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Md. PSC Hears Testimony on Viridian, Staff Injects Uncertainty into TPV Requirements
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February 10, 2011
Copyright 2010-
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The Maryland PSC yesterday heard from Staff and Viridian Energy PA, LLC regarding Staff's complaint against Viridian, and continued the hearing until April 1.
Staff’s complaint was first reported in Matters (see 1/17).
The Commission's hearing took a much different tenor than a similar hearing regarding North American Power held two weeks ago (see 1/27).
While certain elements of the Staff complaints against each supplier are, at a high level, common (regarding the use of the description "no contract" to describe the product and various advertising issues), Staff's complaint against Viridian was solely based on various marketing materials. Unlike with North American Power, no allegations resulted from a customer complaint to the PSC's Office of External Relations, and, as such, Staff did not sponsor any witnesses during yesterday's hearing as was required with North American Power
Furthermore, Viridian stipulated to the introduction into the record of the at-
Given this, it may have been expected that yesterday's hearing would have been more perfunctory, as there was no opportunity for cross examination of Staff witnesses concerning their conversations with customers, and the disputes were more legal in nature (whether the ads rise to the level of deceptive, etc. rather than whether the ads were actually produced) which could be addressed in briefs.
Nevertheless, yesterday's hearing took a decidedly more adversarial tenor. Much of this stemmed from the appearance that Staff's line of questioning appeared to concern soliciting testimony on potential amendments or additional counts to the complaint.
As noted by Chairman Douglas Nazarian, "Part of what's awkward here is we're getting a complaint that ... on one hand has got some narrow allegations but raises broader issues that the parties are apparently trying to develop while we sit here." Partly for this reason, Commissioners did not ask any questions of Viridian's witnesses during yesterday's hearing, and reserved its questions to the April 1 hearing. Nazarian did say that he has "a lot of questions" for the company.
Cross-
Since Viridian CEO Michael Fallquist offered testimony about the company's robust compliance program in response to the show cause order, Nazarian granted Staff some latitude to conduct cross examination on a variety of customer marketing and enrollment issues, not directly related to the original Staff complaint.
However, Nazarian prevented Staff from engaging in an extended line of questioning concerning Viridian's third party verification process. Staff began by asking about the requirements of COMAR 20.53, and then began a line of questioning that apparently, if permitted to continue, would have asked Fallquist to compare specific statements in Viridian's TPV versus the requirements of COMAR 20.53. While allowing a general question about the requirements of COMAR 20.53, Nazarian stopped Staff from reciting Viridian's TPV script and continuing a line of questioning about it, stating that any comparison of the script to the requirements of COMAR 20.53 would be inappropriate as any TPV issues were not contained in the complaint.
Departing from any issues specific to Viridian for a moment, and of concern to the broader market, it is also noteworthy that Staff counsel, in her line of questioning, described COMAR 20.53 as "requir[ing] that the customer be apprised by the third party verifier of all material terms and conditions, and that he accept them" [emphasis added].
With respect to residential service, COMAR 20.53 provides in relevant part:
20.53.07.08.B.4.b:
"(b)
In the event a supplier is contracting with a customer as a result of a telephone
solicitation that is exempt from all applicable State and federal law, including
the Maryland Telephone Solicitations Act, Commercial Law Article, §§14-
(i) Comply with this regulation;
(ii) Confirm that customer questions relating to the contract are answered;
(iii) Confirm that an independent third party verifies the contract or records the entire telephone conversation and maintains the recording for the duration of the contract;
(iv) Mail or otherwise transmit to the customer a complete written contract within 3 business days of the contracting conversation; and
(v) Disclose all material contract terms and conditions to the customer over the telephone."
It would appear that COMAR 20.53 is not explicit that the third party verifier must,
as Staff counsel said, apprise the customer of, "all material terms and conditions,"
but rather, that the supplier shall disclose all material contract terms and conditions
to the customer over the telephone some time during the call (which could be met
through the third party verifier repeating such terms, but seemingly could be satisfied
by the supplier, and not the verifier, disclosing all such terms earlier in the call).
A TPV which does recite all material terms is a good business decision regardless of whether it is required or not, however, COMAR 20.53 is apparently not explicit on what a TPV is actually required to verify, other than "the contract," or alternatively recording the entire call.
