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Tag Archive: consumer protection

Virginia Commission Denies Walmart’s Request to Shop for Electricity

On February 25, 2019, the Virginia State Corporation Commission entered a Final Order denying Walmart’s petitions seeking permission under Va. Code § 56-577(A)(4) (“Section A 4”) to aggregate or combine the demands of certain electricity accounts. Walmart had filed a petition to aggregate 120 accounts in the Dominion service territory and 44 accounts in the Appalachian Power service territories. Had the petitions been approved, Walmart intended to enter into a contract to purchase electricity from its affiliate, Texas Retail Energy, but would remain as a distribution customers of the utilities. But, the Commission denied both petitions.

Under § 56-577(A)(4), nonresidential customers can aggregate their load to hit the 5 MW floor needed to switch electricity supply from the customer’s utility to a competitive service provider (“CSP”). Section A 4 requires the customers to seek Commission approval to aggregate. A company like Walmart must seek permission because the Code treats non-contiguous sites that are under 5 MW as separate customers. The Commission may approve the petition if it finds that: (1) “neither such customers’ incumbent electric utility nor retail customers of such utility that do not choose to obtain electric energy from alternate suppliers will be adversely affected in a manner contrary to the public interest by granting such petition,” and (2) “approval of such petition is consistent with the public interest.”

In the Final Order, the Commission found that remaining customers would be adversely affected in a manner contrary to the public interest. The Commission cited to alleged costs that would be shifted to remaining customers attributable to the loss of Walmart’s load. The Commission also cited to the alleged bill impacts that the utilities presented in the cases which purported to show the increases to an average residential customer’s monthly bills in the event Walmart was allowed to shop. The Commission also cited to the potential for lower earned returns for the utilities and found that the potential for load growth in a utility service territory did not matter.

The Commission determined that “the harm to customers who do not, or cannot, switch to a CSP is contrary to the public interest.” The Commission noted that the vast majority of Dominion and APCo customers have no ability to shop for solely lower prices. The Commission discussed that since 2007, the average Dominion and APCo residential customer has seen monthly bills increase by $48 (73%) and $26 (29%), respectively, and that with the mandates in Senate Bill 966, passed in 2018, more increases are likely to come.

Of course, there were numerous arguments presented by Walmart and other parties in the proceedings that addressed and countered the Commission’s findings summarized above.

The Commission concluded that if Walmart believes the current statutory structure results in rates that are too high, or that the public policy of Virginia should be to institute retail choice on a far more extensive scale than required under current law, “its potential for recourse may be found through the legislative process.” That process would begin with the 2020 legislative session because the 2019 sessions ended on Sunday, February 24 — the day before the Commission entered the Final Order.

The case numbers are PUR-2017-00173 (Dominion) and PUR-2017-00174 (APCo). Follow those links to see all the documents, including the Final Order, filed in each case. If you have questions about these cases, electricity purchases or rates, or need legal counsel regarding electricity regulation, please contact one of our Virginia regulatory lawyers.

Update on Supplier Consolidated Billing in Maryland

Maryland State House (side)

Maryland State House (side) (Photo credit: Wikipedia)

Last fall, Brian Greene discussed the Maryland Public Service Commission’s retail energy supplier consolidated billing proceeding. The Commission is considering supplier consolidated billing as an additional billing option for Maryland customers, alongside the existing utility consolidated billing and dual billing options. With supplier consolidated billing, customers would receive a single bill from their competitive retail supplier that includes both the electricity and natural gas supply charges (from the competitive supplier) and the utility’s transportation and distribution charges.

Under the existing billing paradigm in Maryland, the vast majority of customers receive a consolidated bill from their utility that includes both the energy supply charges and the utility’s transportation and distribution charges. Supplier consolidated billing would flip that model, enabling the competitive supplier to bill the customer, with the flexibility to expand product and service offerings. More information on the details of the proposal are available in the Petition and Reply Comments filed by the petitioning retail energy suppliers (NRG Energy, Inc., Interstate Gas Supply, Inc., Just Energy Group, Inc., Direct Energy Services, LLC, and ENGIE Resources, LLC).

In November 2017, stakeholders submitted extensive comments discussing the benefits and potential risks associated with the supplier consolidated billing proposal. Copies of the comments are publicly available in the Commission’s docket for Case No. 9461.

