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HOW TO REGULATE COMPETITIVE ENERGY SUPPLIERS

HOW TO REGULATE COMPETITIVE ENERGY SUPPLIERS

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HOW TO REGULATE COMPETITIVE ENERGY SUPPLIERS

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  1. 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

  2. FEDERAL-STATE JURISDICTION ELECTRIC AND GAS • STATE JURISDICTION OVER DISTRIBUTION UTILITIES AND RETAIL SALES TO CUSTOMERS • NO FERC ROLE IN RETAIL CONSUMER PROTECTION OR QUALITY OF SERVICE • FEDERAL TRADE COMMISSION: UNFAIR TRADE PRACTICES BUT DEFER TO STATE LICENSING AUTHORITY IN MOST CASES

  3. 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

  4. CONSUMER PROTECTION IN COMPETITIVE MARKETS • 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

  5. DISCLOSURE IS KEY IN A COMPETITIVE MARKET: Regulator must decide when and how disclosures are made TRUTH IN LENDING ACT • UNIFORM DISCLOSURE OF INTEREST RATE AS ANNUAL PERCENTAGE RATE BY ALL CREDITORS TO ALLOW FOR COMPARISON SHOPPING LABELS AT POINT OF SALE • FOOD: NUTRITION CONTENT • SECURITIES • ENERGY EFFICIENCY LABELS PRICE AND CONTRACT TERM DISCLOSURE MODELS

  6. 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

  7. 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 consumers ignore these documents! TERMS OF SERVICE DISCLOSURES

  8. 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?

  9. 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 REGULATION OF COMPETITIVE SUPPLIERS BY COMMISSION

  10. SUPPLIER DEFAULTS • 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

  11. DOOR TO DOOR AND TELEMARKETING SALES • MAJOR SOURCE OF CUSTOMER COMPLAINTS • 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)

  12. 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

  13. 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

  14. 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

  15. 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 MARKETING

  16. 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

  17. ENFORCEMENT; ACCESS TO BOOKS AND RECORDS • ACCESS TO BOOKS AND RECORDS • STATUTORY AUTHORITY FOR ADMINISTRATIVE FINES • LICENSE REVOCATION AND SUSPENSION • CUSTOMER RESTITUTION • SUBSTANTIAL INCREASE IN PENALTIES, UP TO $10,000 PER DAY PER VIOLATION • STAFFING IMPLICATIONS FOR COMMISSION • INVESTIGATORS • ATTORNEYS WITH SKILLS IN CONSUMER PROTECTION LAW

  18. SUMMARY OF KEY ISSUES • 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?

  19. SUMMARY (Continued) • 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