While Staff was not making a formal legal interpretation of COMAR 20.53 in a brief,
and in another context Staff's description of COMAR 20.53 could be chalked up to
a colloquial generalization, the fact that Staff was engaging in a specific, compliance-
This is important because, since Staff's line of questioning was not permitted continue, it is unclear what Staff considers "material," and whether Staff intends to define something other than price, term, exit fee, or guaranteed savings (if applicable) as a "material" term which, based on Staff's recitation during questioning, the verifier must apprise the customer of. In Order No. 75949 (Case 8738), the Commission defined “material terms and conditions” as including but not limited to the following:
1. Itemization or description of the service offered, including minimum use requirements;
2. Unit price (if not a flat rate, has to be on a cents per kWh basis);
3. Notice that generation as opposed to transmission or distribution is being offered;
4. Duration of the agreement (including initial time period, rollover provisions
with a mandatory 60-
5. Notice that there may be a deposit required, including the amount of the deposit, return procedures, use of and protection for such deposits;
6. All applicable fees and charges and under what circumstances the customers will incur them;
7. Notice concerning circumstances under which early termination by the supplier could occur, and the options open to the customer if termination does occur; and
8. Notice concerning early termination by the customer and the options open to the customer if termination occurs.
9. Notice that customers will have a 10-
Notably, it is unlikely any third party verification used by a supplier apprises the customer of provisions for early termination by the supplier (Item 7), yet, as Staff counsel described COMAR 20.53, the verifier would have to disclose such information. Similarly, although the solicitation call may address renewal provisions, this item may not typically be recited in the TPV.
Additionally, the list in Order No. 75949 is not exhaustive, and additional terms
could be considered material under a broad interpretation. For example, because
a customer's benefit from taking competitive supply at any point in time is dependent
on the current default service price, a broad interpretation of "material terms"
could be read to include the start date for the customer's competitive service. Even
if the supplier is not relying on a comparison to SOS rates in marketing to the customer,
the start date for service could still be considered material, or influencing the
customer's decision, because if the supplier's price is lower than the current SOS
rate, but higher than a known and impending change in SOS rates, the customer may
not wish to take service at the supplier's price if service won't start for 45-
While suppliers will typically explain the customer's start date sometime during the sales call, it is less clear that the start date (or approximate start date) would be repeated in the TPV, which is typically focused on asking the customer if they have agreed to take service from the supplier, at a specific rate, for a specific duration (and with any early termination fee), and then obtaining verifying information (name, account number, address, date/time of the call, etc.).
As an aside, outside of and apart from COMAR 20.53, the Commission has addressed TPVs in Order Nos. 75949, 76110, 76931 (Case 8738), which were not part of a formal rulemaking process for COMAR but would apparently still hold. Order No. 75949 holds that:
1. All material contract terms and conditions, as stated in this Order, must be disclosed to the consumer over the telephone; [emphasis added]
2. The consumer's agreement to contract must be verified by an independent third party and the tape of the verification maintained by the supplier; [emphasis added]
Again, these orders do not appear to support that the third party verifier must apprise the customer of all material terms and conditions, but that the third party must verify the "agreement." Order Nos. 76110 & 76931 did not alter this requirement, but address whether a recording of the entire call is required as well.
In any event, the Commission set forth additional discovery procedures for the parties. While the Commission scheduled a following hearing for April 1, this date could be delayed if Staff amends its complaint, to provide the company with additional time to respond to any new allegations. At the very least, Staff indicated that it may call new witnesses at the April 1 hearing to sponsor documents Staff intends to place into the record. These documents were apparently not part of the original complaint, as otherwise Staff would have offered them, with appropriate witnesses, yesterday.
Fallquist detailed a number of current and new compliance measures Viridian has undertaken. Viridian will institute annual testing in order for associates to receive commissions.
Additionally, associates will no longer be allowed to develop their own marketing materials (which had to still be approved by the company under the old system). Instead, all materials will be developed by Viridian, with only space for the independent associate to fill in their name and contact information.
Viridian will also validate IP addresses and verify email addresses for enrollments.
Viridian, which has in excess of 100,000 customers, has only recorded 13 complaints, Viridian said. Eight of those complaints are in Maryland, and Viridian noted that not all of the complaints have yet been adjudicated (one complaint apparently related to a customer believing they were not switched to Viridian as desired because they were receiving a utility consolidated bill, though Viridian is still investigating this complaint as it is recent).
Fallquist indicated during testimony that Viridian is planning to expand its offerings from only a variable offering to include fixed products, and added that Viridian will "hopefully" add natural gas in the future.
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