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Md. PSC Hears Testimony on North American Power, Will Continue Review in March

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January 27, 2011
Copyright 2010-11 Energy Choice Matters
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The Maryland PSC yesterday heard from Staff and North American Power and Gas LLC regarding Staff's complaint against North American Power (see 1/10), and took the matter under advisement after several hours of testimony.

The Commission intends to resume consideration of the matter at a meting in early March, at which time oral arguments and/or a legislative style hearing would be held, and the Commission would move into the question of what penalty, if any, is appropriate should the Commission find the allegations made by Staff are sustained. Due to time constraints, much of yesterday's hearing dealt with entering factual background into the record, and neither Staff nor North American Power offered any testimony regarding what appropriate actions from the Commission would be.

In the interim, North American Power will also respond to several data requests from the Commission.

During yesterday's hearing, North American Power CEO Kerry Breitbart testified that North American Power has a total of about 85,000 customers, with 12,000 to 13,000 in Maryland. Breitbart said that enrollments were about 1,000 customers per day.

About 30-40% of North American Power's customers come from its "direct" sales channel, its term for network marketing. North American Power's network sales force includes 8,000 independent agents, with 2,000 in Maryland.

Breitbart reported that North American Power is in the process of becoming licensed and entering the New York and New Jersey markets. Currently, North American Power is active in three states: Connecticut, Maryland, and Pennsylvania.

Breitbart also testified that a "large" fine could potentially put North American Power out of business, though the amount of a "large" fine that could potentially prompt such an issue was not identified by Breitbart or counsel. Breitbart explained that the company has been largely self-funded by its partners, but that one of the hottest summers on record in Connecticut and one of the worst Decembers have resulted in "losses," particularly as North American Power has chosen not to raise its pricing, and has continued to lower its pricing in some markets such as Maryland.

Stating that he was "horrified" to have to appear before the PSC to answer Staff's allegations, Breitbart reported a series of additional remedial and compliance measures that the company has instituted, aside from the previously reported suspension of Maryland door-to-door and telemarketing, and revisions in the terms of service (see 1/24).

Among other things, North American Power has instituted a check in its online enrollment procedure that flags any enrollment coming from the same IP address as a prior enrollment, and places it into a queue for further investigation. This measure is meant to protect against independent agents, and not customers themselves, using the website to perform enrollments, and prevent independent agents from taking a customer's bill home and using it to enroll the customer from the independent agent's own computer. A similar process also flags an enrollment for further investigation if a duplicate email address or phone number is used during enrollment.

In fact, the agent whom Staff has alleged misrepresented themself as being from the PSC was terminated by North American Power, prior to North American Power being made aware of Staff's complaint, because the representative had multiple enrollments from the same IP address.

Breitbart also said that all sales would be third party verified, including web sales which will use an outbound TPV to the customer. Previously, North American Power attempted to TPV all sales, including web enrollments, but if the verifier could not connect with a customer enrolling through the web after six attempts, the accounts were enrolled without TPV.

Independent agents are also now prohibited from conducting any advertising of North American Power. Part of Staff's allegations concern an ad placed by a North American Power agent (though the ad did not cite North American Power by name) that made claims regarding a 20% savings versus Baltimore Gas & Electric, and that there was "no contract" to sign. During the hearing, Commissioner Lawrence Brenner said that an online ad with similar statements appeared when performing a google search for "NA Power" (although it was not clear from Brenner's statement how NA Power was entered into the search field, e.g., spacing between N-A, whether quotes were used, etc.).

Breitbart said that North American Power has scrubbed online sites of its agents to remove such ads, but had not encountered the ad cited by Brenner, possibly because of google's regional and user-specific metrics used to display ads for some users and not others. Matters could not locate Brenner's cited ad; however, it should be noted that several social media pages, some of which are identified as belonging to a North American Power agent, make similar claims to the claims at issue.

North American Power is staffing up its compliance department, including the hiring of Bill Kinneary, formerly a top executive at KeySpan Energy Services and Total Gas & Electric, as President, who will be charged with ensuring "bullet-proof" compliance procedures and processes.

Additionally, North American Power has revised its training procedures for agents, now requiring agents to pass an online test after online training.

Breitbart testified that door-to-door marketing is "inherently difficult" from a compliance perspective, and is seriously considering eliminating door-to-door marketing.

Regarding Staff's allegation, based on a call from a customer to the PSC's Office of External Relations, that a North American Power agent misrepresented themself as being from the PSC, North American Power's cross-examination of Staff's witnesses centered on the claim that the customer, according to Staff, alleged that the agent informed the customer that the customer could save money on their "gas bill." North American Power does not currently offer natural gas supply. Staff witnesses countered that, due to BGE's dual commodity service, the term "gas bill" is colloquially used in the region to mean "utility bill."

North American Power also stressed through its cross-examination that while the customer alleged the agent stated they were from the PSC, when a PSC Staffer called the agent, not identifying themself as a PSC Staffer but rather as a customer referral from the original customer, the agent did not identify themself as with the PSC, and when asked if they were from the PSC, the agent stated that they were not. Counsel for North American Power suggested that it would be inconsistent for the agent to identify themself one way to one potential customer, but another way to another potential customer.

Regarding North American Power's terms of service, which had incorrectly stated that they were approved by the PSC, Commissioners pressed the company of why these terms of service were still available on North American Power's website. Although Commissioners appreciated that the company would not want to begin using its revised terms of service until being reviewed by Staff, Commissioners said that, at the very least, the company could have removed the statement that the terms of service had been approved by the PSC from its online version of the terms of service, as there is no dispute by the company that the statement is inaccurate.

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