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Maryland PSC Fines North American Power $100,000
June 10, 2011
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Copyright 2010-11 Energy Choice Matters
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The Maryland PSC has ordered North American Power and Gas, LLC to pay a civil penalty of $100,000 after the Commission found that North American Power (NAP) committed multiple deceptive practices.
The PSC said that it gave "substantial weight" to North American Power's, "good faith efforts to achieve compliance after notification of the violations," and that absent such good faith, "the maximum civil penalty we could impose would be many times higher."
"This case should be read to stand emphatically for the proposition that this Commission cannot and will not tolerate misleading or deceptive advertising or sales tactics in the retail electricity space, and that we intend to react severely when we find that they have occurred," the PSC said (Case 9153).
The PSC said that it declined to impose a larger fine, or suspend or revoke North American Power's license, given that North American Power has cooperated with Staff and the Commission to address many of the violations in a timely manner and has demonstrated a willingness to continue its efforts to avoid further violations. "Although an intent to deceive is not a necessary precondition to imposing sanctions, we also recognize that the record supports NAP's contention that its violations resulted from inattention and a nascent understanding of how to properly manage its rapid expansion into Maryland's electricity supply market, rather than a deliberate intent on NAP's part to deceive potential customers," the PSC said.
North American Power CEO Kerry Breitbart said that the violations occurred at a time when North American Power was less than 12 months old and resulted from its rapid growth (enrolling 100,000 customers in such time). Breitbart stressed that North American Power has undertaken needed changes since it was first notified of the violations, including revised marketing and enrollment practices, and said that North American Power is a much better company than it was since it has implemented these remedial measures.
The Commission declined to accept a $35,000 contribution from North American Power into a regional fuel fund in lieu of a civil penalty (see 2/23), as recommended by Staff and the company, citing both the serious nature of the violations and the lack of statutory authority to accept such an alternative.
The PSC found insufficient evidence to sustain the most serious allegation in Staff's original complaint, in which Staff alleged that a North American Power independent representative allegedly stated that he worked for the PSC. The Commission concluded that the allegation relied upon two levels of hearsay, and any number of misunderstandings between the caller and North American Power's representative could have occurred.
The Commission concluded that the following statements contained on an advertisement created by a North American Power independent representative were deceptive:
- "BGE encourages their customers to find a new supplier," as the Commission found this statement is distinguishable from advertisements by BGE in which BGE has shown customers stating that they have shopped, because, according to the PSC, the BGE ads did not suggest that BGE actively encourages its customers to shop
- "No contract to sign," since North American Power customers must agree to the company's terms and conditions, and the PSC disagreed that the "no contract" language would be understood as only indicating there was no early termination fee
- "Save up to 20%," as actual savings have been in the 5-15% range.
The Commission further found North American Power's terms and conditions violated Commission requirements. Among other things, North American Power's terms and conditions stated that they were approved by the PSC, when they had not been. North American Power said that this was an oversight from the use of a Connecticut template, where contract terms are approved by the DPUC.
Additionally, North American Power's Terms and Conditions stated that, "potential savings can fluctuate from month to month," in describing its variable rate product. The PSC concluded that such language is deceptive because, "it strongly suggests that the customer will always realize some degree of savings, with the extent of the savings being the only variable," even though savings were not guaranteed.
The Commission found North American Power to have committed 19 deceptive practices in total, representing four separate deceptive statements in a single advertisement used by four separate representatives, in addition to the three violations in the company's terms and conditions.
The PSC also ordered North American Power to implement the remedial measures agreed to in the settlement between the company and Staff, which was first reported by Matters and more extensively covered in our 2/23 story.
Briefly, such remedial measures include a prohibition on independent representatives creating advertising, the cessation of door-to-door marketing, the use of third party verification for online enrollments (in addition to its use in other sales channels), and a prohibition on independent representatives using their own computer to enroll a customer.
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