch in three business days as opposed to the current timeline which can take up to five or six weeks. The customer’s access to the new price can include posting the new price on a website, or allowing the customer to call the supplier to obtain the new price.

What do I need to say in a renewal letter and when do I send it to the customer?

Each state has different requirements in terms of substance and in the timing of sending the notice to customers. Omitting the required information can result in penalties. Some states require you to highlight any changes to the material terms of the contract. Many states have altered their renewal notice requirements in the past few years, so we recommend that you review your notices to ensure they are compliant.

How’s your on-line enrollment process?

Most suppliers allow customers to enroll online. Just pick your product, enter the relevant info and you’ve authorized a switch to the new supplier. But are you providing all the necessary information at the right times? Does your site prompt the customer to print the contract? Are you doing what’s required to ensure that the signature qualifies as an electronic signature? Some states are broadening their review of suppliers’ websites during the application process, and certainly consumer advocates are examining the information on the sites to ensure that customers fully understand the products they are considering.

Compliance can seem daunting, and it takes time. At the end of the day, it’s an investment that will make for well-informed customers that choose your company because they understand the product and trust that your company is better than all others. We hope that the above list, and the list we’ll publish next week in Part 2 of our series, provides a starting point for your review, as these are just some of the issues our lawyers see on a daily basis and that every supplier should address in each state in which it operates. Stressing compliance within your company, while perhaps not popular, should lead to a happier, loyal customer base and avoid significant regulatory costs down the road.

GreeneHurlocker’s lawyers handle a broad range of regulatory and transactional matters related to electricity, natural gas, and water. Our lawyers work extensively with retail electricity and natural gas suppliers throughout the Mid-Atlantic. We’re also heavily involved in the renewable energy business, including solar, biomass and wind. We do other stuff, too. We encourage you to contact us with any questions.