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MD Public Service Commission issues Final Order in Blue Pilot

(first published in LinkedIn.com)

Maryland retail energy suppliers should be aware of a recent Maryland Public Service Commission decision on consumer protection and regulatory compliance issues in the Blue Pilot case. In 2014, the Polar Vortex caused energy prices and customers’ usage to spike dramatically. These spikes led to increases in variable prices (and monthly bills) for customers on monthly variable price energy contracts. When prices went up, there was an increase in customer complaints filed with the Commission. In response, the Commission initiated show cause proceedings against several retail electricity and natural gas suppliers, including Blue Pilot. In early December 2016, the Commission entered its Final Order and subsequent clarifying Order in the Blue Pilot case.

The Commission’s December 1, 2016, Final Order affirmed a Public Utility Law Judge’s findings in a prior Proposed Order. This is an important case for retail energy suppliers using telemarketing to enroll Maryland retail customers. In particular, the analysis in this case offers new detail about compliance with the Maryland Telephone Solicitations Act (“MTSA”) and the Commission’s consumer protection regulations regarding telemarketing. The case also addressed required disclosures for variable price energy supply products and provides guidance on how to avoid unfair or misleading messaging when marketing variable price products.

Maryland Telephone Solicitations Act

The MTSA generally requires telemarketers to obtain a “wet signature” from consumers to validate a telephone contract. This requirement can be burdensome on both suppliers and customers trying to enroll over the phone because it requires a second step: after the call, the supplier must send a copy of the contract to the customer, which the customer must sign (in hard copy or electronically) and return to the supplier. The MTSA provides a few limited exceptions to the wet signature requirement. However, as we learned from Blue Pilot’s experience, suppliers must to prove that their telephone contracts are exempt from the MTSA, and there are critical steps that must be carefully followed and documented when relying on an exemption. Even if suppliers can successfully prove that the sale is exempt from the MTSA, they must follow the Commission’s regulations governing MTSA-exempt telemarketing sales and ensure that their agents are properly trained to comply.

Retail suppliers stand to learn from Blue Pilot’s telemarketing mistakes by understanding the Commission’s interpretation of these requirements in the Blue Pilot orders.  Any supplier actively telemarketing in Maryland or looking to utilize this marketing channel in the future should be sure to understand the MTSA and its interplay with the Commission’s requirements for telemarketing sales, paying careful attention to the Blue Pilot decision.

Variable Prices

In addition to the MTSA issue, Blue Pilot was penalized $80,000 for marketing its variable price energy products to consumers with promises of savings as compared to local utility prices, when customers were actually charged “substantially more” than the utility’s price. One of the problems with Blue Pilot’s “variable” price structure was that when market prices went up from one month to the next, Blue Pilot would increase the variable price. However, when market prices went down, Blue Pilot generally would not adjust its variable price down unless the customer contacted Blue Pilot to request a “better rate.” The PULJ determined that this practice was an unfair or misleading trade practice violating the Commission’s regulations.

No Contract Required?

One last lesson from Blue Pilot is that retail suppliers cannot advertise that there is “no contract” for their retail energy supply products. The Proposed Order in this case reiterates the Commission’s previous findings that when a retail energy suppliers enrolls a Maryland customer, a contract is required. Even if there is no early termination fee and no long term obligation, there is a still a contract under the Maryland rules. While advertisements of “no contract” plans for other products and services may be common today, these types of advertisements for retail energy supply do not fly with the Maryland Commission.

GreeneHurlocker’s attorneys welcome any questions about the Commission’s findings in the Blue Pilot case. The lawyers of GreeneHurlocker practice regularly before public service commissions in Maryland and other mid-Atlantic jurisdictions and are experienced with consumer protection and regulatory compliance issues pertaining to competitive retail energy suppliers. Notably, some of the analysis from the Blue Pilot case discussed above would be different if the same case arose today because of recent changes to the Commission’s consumer protection rules, though the general principles and conclusions remain valid.

If you found the information in this post helpful, you should also check out our recent postings on retail energy compliance issues: (1) For Retail Energy Suppliers – Compliance Matters and For Retail Energy Suppliers – Compliance Matters Part 2. If you have questions about the Maryland Public Utility Commission or utility regulation in the mid-Atlantic, contact any of our utility regulation lawyers.