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Connecticut OCC Seeks to Define Agent as Including Multi-Level Marketers

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October 7, 2010

The term "agent" as used in proposed Connecticut electric marketing standards should be defined to include multi-level marketers, the Connecticut Office of Consumer Counsel said in an initial brief (Docket 10-06-24).

Parties' briefs mainly reiterated positions previously taken in an earlier round of comments, covered in our 9/21/10 story.

Among the novel issues raised in briefs is that OCC recommended that the term agent be specifically defined as including multi-level marketers.  "OCC firmly believes that, for purposes of the guidelines, Suppliers and Aggregators should be held responsible for anyone soliciting on their behalf."

Furthermore, OCC recommended that the definition of "door-to-door" sales and marketing be clarified to include multi-level marketing.  

OCC did agree, however, that the Department should consider limiting the door-to-door sales provisions to residential and small business customers of less than 50 kW demand.  As proposed, the door-to-door standards would apply to all sizes of customers, except for the prohibition of such marketing after certain hours, which would only apply to residential customers.

The Retail Energy Supply Association continued to stress the difference between agents and brokers, and said that the DPUC should not try to regulate brokers, which are currently not regulated by the Department or under the restructuring statute, through the indirect means of making suppliers liable for brokers' conduct.

"Some participants in the public hearing appeared to be either using the term 'agent' casually or intentionally trying to expand the notion of an agent to reach a category of energy market participants that the State of Connecticut has thus far chosen not to regulate:  Energy brokers," RESA said.

RESA defined a broker as distinct from an independent contractor or marketing agent.  RESA described a broker as an individual who advises customers on energy procurement, helps them evaluate competing offers from various suppliers, makes recommendations with respect to the ultimate selection of the supplier, and sometimes advises the customer on the terms and conditions of the final contract between the customer and the selected supplier.  "Energy brokers are essentially customer representatives," RESA said.

Although a supplier may compensate a broker, "these compensation arrangements do not mean that a supplier has the legal power to control a broker (it does not), or that the supplier should be legally liable for the conduct of the broker.  (Under Connecticut agency law, a supplier would not be responsible for the broker's actions.)," RESA said.

"Indeed, because brokers typically assist customers in evaluating multiple competing offers from various suppliers, no single supplier would have the ability to control or train the broker and no single supplier should be liable for that broker's conduct after the fact," RESA added.

"By contrast, an independent contractor who agrees to solicit and enroll customers for a single supplier on commission resembles an 'outside' salesperson, not an energy broker.  Most of these individuals are 'agents' under the modified definition provided in the RESA Comments and would thus properly be subject to the training and liability provisions set forth in the Initial Staff Guidelines," RESA said.

Other Issues
OCC said that the cap on residential termination fees should be a flat rate of $100 only, and that the supplier should not have the option to base the fee on twice the estimated bill for energy services for an average month, "because at the time of the contract, Suppliers may not have the specific information needed to provide the customer with an estimate of its average monthly bill. "

RESA opposed mandating that retail suppliers post their offers on the CT Energy Info rate board, since such posting is not required by statute.  "Worse, it could stifle the sort of innovation among suppliers that can add significant value to consumers," RESA said.

During a hearing in the proceeding, the DPUC specifically cited Energy Plus Holdings LLC as not participating on the rate board.  In a late filed exhibit, Energy Plus Holdings noted that its marketing model does not lend itself to participating on the rate board, since it does not have a generally available offer.  Energy Plus Holdings' offers are typically tailored in combination with some sort of affinity or rewards program, using targeted direct mail and email marketing.  As the offers are bundled with some other benefit (airline miles, credit card points, etc.) that the customer is already be using, Energy Plus Holdings' products are not suited to mass marketing via the rate board.

The Department has also been concerned with the timeline for enrollments.  From the testimony of the electric distribution companies at the hearing, RESA noted that it appears that there is no technical barrier to effecting enrollments at times other than the beginning of a billing cycle, so long as there is only one new enrollment per billing cycle.  "With (at most) two different suppliers serving a customer during a billing cycle, prorating the bill based upon the number of days in each supplier's period appears to be well within the capability of the existing EDC customer information systems," RESA said.  

The Department should direct the EDCs to process enrollments during billing cycles rather than waiting for the next billing cycle, RESA said.

As only noted in Matters, Connecticut Light & Power has again proposed that suppliers be required to pay a fee for utility consolidated billing.  RESA responded that such a charge would necessitate a detailed cost analysis to arrive at the correct fee, and would also introduce the need to unbundle the utility billing function so that the cost of the billing function appeared on the generation portion of the bill for any customer taking Standard Service or Last Resort Service.

"Simply assessing a fee on suppliers who utilize EDC billing without fully unbundling the billing function will mean that customers taking competitive supply will pay for billing in their generation charge while customers taking standard/last resort service will see those charges embedded in their distribution fees," RESA said.

As previously noted, the DPUC's proposal calls for enrollment verifications to be maintained fro 10 years.  OCC said that the record retention requirement could be reduced to a period of three years after contract termination.

   
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