|July 29, 2013|
Previously published on July 2013
The Connecticut Public Utilities Regulatory Authority (“PURA” or the “Authority”) recently commenced several investigations in connection with the state’s market for retail electric service.
The first investigation is a generic review of electric marketer practices. The Authority commenced this investigation in response to customer complaints and inquiries suggesting the need for a review of how such companies advertise and serve customers in Connecticut.
In the other cases, the Authority announced its intent to examine the marketing practices of three specific electric suppliers. The Authority seeks to determine whether these suppliers’ violated the Connecticut Unfair Trade Practices Act, or other state statutes, based upon complaints regarding billing practices and slamming practices (the unauthorized switching of a customer to a different provider), as well as criticisms regarding the quality of service.
These investigations mark the latest effort by a state to ensure the integrity of a market which has expanded due to the competitive electric offerings that permit companies to distinguish themselves through innovative product offerings. Many states that have authorized such competitive electric supply offerings have also initiated one or more investigations into alleged supplier misconduct. It is true that as the evolution of the competitive electric supply market continues and the number of suppliers increases, a small number of “bad actors” could emerge. However, more often the current allegations are the result of consumer confusion, and not the result of unfair or deceptive practices.
This confusion could arise in a variety of ways. For instance, consider the following exchange:
“Hi, my name is John Smith and I am a representative of the ACME Electric Supply Company. You may have heard that the State of -------- has authorized competition for electric service. This means is that you can now choose to have your service provided by companies other than your traditional electric company. Let me assure you that ACME has been licensed by the state’s public utility commission after a review of its managerial, financial, and technical qualifications.
And here’s the good part - your electricity will still be delivered by your current, incumbent provider. They’ll also still send you your monthly bill. Unlike your current provider, we can provide you special offers such as a “green” product comprised of renewable alternatives, a “guaranteed” savings product which is priced at a rate below your current standard service price, or we can offer a variable rate.
What’s more, you can cancel at any time. So what do you say, will you give us a shot and sign up?”
Imagine the supplier’s surprise when several months later, a state commission opens an investigation for “slamming” because the customer didn’t understand that they were switching suppliers (“They told me my service would still be delivered and billed by the incumbent electric company”). Alternatively, the customer may allege that the supplier engaged in deceptive marketing practices because it did not proactively alert the customer when the price rose to a level greater than the standard service price, even though the customer was told that the product was a variable price offer.
State commissions and legislatures are challenged to ensure a proper balance between consumer and supplier interests. While suppliers must be ever-mindful of the potential for confusion, customers must also bear some responsibility for their decisions. State commissions must be wary of adopting the paternalistic view that the customer’s failure to understand what they were buying was the result of “deceptive” acts by the supplier. Otherwise the state legislatures should enact laws which expressly prohibit particular product offerings in an effort to protect consumers from themselves. Alternatively, state commissions can initiate generic proceedings such as was recently done in Pennsylvania and New York, to implement improvements to ensure a properly functioning and workable competitive electric market.
A clear understanding of the behavior that the Authority deems impermissible puts all suppliers on notice as to expectations. After the fact allegations of deceptive behavior, measured against standards which are often vague, are not only inherently unfair but will likely serve to frustrate further development of the competitive market for utility services. On the other hand, clearly articulated standards will promote attainment of the desired benefits of competition, thereby fulfilling the original objective of consumer choice.