The Need for Consumer Protections in Retail energy marketing Maryland’s Perspective

1. The Need for Consumer Protectionsin Retail energy marketingMaryland’s Perspective Peter Saar Assistant People’s Counsel Maryland Office of People’s Counsel 6 St. Paul Street, Suite 2102 Baltimore, MD 21202 410-767-8150 www.opc.state.md.us NASUCA Annual Meeting November 15, 2011

2. Maryland Regulatory Background • Maryland is a “deregulated” or “restructured” state • Maryland law: Energy suppliers • License Requirements • Consumer Protection rules • Disputes

3. Supplier Licensing • MD PSC must approve license • Requirements • Technical and managerial competence • Affirmations of Compliance • FERC and PJM rules • Federal and state consumer protection laws and regulations • Disclosure of problems in other states • Federal and state environmental laws and regulations • Tax compliance • Financial history and integrity • Guarantees, bonds and letters or credit • Certifications • MD Assessments and Taxation: Business qualification and standing

4. Licensing Procedures • PSC Staff • Application – Compliance Review • Technical and financial competence • Certifications and affirmations • Consumer and environmental complaints – Other states • Review of training and marketing materials (if available) • Comments to PSC • OPC Role • Application - Focus of Review is on Customer Issues • Disciplinary actions and complaints – Other states • Internet • Supplier website • Marketing and training materials (if available) • Solicitations without a license • Comments to PSC • PSC Approval or Denial

5. Consumer ProtectionUnfair and Deceptive Acts & Practices (UDAP) • Unfair and deceptive practices • “Representations, omissions or practices that are likely to mislead the consumer” • Attorney General can enforce State consumer protection laws • UDAP: Advertising, solicitation and contracting • Door to Door Solicitation Act • Telephone Solicitation Act • Refers consumer complaints to MD PSC in first instance • MD PSC enforces Public Utility law and regulations (which incorporate UDAP principles) • Adequate, accurate customer information – informed choices • Supplier website: Readily understandable information • Services, prices and emissions disclosures

6. Consumer ProtectionsContracts • General rule: Written contracts are required • Door to door (anyplace other than supplier’s fixed location) • Telephone (unless exempt from rule) • Customer must receive and sign a written contract after call • Contract is void otherwise • Typical exemptions • Pre-existing business relationship • Customer-initiated call • Customer has reviewed written materials in advance ( slippery exception) • Exempt solicitation requirements • Disclosure of all material terms and condition • 3rd party verification • Mail or transmit contract within 3 business days • Internet • Printable document with terms and conditions sent to valid email address of customer • No right of reccission • Automatic renewal is permitted – 45 Advance notice is required

7. Consumer ProtectionContract Disclosures • Contract: All Material terms and conditions • Description of services and restrictions • License number • Price terms • Deposits • Cancellation: Circumstances, notice and fees • Automatic renewal term • Billing options • No Electricity Facts Label • Price terms • Fixed and variable prices • Price: what is included/excluded • Price Comparison: Supplier price vs. utility SOS price for set periods • See OPC Price Comparison sheets • New Law: PSC must have consumer education website – electric supply only

8. Consumer ProtectionDisclosure Requirements • Restrictions • Customer Information • Mass Customer List: PSC permits release of name, address and phone number to energy suppliers • Utility must obtain pre-approval • Customer deemed to consent • Notice required • Customer can “opt-out” • Account number and energy usage information cannot be disclosed without express consent • Bills to require disclosure have been introduced and narrowly defeated • Supplier cannot disclose customer billing, payment or credit information without customer consent • Exception: Use for billing, bill collection and credit reports

9. Regulatory Enforcement • MD PSC - License Violations • Show Cause Proceedings • Suspension or revocation of license • Prohibition on new customer soliciation or enrollment • Civil penalty ($10,000 per violation) • Factors • Provision of false information • Switching customers without consent • Service default • Fraudulent or deceptive practices • Failure to maintain financial integrity • Violation of a PSC regulation or order • Non-payment of taxes • Violation of PSC law or consumer protection laws • Conviction for a felony, or crime of fraud, deceit or theft • Suspension or revocation of license in other state

