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RESA Files Complaint Against FirstEnergy Ohio Utilities, Alleging Billing Of Non-Regulated Services Offered Via "Smartmart By FirstEnergy" Site On Utility Bills Violates Corporate Separation Code

April 26, 2018

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Reporting by Paul Ring • ring@energychoicematters.com

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The Retail Energy Supply Association has filed a complaint at the Public Utilities Commission of Ohio against Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company (collectively, the FirstEnergy Ohio utilities or EDUs), alleging that the billing of various nonelectric services offered on the "Smartmart By FirstEnergy" e-commerce site on the customer's FirstEnergy Ohio utility bill violates various statutory provisions related to corporate separation

The FirstEnergy Ohio utility companies told EnergyChoiceMatters.com that they are reviewing the complaint.

See background on the launch of Smartmart By FirstEnergy here, as reported by RetailEnergyX.com

In the complaint, RESA alleged, "The FirstEnergy EDUs may not 'engage in this state, either directly or through an affiliate, in the business of supplying a noncompetitive retail electric service and supplying a competitive retail electric service . . . or service other than retail electric service, unless the utility implements and operates under a corporate separation plan that is approved by the public utilities commission[.]' R.C. 4928.17(A)."

In the complaint, RESA alleged, "Even under a corporate separation plan, the FirstEnergy EDUs may not furnish any competitive retail electric service or other 'nonelectric product or service.' R.C. 4928.17(A)(1). Such services must be provided by 'a fully separated affiliate of the utility.'"

In the complaint, RESA alleged, "Additionally, the FirstEnergy EDUs may not 'extend any undue preference or advantage to any affiliate, division, or part of its own business engaged in the business of supplying the competitive retail electric service or nonelectric product or service' by lending or making available 'utility resources such as trucks, tools, office equipment, office space, supplies, customer and marketing information, advertising, billing and mailing systems, personnel, and training, without compensation based upon fully loaded embedded costs charged to the affiliate[.]' R.C. 4928.17(A)(3)."

In the complaint, RESA alleged, "As alleged herein, the FirstEnergy EDUs, directly or through one or more affiliates, are developing, marketing, billing, and receiving payment for various nonelectric products and services in a manner which gives an undue preference and advantage to the FirstEnergy EDUs and their affiliates."

In the complaint, RESA alleged, "Many of these nonelectric products and services now offered for sale to the FirstEnergy EDUs’ customers are promoted and sold on an online store and e-commerce website referred to as 'Smartmart by FirstEnergy' (www.smart-mart.com) (Smartmart). The Smartmart products and services include or will include, among other things, leased electric vehicle chargers, smart thermostats, dimmable LED lights, home protection services, and home repair and maintenance services. The FirstEnergy EDUs include charges for the Smartmart nonelectric products and services on their customers’ electric bills."

In the complaint, RESA alleged, "The FirstEnergy EDUs, directly and/or through their affiliate(s), also have contracted with HomeServe USA (HomeServe) to market and sell various home protection and repair plans for exterior and interior lines and heating and cooling appliances exclusively to the distribution customers of the FirstEnergy EDUs. Customers who purchase HomeServe plans are billed directly for the cost of their plans on their FirstEnergy EDUs’ electric bills."

In the complaint, RESA alleged, "The FirstEnergy EDUs utilize, or permit their affiliate(s) and/or third-party partner(s) to utilize, utility assets and resources for the marketing, advertising, promotion, financing and/or billing of Smartmart and HomeServe nonelectric products and services."

In the complaint, RESA alleged, "The FirstEnergy EDUs do not permit non-affiliated competitors to utilize the same utility assets and resources for the marketing, advertising, promotion, financing and/or billing of similar nonelectric services and products to the FirstEnergy EDUs’ customers."

In the complaint, RESA alleged, "Although the FirstEnergy EDUs’ advertising and promotion claims that Smartmart and HomeServe nonelectric services and products are provided by independent third-parties, the FirstEnergy EDUs participate in, facilitate and assist in the marketing, billing and sale of Smartmart and HomeServe nonelectric services and products, to the confusion and deception of the FirstEnergy EDUs’ customers, and to the benefit of the FirstEnergy EDUs, their affiliate(s) and/or their third-party partner(s)."

