Commercial Customers Need Protection Too

By Cynthia A. Arcate and Sean Burke 9 July, 2019

 

The competitive electricity supply market is tightening. Margins are thinning and suppliers are working harder to maintain their business. Most suppliers have responded to this tightening by becoming more responsive to customer desires, offering new products and services to deepen customer relationships. Other suppliers have become increasingly reliant on brokers, through channel relationships, to broaden their marketing footprint. These relationships are ripe for abuse as the broker is given significant marketing leeway, and a visible minority have resorted to unethical and manipulative practices.

Much of the attention has been paid to abuses in the residential market, but shady supplier and broker practices are becoming more common in the commercial and industrial market as well. In fact, some PowerOptions members have turned to us for assistance after they were taken advantage of. Some members have been the victim of “slamming,” in which they are unwittingly signed up for an electricity supply contract, even when they are already under contract with someone else! While these bad interactions represent a minority of all interactions, they indicate a need for strong policing of the existing rules and regulations and for a potential expansion of the rules to protect all electric supply customers. To date, we have referred most of these interactions to the Attorney General’s office, but the regulatory agencies have recently indicated a desire to be more active in investigating allegations of supplier and broker abuse.

When customers sign a fixed price contract, they assume that the fixed price will hold for the length of the contract. However, all contracts contain a “change in law” provision that allows the supplier to alter the contract price in response to legislative or regulatory changes (including rule changes by ISO-NE, the grid operator) that impact their costs. Typically, this would cover something like changes to the Renewable Portfolio Standard or the Winter Reliability Program implemented by the ISO. But some suppliers claimed that an increase in capacity costs last year triggered the “change in law” provision and tried to increase the price for many customers already under contract. This is not a change in law; fluctuations in capacity costs are part of the market risk suppliers take in offering prices to customers. PowerOptions’ supplier recognizes this and did not claim a change in law. Nor would they have been able to under our contract without our express agreement. Unlike brokers, who do not remain involved in the enforcement of a client’s contract, we stand next to our members and protect their interests. But most commercial customers do not have that kind of ally.

The Connecticut Public Utilities Regulatory Authority (PURA) recognized the unlawful interpretation of the change in law provision by some suppliers and has opened a declaratory ruling to address the issue. The Massachusetts Department of Public Utilities (DPU) has also recently opened a docket to investigate the need for new rules to prevent abuses in the residential market. But they should not stop there. Commercial customers have also been slammed and taken advantage of not only by suppliers but brokers who have no regard for the interest of their clients.

We have become increasingly alarmed by the unethical behavior of players in the competitive supply industry. This misconduct decreases customer trust and negatively impacts those who are playing by the rules. It is in the interest of all market participants that the bad apples be rooted out. As the state regulatory bodies are signaling their desire to step up enforcement in the competitive supply market, this should communicate clearly that abuses will not be tolerated and that consumer protection is the number one priority. It’s our priority.

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