HOW TO REGULATE
COMPETITIVE ENERGY
SUPPLIERS
Barbara R. Alexander
Consumer Affairs Consultant
83 Wedgewood Dr.
Winthrop, Maine 04364
(207)395-4143
E-mail: barbalex@ctel.net
NASUCA 2011
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FEDERAL-STATE JURISDICTION
ELECTRIC AND GAS
ä STATE
JURISDICTION OVER DISTRIBUTION
UTILITIES AND RETAIL SALES TO CUSTOMERS
ä NO FERC ROLE IN RETAIL CONSUMER
PROTECTION OR QUALITY OF SERVICE
ä FEDERAL TRADE COMMISSION: UNFAIR TRADE
PRACTICES BUT DEFER TO STATE LICENSING
AUTHORITY IN MOST CASES
NASUCA 2011
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EXISTING CONSUMER PROTECTION LAWS
EQUAL CREDIT OPPORTUNITY ACT
FAIR DEBT COLLECTION PRACTICES ACT
FAIR CREDIT REPORTING ACT
UNFAIR 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
NASUCA 2011
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CONSUMER PROTECTION IN
COMPETITIVE MARKETS
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NASUCA 2011
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 MODELS
DISCLOSURE IS KEY IN A COMPETITIVE MARKET:
Regulator must decide when and how disclosures are made
TRUTH IN LENDING ACT
n UNIFORM DISCLOSURE OF INTEREST RATE AS
ANNUAL PERCENTAGE RATE BY ALL CREDITORS TO
ALLOW FOR COMPARISON SHOPPING
LABELS AT POINT OF SALE
n FOOD: NUTRITION CONTENT
n SECURITIES
n ENERGY EFFICIENCY LABELS
NASUCA 2011
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ELECTRICITY FACTS LABEL
PRICE AND KEY PRICE-RELATED
TERMS—Is there an “APR” for energy price?
SUPPLY MIX
EMISSIONS
Adopted in similar format for Massachusetts,
Maine, New Jersey, Ohio, Illinois, Texas
NASUCA 2011
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TERMS OF SERVICE DISCLOSURES
 Plain Language
 KEY CONTENTS MUST BE MANDATED:
 KEY PRICE DISCLOSURES: must require fixed
or variable price terms (e.g., variable rate
mortgage)
 ITEMIZATION OF ALL SERVICES
 OTHER FEES—EARLY TERMINATION FEES
 DEPOSIT; INTEREST RATE; RETURN POLICY
 COLLECTION POLICIES
 RIGHT OF RESCISSION AND HOW TO
EXERCISE RIGHT
 COMPLAINT POLICY
 PROBLEM: Timing of disclosures; fine print: most
NASUCA
2011
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?
NASUCA 2011
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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
NASUCA 2011
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SUPPLIER DEFAULTS
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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
NASUCA 2011
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DOOR TO DOOR AND
TELEMARKETING SALES
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MAJOR SOURCE OF CUSTOMER COMPLAINTS
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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)
NASUCA 2011
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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
NASUCA 2011
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LICENSING/CERTIFICATION
 The Commission’s authority in this regard is tied directly to
statutory language:
 FINANCIAL AND TECHNICAL CAPABILITY
 SCREEN FOR BAD ACTORS (BOTH INDIVIDUALS AND
ENTITIES)
 HOOK FOR CONSUMER PROTECTION ENFORCEMENT
 CONSUMER PROTECTION BOND: CUSTOMER
PREPAYMENTS OR DEPOSITS
 REVOCATION; SUSPENSION
NASUCA 2011
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REGULATION OF CONTRACT
TERMS: CONTRACT OF ADHESION
RIGHT OF RESCISSION
COLLECTION COSTS
RIGHT TO PAYMENT ARRANGEMENT;
MEDICAL EMERGENCY
REGULATION OF LATE FEES; EARLY
CANCELLATION FEES
MINIMUM/MAXIMUM CONTRACT TERM
AUTOMATIC RENEWAL CLAUSES
WITHOUT NOTICE
NASUCA 2011
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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
NASUCA 2011
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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
NASUCA 2011
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ENFORCEMENT; ACCESS TO
BOOKS AND RECORDS
ACCESS TO BOOKS AND RECORDS
l STATUTORY AUTHORITY FOR ADMINISTRATIVE FINES
l LICENSE REVOCATION AND SUSPENSION
l CUSTOMER RESTITUTION
lSUBSTANTIAL INCREASE IN PENALTIES, UP TO $10,000
PER DAY PER VIOLATION
lSTAFFING IMPLICATIONS FOR COMMISSION
•INVESTIGATORS
•ATTORNEYS WITH SKILLS IN CONSUMER PROTECTION
LAW
l
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SUMMARY OF KEY ISSUES
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NASUCA 2011
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)
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NASUCA 2011
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 license
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