Pa. PUC Still Looking at Whether Third Party Contractors Require License

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November 8, 2010

The Pennsylvania PUC has extended the period for its consideration of whether third party contractors who conduct marketing and sales activities on the behalf of licensed electric generation suppliers (EGSs) and natural gas suppliers (NGSs) should also be licensed (M-2010-2185981).

In its written order on interim guidelines for supplier marketing, the PUC agreed that it may not have sufficient information by November 30, 2010 to make a final determination on whether such third party contractors should be licensed.  For this reason, the PUC extended the deadline for Staff to provide a preliminary report on the issue until April 30, 2011.

While the Commission deferred this licensing question, the interim guidelines do apply to all licensed suppliers (which includes brokers) and their "agents."  The use of the term "agent" in the guidelines is intended to apply to, "any person who is conducting marketing or sales activities, or both, on behalf of a licensed supplier or suppliers."  Consequently the term agent includes an employee, a representative, an independent contractor, or a vendor.  For natural gas suppliers, the term agent also includes "marketing services consultant" or "nontraditional marketer" as those terms are defined at 52 Pa. Code § 62.101.

The PUC reminded suppliers that Section 54.43(f) and Section 62.114(e) of the licensing regulations for EGSs and NGSs state that the supplier is responsible for, "any fraudulent deceptive or other unlawful marketing or billing acts performed by the licensee[,] its employees, agents or representatives."

The final interim marketing guidelines published by the PUC apply solely to residential customers, as the PUC declined to extend their applicability to small business customers.  However, the PUC encouraged small business customers to report their experience with supplier marketing to the Commission, and said that any incidents reported by small businesses may support a future expansion of the scope of the guidelines to include small business customers.

As noted Friday, the guidelines do not prohibit door-to-door marketing to residential customers.  Additionally, the PUC modified the proposed guidelines to allow a limited expansion of the hours in which door-to-door marketing is permitted.  Between April 1 and September 30, suppliers may conduct door-to-door marketing between the hours of 9:00 am and 8:00 pm, except where the local ordinance is more restrictive.  The 8:00 pm cutoff is a limited expansion from the original cutoff of 7:00 pm, which is still in place for the period between October 1 and March 31 (where the authorized hours absent local restrictions are 9:00 am to 7:00 pm).

The final guidelines retain the requirement that suppliers performing door-to-door marketing, "shall conduct, on all potential door-to-door marketing agents or sales agents, comprehensive criminal background checks and screenings necessary to determine if an individual presents a possible threat to the health and safety of the public."  However, aside from specifying that any person on the "Megan's Law" sex offender registry presents a threat to the health and safety of the public, the Commission did not include any additional specificity on what constitutes a possible threat to the health and safety of the public, stating that it will, "defer to the suppliers that must abide by these guidelines to decide how they will meet this standard."

Suppliers must ensure that the third party vendors and independent contractors used for marketing and sales support also conduct such background checks on employees and agents.  

The PUC will not require independent third-party verification (TPV) of sales, citing cost concerns.  "Instead, we will again state that all transactions are to be verified by some appropriate method that confirms the customer's consent to the transaction and that creates a record of that verification.  This protects the customer by providing for the verification of the sale but allows for flexibility in how the supplier handles the process," the PUC said.

The PUC affirmed that for verifications of door-to-door sales, the sales agent must, "physically separate[] himself from the potential customer by exiting the customer's residence."  To deter "loitering" by sales agents outside a customer's home during verification, the PUC struck language that had provided that the agent could return to the customer's premises upon the customer's request if a problem was detected with the enrollment.

"The obvious time for an agent to answer any questions from the customer is before the transaction or sign-up has been completed, and most certainly, prior to the verification stage.  In other words, if the agent has done his or her job correctly and provided all of the information required by these guidelines and other applicable rules, the customer who has agreed to the transaction should not have any questions at the verification stage," the PUC said.

The final guidelines retain language stating that suppliers "should" provide the local distribution company with general, non-proprietary information about marketing or sales activity likely to generate phone calls to the distribution company.  The PUC confirmed that the use of the term "should" strongly suggests that such notification to the distribution company should occur, "but does not require it."

While the guidelines do not prohibit suppliers from leaving marketing materials at the residence of consumers who are not home, the PUC, "urge[s] suppliers to use common sense when determining whether to leave marketing materials outside a customer's residence."  Uncollected marketing material, like accumulating mail and newspapers, outside of a residence, "is a signal that no one is home, and can create a safety risk," the PUC said.  "Refraining from this uneconomical practice should diminish such risks and should result in decreased marketing costs for the supplier," the PUC added.

Additionally, the PUC said that the suspicion that an agent who is compensated based on commission will have too great an incentive to obtain sales by any means (in contrast to a salaried agent) is a "legitimate concern."  Though the PUC did not order any mandates regarding the use of commissions as compensation, the Commission, "urge[s] all suppliers to reconsider their agent compensation programs to ensure that they are not inadvertently promoting and rewarding behavior than runs counter to the practices established in the guidelines and to the general obligation of fair dealing and good faith that suppliers should exercise when they interact with customers and potential customers."

Though the interim guidelines are not formal rules, the PUC said that the majority of the interim guidelines are based on statutory law and regulations that have been properly promulgated through the rulemaking process.  "We expect full compliance with these guidelines, and will impose penalties as required," the PUC said.  

The PUC also affirmed its intent to post supplier complaint statistics, dismissing arguments that such data may be commercially sensitive, but said that it need not determine the exact manner of such reporting in the instant proceeding.

The PUC extended the date for Staff to prepare a proposed rulemaking based on the interim guidelines until February 1, 2011.

   
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