Following submission of the written comments, the Commission held a legislative-style hearing on February 20th and 21st. Here is a short summary of the two-day hearing:

  • The hearing began with a presentation from the Petitioners in support of supplier consolidated billing. The panel presented and answered questions from the Commissioner for about 2.5 hours.
  • Maryland’s distribution utility stakeholders followed the Petitioners, presenting their views on SCB and responding to the Petitioners’ presentation.
  • Following the utilities, a competitive retail energy supplier panel offered support for SCB, with some offering tweaks to the proposed program.
  • The next panel included public sector stakeholders from the Maryland Energy Administration and Montgomery County offering support for the proposed supplier consolidated billing program and suggestions regarding some of the program details. The Maryland Office of People’s Counsel also presented, discussing what it perceives as potential risks of the program.
  • Commission Staff rounded out the presentations, discussing the merits of the SCB proposal, offering support for the concept and at least one recommendation to alter the proposal.
  • The hearing concluded with the Petitioners offering a few final comments responding to some of the points raised by other stakeholders during the hearing.

After concluding the hearing, the next step is for the Commission to take further action on the proposal. If you are interested in the pending SCB petition in Maryland or any related competitive retail energy market issues, please contact one of GreeneHurlocker’s mid-Atlantic energy lawyers.

Appearing at the MPSC Hearing: From L to R – Brian Greene, Mike Starck (NRG Energy), Duncan Stiles (Just Energy), Tami Wilson (IGS Energy), and Alex Donaho (Direct Energy).

Virginia Supreme Court Upholds Electric Utility Rate Freeze

But There Is A Powerful Dissent

On September 14, 2017, the Supreme Court of Virginia issued an opinion affirming the controversial “rate freeze law.”transmission towers for electricity

As we previously discussed here and here, a group of industrial customers of Appalachian Power Company (“APCo”) appealed to the Supreme Court of Virginia, asking the Court to strike a controversial portion of the Virginia Electric Utility Regulation Act (“Regulation Act”). The group, the Old Dominion Committee for Fair Utility Rates (“Committee”), challenged a 2015 amendment to the Regulation Act, Senate Bill 1349 — the so-called “rate freeze law” which prevents the State Corporation Commission (“SCC” or “Commission”) from reviewing or reducing the base rates of APCo and Dominion Virginia Power (“Dominion”) until 2020 and 2021, respectively.

There is little dispute the law has helped APCo’s and Dominion’s profits and led to rates that are higher than they otherwise would be if the Commission had authority to review them. Using Dominion’s own figures, Commission Staff calculated in a recent report that the company’s customers would be due about a $130 million refund on bills paid in 2015 and 2016. APCo had overearnings of more than $20 million in 2016, according to the report.

The case centered around the language in Article IX, § 2 of the Constitution of Virginia, which the Committee argued reserved rate-making authority to the Commission, and that the General Assembly had overstepped its authority by passing legislation that stripped the Commission from reviewing the utilities’ rates for five and seven years. Article IX, § 2 provides as follows:

“Subject to such criteria and other requirements as may be prescribed by law, the [State Corporation] Commission shall have the power and be charged with the duty of regulating the rates, charges, and services and, except as may be otherwise authorized by the Constitution or by general law, the facilities of railroad, telephone, gas, and electric companies.” Va. Const. art. IX, § 2.

Justice Mims, in a powerful dissent, summed up the issue properly:  “This case boils down to a simple question: what does that sentence mean?”

In an opinion written by Justice Elizabeth A. McClanahan, the Supreme Court of Virginia rejected the Committee’s argument that the rate freeze law violates Article IX, § 2 of the Constitution of Virginia. The Court explains that “[t]here is nothing in Article IX, § 2 that clearly indicates that the Commission’s authority to set rates displaces or is exclusive of the General Assembly’s authority.” The Court further states that the Commission correctly decided that the rate freeze law “is constitutional because it is not plainly repugnant to Article IX, § 2 of the Virginia.” In her opinion for the Court, Justice McClanahan also noted that the Court has “no constitutional authority to judge whether a statute is unwise, improper, or inequitable because the legislature, not the judiciary, is the sole author of public policy.”

In his dissent, Justice Mims argues that the language in Article IX, § 2 means that the “General Assembly may impose standards and prerequisites that the Commission must adhere to when exercising its power and duty to set rates.”  He goes on to clarify that it “does not mean that the General Assembly may suspend that power and duty.” Justice Mims warns that based on the Court’s analysis, the General Assembly has the power to strip the Commission of its power set forth in Article IX, § 2 at its will. “That sobering outcome thwarts the purpose behind creating the Commission in the first place.”