In the complaint, RESA alleged, "The marketing, advertising, promotion, financing and/or billing for Smartmart and HomeServe nonelectric services and products: (i) do not comply with the State’s corporate separation requirements, the FirstEnergy EDUs’ Corporate Separation Plan and the FirstEnergy EDUs’ Code of Conduct; and (ii) violate Ohio statutory provisions that prohibit the FirstEnergy EDUs from engaging in unfair discriminatory, preferential, anticompetitive and deceptive conduct."

In the complaint, RESA alleged, "The Smartmart nonelectric products and services include leased electric vehicle chargers (with installation and repair services), smart thermostats and HVAC monitoring services, various dimmable, smart LED lights, surge protection plans, security and landscape lighting, disaster protection plans, electrical services, tree-care services, appliance repair plans, plumbing repair plans, HVAC maintenance plans, and other home protection and repair plans."

In the complaint, RESA alleged, "The FirstEnergy EDUs prohibit RESA members from entering into arrangements that would permit RESA members to bill, and for their customers to pay for, nonelectric products and services through the FirstEnergy EDUs bills for electric distribution service."

In the complaint, RESA alleged, "The FirstEnergy EDUs do not have a 'fully separate affiliate' responsible for and engaged in the business of marketing, advertising, promotion, financing and billing of Smartmart and HomeServe nonelectric services and products, as required by R.C. 4928.17(A)(1)."

In the complaint, RESA alleged, "The FirstEnergy EDUs and their affiliate(s) do not have a separate cost center and separate accounting and procedures in place for the marketing, advertising, promotion, financing and billing of Smartmart and HomeServe nonelectric services and products, as required by R.C. 4928.17(A)(1)."

In the complaint, RESA alleged, "The 'Consumer Products' section of the FirstEnergy EDUs’ Corporate Separation Plan, and Attachment 1 entitled 'Current Affiliates/Products and Services,' do not identify the nonelectric services and products for which the FirstEnergy EDUs and their affiliates participate in, facilitate and assist in the marketing, billing and sale through the Smartmart marketplace and partnerships with HomeServe."

Among other relief, RESA in the complaint sought, "An interim, emergency order directing the FirstEnergy EDUs and/or affiliated entities, during the pendency of this Complaint, to immediately cease and desist from advertising, offering, or providing the Smartmart and HomeServe nonelectric products and services identified herein."

Among other relief, RESA in the complaint sought, "Issuance of a final order finding that the FirstEnergy EDUs are in violation of R.C. 4928.17, R.C. 4905.32, R.C. 4905.33 and R.C. 4905.35, and therefore subject to a civil complaint for treble damages under R.C. 4905.61."

RESA's complaint included an exhibit averred to be an email communication to RESA's counsel from FirstEnergy Service Company's Vice President, Corporate Secretary & Chief Ethics Officer, in response to a letter from RESA to the Chief Ethics Officer requesting that the issues ultimately raised in RESA's formal complaint be investigated.

Per the exhibit attached to RESA's complaint, the FirstEnergy Service Company Chief Ethics Officer replied to RESA that, "As requested by your letter of January 4, 2018, a preliminary investigation was conducted by my designee, in accordance with the Public Utilities Commission of Ohio’s corporate separation rules and the EDUs’ corporate separation plan, to address whether the EDUs’ offering of Smartmart products is consistent with EDU tariffs and the corporate separation plan. The conclusions of the preliminary investigation were that: 1) the EDUs are permitted to offer certain products and services other than retail electric service under their corporate separation plan and existing tariff provisions, including the programs and services currently being offered by the EDUs in the Smartmart program; 2) that the probable violations alleged in RESA’s January 4, 2018 letter appear to be unfounded; and 3) that the EDUs’ offering of these programs and services are not in violation of RC 4928.17 or RC 4905.30."

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