10. Problematic Practices • General – Advertising • Potential misrepresentation or exaggeration of price savings • Percentage savings exaggerated • Deceptive price comparisons • “Teaser” rates (low rates for month or two on variable contract) • “Guarantee” of savings on multi-year contracts (utility SOS price is not known past one year) • Use of “gifts” (gift cards; points) can blur price comparison information • Targeting: Customers with Limited English Proficiency and Seniors

11. Problematic Practices • Solicitations • Door to door • Marketing agents’ lack of knowledge (paid on commission) • Deceptive appearance of marketers (logos; clothing) • Deceptive identification (“I am from the utility”) • Failure to provide written contract and obtain signature • Customers do not get required notice of 3-day recission period • Telephone • Potential cramming concerns • Failure to provide written contract and get signature after the call • 3rd party verification: selective recording

12. Problematic Practices • Contracts • Contract terms do not match oral representations • Price terms • Variable prices • Insufficient fee disclosures • Asymmetrical cancellation terms • Billing • Consolidated billing • Handling of disputes over supplier charges (on utility bill) • Purchase of receivables (POR) – Authorized by MD PSC • Termination of utility services for non-payment of supplier charges • Inclusion of non-energy charges in supplier charges

13. Maryland Experience • MD PSC Proceedings • North American Power • Viridian • Licensing • Pending question – should independent marketing representatives be licensed? • Advertising and Solicitation • Price offers and comparisons • “Guaranteed” savings on long-term contracts (2-5 years) which cannot be substantiated • Percentage savings are exaggerated • Offers lack utility price comparisons • Brokers • Advertising and Marketing materials do not clarify the broker role • Residential brokers have relationship with only one supplier (acting in agent role) • Account Information • Submission of personal information (account number) prior to price quote

14. RecommendationsLaws, Regulations or Codes of Conduct • Supplier licenses • Suppliers (with title), brokers and independent marketing representatives • Enforcement • Dispute process • Suppliers and brokers • License or registration for independent marketing representatives • Consumer Protection • Marketing and advertising • Solicitation • Contracts • Billing • Dispute Procedures • Enforcement

15. References • Maryland Laws • MD. Public Utilities Article (PUA) • §7-507 (Electricity Supplier License and Consumer Protection) • §7-603 (Gas Supplier License and Consumer Protection) • §7-507 (q) (Concurrent PSC and Attorney General authority) • Md. Comm. Law Art. • §13-301 et seq. (UDAP) • §14-2201 et seq. (Telephone Solicitation Act) • § 14-2601 et seq. (Door-to-Door Solicitations Act) • Maryland Regulations (COMAR) • 20.51.02.01 (Electricity supplier license requirements) • 20.54.02.01 (Gas supplier license requirements) • 20.53.07.01 (Residential electricity customer – consumer protections) • 20.59.07.01 (Residential gas customer – consumer protections) • 20.53.05.03 (Electric Utility billing – includes purchase of receivables) • 20.59.05.01 (Gas Utility billing – includes purchase of receivables)

16. References • Federal Laws • 15 U.S.C. §§ 11601-1608 (1994) (Telephone Consumer Fraud and Abuse Prevention Act) (“Do Not Call Registry”) • Federal Regulations • 16 CFR Part 310 (Telemarketing Sales Rule) • FTC Policy Statement on Deception, 103 F.T.C. 110,174 (1984) • FTC Policy Statement on Unfairness, 104 F.T.C. 949, 1070 (1984)

17. Resources • MD OPC Consumer Information • Monthly Electricity and Gas Supplier Price Comparisons • Guide to “Contracting for Electricity and Natural Gas Supply” Available at www.opc.state.md.us • FTC • “Advertising Retail Electricity and Natural Gas” • “Advertising and Marketing on the Internet” (September 2000) Available at www.ftc.gov