GreeneHurlocker represented the Virginia Citizens Consumer Council (“VCCC”), which filed an amicus brief before the Court. The VCCC argued that the rate-freeze law was unconstitutional. If you have any questions about any of the legal aspects of this case, do not hesitate to contact one of GreeneHurlocker’s Virginia energy and regulatory attorneys.

Maryland Public Service Commission Rejects Utilities’ Proposals

Proposals Would Drive Up Costs for Competitive Retail Energy Suppliers and their Customerstransmission towers for electricity

Good news for Maryland’s competitive energy suppliers and their customers. In the past few weeks, the Maryland Public Service Commission issued two Letter Orders rejecting requests by BGEPepco, and Delmarva Power to include in the Purchase of Receivables programs costs incurred to comply with the recent RM54 proceeding. In other words, they wanted to recover those costs from competitive retail suppliers. Under the utilities’ proposals, costs to implement certain market enhancements – including 3-business-day accelerated switching – would have been recovered through the discount rate applied when the utility purchases supplier receivables.

There were slight differences to the utilities’ arguments. BGE argued that its current tariff allowed for recover through the POR rates of RM54-related costs. The Commission agreed with the Retail Energy Supply Association that BGE’s tariff does not allow BGE to recover these costs through POR discount rates. Pepco and Delmarva had sought to modify their respective tariffs to include language allowing for recovery. The Commission said no.  Also, in each case, the Commission stated that it “does not believe that it would be appropriate to force suppliers and their retail customers to bear the costs associated with the implementation of a program that benefits all ratepayers, as well as the competitive market as a whole.” Instead, the utilities can seek cost recovery through a base rate case.

RESA scored another win on a second issue in the case when the Commission rejected BGE’s proposed exclusion of revenues from late payment charges (“LPCs”) in the POR discount rate, effectively reducing the amount BGE pays suppliers for receivables purchased through the POR program. In a powerful rebuke to BGE’s proposal, the Commission explained that for “the past six years the Commission has consistently approved the inclusion of the LPCs in the discount rate calculation.  Similarly, the Commission has consistently denied any request for exclusion of these charges. The Commission reaffirms the reasons previously given for requiring the inclusion of LPCs in the calculation, declines to make the significant policy change being requested by BGE, and denies the Company’s request that LPCs be omitted from its POR discount rate.” This is a great result for RESA, the competitive retail energy supply markets in Maryland, and Maryland energy consumers.

Brian Greene, managing member of GreeneHurlocker, PLC represented RESA in this matter as referenced in the Commission’s Letter Order. The lawyers of GreeneHurlocker are pleased to be able to report this good news from Maryland and look forward to continuing to serve our clients in Maryland and the other jurisdictions where they operate. If you have questions about the details of this Commission Letter Order or any other matters involving regulated industries, please contact one of GreeneHurlocker’s regulatory attorneys.

Regulators Continue to Press on Consumer Rules

March 2017 Energy Update Brian Greene

The March Energy Update features Brian Greene explaining efforts in Delaware, Maryland and the District of Columbia to improve consumer protection rules that apply to selling commodities direct to consumers in the energy and natural gas markets.

Delaware Adopts New Consumer Protection Rules for Electricity Sales

The Delaware Public Service Commission has approved new Electric Supplier Rules for final publication in the April 1, 2017 edition of the Delaware Register. The rules will become canstockphoto17677884effective April 11, 2017.

The new rules replace Delaware’s existing Electric Supplier Rules and introduce numerous provisions that affect virtually everything that retail suppliers do – including not only obtaining a license but also marketing electricity and enrolling new customers.  In fashioning the new rules, the stakeholders looked primarily to Maryland’s and Pennsylvania’s recently-revised rules, and then tailored them to Delaware.  Retail suppliers will be required to make additional upfront disclosures in marketing and contract documents, and provide specific training for their agents. The rules directly address telemarketing and door-to-door sales and add requirements that do not exist today. As an example, for door-to-door sales, a supplier will be required to obtain a wet or electronic signature and also to perform a third-party verification. The rules also have a new definition and requirements for third-party verifications.

Our firm was very involved in negotiating the new rules and arguing non-consensus items before the Commission. If you’re a retail supplier eyeing Delaware as a new service territory, or if you’re already serving in Delaware, please feel free to call our energy lawyers with any questions.

 

Maryland Commission Adopts New Consumer Protection Rules

On February 10, 2016, the Maryland Public Service Commission approved revised consumer protection regulations governing the retail sale of electricity and natural gas. The revised rules include several substantive changes relating to how retail suppliers operate in Maryland. The changes involve additional up-front pricing disclosures to customers, and additional notices throughout each customers’ contract term. One of the more significant operational changes is a new requirement that utilities process a customer’s request to switch electricity providers within three business days. The revised Rules also include entire new sections addressing retail suppliers’ relationships with their marketing and sales agents.

We have previously blogged here, here, and here at various stages of this two-year rulemaking. In sum, the Commission initiated this rulemaking in response to the extreme cold weather conditions in the beginning of 2014 that caused wholesale energy prices to spike dramatically. Generally speaking, customers who had signed up for monthly variable retail priced contracts, which are tied to wholesale prices, saw their retail rates increase considerably. The primary policy goals of the revised rules is to assist customers in better understanding the energy products they are considering, to require certain notices to customers during their contract term, and to afford customers the opportunity and flexibility to change their energy provider quickly to take advantage of pending offers.

The next step for implementation will be publication of the final rules in the Maryland Register. While the timing of the publication is uncertain, it is anticipated that the rules will become effective at some point in March 2016. Retail suppliers will need to review their contract language, third-party verification scripts, training materials, and other areas to ensure they are complying with the new rules. Retail suppliers that are unable to comply with any of the new requirements will need to seek a waiver from the Commission.

If you have any questions about Maryland’s new retail energy supplier rules or the process for seeking a waiver, please contact one of GreeneHurlocker’s energy lawyers for more information.

Delaware Hearing How to Improve Consumer Choice for Electricity

transmission towers for electricityIn October and November, 2015, the Delaware Commission (Commission) and the Division of Public Advocate (DPA) held two workshops for stakeholders to discuss ways to enhance the visibility of and improve participation in customer choice for electricity products and services.  The group also examined what, if any, options might be available to enhance customer choice that the Delaware Commission and stakeholders might not have been considered. The Commission accepted written comments on November 6, 2015.

GreeneHurlocker’s lawyers represented the Retail Energy Supply Association in the meetings and submitted these comments.  RESA identified market-enhancing programs and services such as a purchase of receivables program that would require the utility to purchase the receivables of retail suppliers; implementing “accelerated switching” to allow customers to more quickly take advantage of suppliers’ offers; requiring the utility to allow customers to keep their supplier if the customer moves within the service territory, which is not operationally possible now and can harm customers if they move residences; requiring the utility to allow suppliers to access prospective and current customer account information with customers consent; and revisiting the manner in which the utility currently purchases its power to serve the customers who do not choose a supplier. It will be interesting to see what the Commission and DPA do with the various comments received.     

 

Maryland’s New Consumer Protection Rules Hearing

The Maryland Public Service Commission has set a June 16-17 hearing date to consider the publication of new consumer protection rules for electricity and natural gas retail suppliers.  The new rules would impact several aspects of a supplier’s marketing and enrollment processes. In January 2015, the Commission Staff, the Office of People’s Counsel, and the Retail Energy Supply Association submitted extensive redlines of the proposed rules. The Commission held a hearing in February that was more of an educational hearing, and then new proposed rules were communicated to stakeholders last month.

One of the biggest issues involves the impact of the new rules on  a supplier’s ability to offer contracts where the price of the electricity or natural gas can change every month (“variable” contracts), and also contracts that automatically renew at the end of the initial term. The proposed rules would require advance notice of any price change and also customer approval, even if the customer had already consented to these terms when he or she initially enrolled. According to suppliers, the new rules would increase customer acquisition and retention costs and would discourage suppliers from doing business in Maryland.  Consumer advocates take the position that these rules are necessary to protect customers from price increases about which they might be unaware.

Another issue is the ability of a customer to quickly switch to another supplier or to his or her utility service. The new proposed rules would reduce that amount of time from 12 days before your next meter read to three business days from the date your switch request is submitted to the utility. The Commission, before setting the June 16-17 hearing date, indicated in a letter order that it wanted to see this “accelerated switching” go into effect.

For more information on Maryland energy consumer protection law or retail electrical markets, please contact the electrical power regulatory lawyers at GreeneHurlocker.

Retail Suppliers Beware! Four More Lessons Learned from Starion Energy’s Record-Setting Fine in Maryland

This is the second in a two-part series highlighting “Lessons Learned” from the Maryland Public Service Commission’s recent ruling penalizing Starion Energy PA, Inc. for violating various consumer protection laws in Maryland. The first cited three lessons for retail electricity suppliers. This final post lists another four.

Lesson Four: Retail Suppliers Absolutely Cannot Make Misrepresentations When Communicating With Customers.

This part of the Maryland Public Service Commission’s decision is painful to read. The Commission found that Starion engaged in a “clear pattern of repeated misrepresentations” to potential customers, including (1) claiming to be representatives of the utility; ; (2) guaranteeing savings; (3) claiming that SMECO buys its power from Starion, so buying direct from Starion would eliminate the middle man. Starion representatives included similar claims on marketing materials, including door hangers left on the doors of SMECO customers. Many of the complaints contended that the Starion representative committed multiple violations in the same phone call.

For its part, Starion did not dispute that these statements were made by Starion representatives. In fact, the Commission noted that, Starion “conceded that the number of misrepresentations could exceed 10,000, although we understand that she was merely reflecting the fact that Starion could not verify how often these misrepresentations occurred.”

Prohibitions against such false or misleading sales tactics are a fundamental component of both Maryland and federal consumer protection laws. Retail electricity suppliers need to be adamant in their training and monitoring of sales agents, including vendors, to ensure that misrepresentations of this kind do not occur.

Lesson Five: Retail Suppliers Must Comply With Maryland’s Door-to-Door Act.

Maryland’s Door-to-Door Act requires sales representatives to fulfill certain requirements. These requirements include things like the sales representative wearing a name badge clearly himself/herself – not branded to the customer’s utility – and providing the customer a written copy of the contract. The Commission found that Starion had violated these requirements over a series of months, and that “[c]onsidering how significantly Starion relied upon this type of solicitation to attract new customers, its ongoing failure to comply with this law is remarkable.” Door-to-door solicitation is generally a risky endeavor, and the Commission in a prior case has held that one instance of misrepresentation could have been enough, if proven, to warrant revocation of the supplier’s license. Therefore, retail suppliers engaging in door-to-door solicitations need to make sure they comply with the requirements of the Door-to-Door Act by, among other things, making sure their sales representatives and vendors receive adequate training before soliciting customers, and the sales force should be monitored daily, even by random audits, if possible.

Lesson Six: Retail Suppliers Should Be Aware that the Maryland Telephone Solicitation Act is Unlike Other State’s Telemarketing Laws.

The Maryland Telephone Solicitation Act (MTSA) has certain specific requirements to obtain a valid and enforceable contract via a phone solicitation. After the initial phone call suppliers must send the customer a written contract within three business days containing statutorily specified language, which the customer must then sign. There are several exemptions to the MTSA, and its “wet” signature requirement. One exemption is if the supplier sends the prospective customer written marketing materials before the telephone solicitation, and the sale is made pursuant to an examination of those materials. Suppliers conducting telephone solicitations in the regulated Maryland retail electricity market also need to be aware of and comply with federal consumer protection laws addressing telephone solicitations – including the Telephone Consumer Protection Act and the National Do-Not-Call List. To avoid falling afoul of telephone solicitation laws, be sure to include required disclosures and statutorily-prescribed language in the scripts used by your telemarketers.

Starion had not obtained any wet signatures and, for whatever reason, no party questioned the Starion witness about whether Starion sent direct mail pieces before calling Maryland residents. While the Commission noted that Starion had the burden of proving that the MTSA exemption applied, the Commission nonetheless held that there could be no MTSA violation because the record was unclear as to Starion’s prior contacts.

Lesson Seven: Retail Suppliers’ Licenses in Maryland are Specific to Utility Service Territories and Customer Service Types, and the Commission Must Approve Any Changes to a Supplier’s License.

In its 2010 Maryland license application, Starion elected not to include commercial customers in Pepco’s service territory or any customers in SMECO’s service territory. Starion could have included these territories simply by checking the applicable boxes on its application. Because Starion had not sought the Commission’s approval to amend its license, the Commission found that Starion had violated applicable regulations. Prudent retail electricity suppliers seeking an initial license should select all of the customer types and service areas, as there is no requirement that a supplier initially serve all selected customers. For those suppliers already licensed and operating in Maryland, it is imperative that you know the scope of your license and operate within the service territories you selected. If you wish to expand, following proper Commission procedures to update your license will save you some serious headaches, and possible dollars, down the road. In the Commission’s words, Starion’s “failure to request an expanded license to operate in SMECO’s service territory until after it is caught is not an academic mistake.”

The regulatory landscape for retail electricity suppliers in Maryland is complex and dynamic, so suppliers need to be aware of the breadth of law regulating marketing in Maryland, and learn from Starion’s mistakes. If you have questions about the Maryland electricity market, the Starion decision or other issues of energy regulation and sales, please contact one of our energy lawyers.

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