New York PSC Issues Show Cause Order To Retail Supplier Over Alleged Slamming, "Questionable" Marketing Practices

October 20, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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Citing allegations of slamming and "questionable" marketing practices, the New York PSC ordered Josco Energy Corp to show cause why the Commission should not revoke its eligibility to operate as an Energy Services Company (ESCO) in the State of New York, or impose other consequences, as described in UBP §2.D.6.

The PSC cited complaints in which complainants alleged that marketing agents were promising savings/discounts; agents were misrepresenting themselves as utility employees while requesting to view the customers’ utility bills to obtain the account information while telling the customer that it was for a light bulb promotion, discount, or rebate on their bill; and agents were marketing in English to consumers with limited English proficiency. The PSC cited complaints which alleged that, "some of these encounters were directly outside of the utility office."

Josco Energy provided the following statement concerning the matter:

"Josco Energy has a long-standing, demonstrated commitment to providing quality customer service and complying with the Public Service Law and the Commission’s rules and regulations. Josco Energy looks forward to reviewing the Public Service Commission’s order and demonstrating that it acted appropriately at all times."

--- Statement from Josco Energy

Josco currently serves residential and non-residential electric and gas customers in the service territories of Consolidated Edison Company of New York, Inc. (Con Edison), Brooklyn Union Gas Company d/b/a National Grid NY, KeySpan Gas East Corp. d/b/a National Grid, Orange and Rockland Utilities, Inc., Rochester Gas & Electric Corporation, New York State Electric & Gas Corporation, Central Hudson Gas and Electric Corporation, Niagara Mohawk Power Corporation d/b/a National Grid, and National Fuel Gas Distribution Corporation.

The PSC stated, "On February 5, 2020, the Department of Public Service (Staff or the Department) sent a Notice of Apparent Failure (NOAF or Notice) to Josco Energy Corp (Josco), an Energy Services Company (ESCO), identifying multiple apparent violations of the Uniform Business Practices (UBP) including slamming and questionable marketing practices. This notice was the most recent of several attempts by Staff to work with Josco to correct its marketing strategies to comply with UBP regulations."

The PSC stated, "In this Order, the Commission finds that Staff has identified sufficiently credible evidence to support the issuance of an Order to Show Cause (OTSC) concerning Josco’s failure to comply with the UBP. Josco is ordered to show cause within 30 days, why Staff’s identification of apparent violations are incorrect and Josco’s eligibility to provide retail energy services as an ESCO in New York State should not be revoked; or alternatively, why other consequences as set forth in §2.D.6. of the UBP should not be imposed."

More specifically, the PSC said, "In July of 2016, Staff initiated an investigation into Josco’s market practices based on several complaints that were received both through the 'Power To Choose' website and our Quick Response System (QRS). These complaints alleged that a Josco agent used misrepresentation and questionable marketing practices in their attempt to enroll customers. Josco responded to the investigation by explaining their intent to improve their telemarketing scripts and instructions as well as implementation of an improved system for door to door marketers. They explained that they retained a law firm as compliance counsel, and they contacted their sales vendor to remedy the non-compliance."

The PSC in its order stated, "On February 28, 2018, Staff sent an NOAF to Josco based on 48 complaints received from November 2, 2017, to February 21, 2018, through the Department’s regular complaint procedures. Most of the complaints alleged slamming, misleading, and/or deceptive marketing tactics. Proof of enrollment was requested for each of the 48 cases. In addition, Josco was directed to include a more detailed response in the QRS response as required in the QRS Guidelines for all future QRS complaints. Upon review of Josco’s March 30, 2018 response, Staff determined that there were clear UBP violations with 18 of the cases and noted that Josco remedied each complaint by cancelling the service, re-rating the charges and adding the consumers to their internal Do Not Contact list. Of the 18 cases, two had sales contact or enrollment dates during 2016, 15 during 2017, and one was February 15, 2018. Josco’s response also included their intention to enhance their compliance capabilities by hiring a new customer service supervisor and a quality assurance auditor. They described their internal complaint procedure, implementation of an enhanced training program, a marketer/vendor scorecard system, and their intention to 'employ stricter enforcement measures to avoid any initiation or recurrence of compliance issues.'"

The PSC stated in its order that, "However, from January 1, 2019, to August 15, 2019, the Department received 93 complaints through our regular complaint procedure. In September 2019, Staff and Josco held a conference call to discuss these complaints. The 93 cases again alleged slamming, misleading, and/or deceptive marketing tactics. Promising savings/discounts, posing as a utility employee, and marketing in English to consumers with limited English proficiency were among the tactics reported. The enrollment or sales contact dates for 74 of the 93 complaints fell between August 2018 and July 2019, which is well after the enhanced training, scoring, and enforcement measures that Josco claimed to have implemented. Additionally, the QRS responses for most of these failed to include all the required elements that Josco promised to include as outlined in the 2018 NOAF. The contracts were missing from 25 of the QRS responses and many consumers claimed never to have received one. Two contracts reportedly signed by New York customers were for Pennsylvania, not the approved contracts for New York consumers. In 12 cases, the complaints included marketing agents misrepresenting themselves as utility employees while requesting to view the customers’ utility bills to obtain the account information while telling the customer that it was for a light bulb promotion, discount, or rebate on their bill. Some of these encounters were directly outside of the utility office and others were door to door. In at least 10 cases, the identification used for enrollment did not match the customer of record, and in at least 15 cases, the third-party verifications (TPVs) had deficiencies. Staff recognizes that when the QRS complaints brought these situations to Josco’s attention, some cases that resulted in enrollment were remedied with refunds and some marketing agents were terminated. However, these trends in complaints clearly indicate that the enhanced training and internal quality assurance measures reportedly implemented by Josco after the 2018 NOAF were insufficient and ineffective."

The PSC stated in its order that, "On February 5, 2020, Staff issued a second NOAF to address Renewable Energy Credits as well as 33 new complaints received from September 2019 to December 2019. These complaints had enrollment dates through October 2019, and they were of the same nature as the previous complaints. The QRS responses were similarly lacking. This further illustrates that the procedures Josco claims to have implemented were still insufficient to address the problems with their marketing, enrollment, and internal complaint procedures. Josco responded to this NOAF on March 13, 2020, and addressed each of the complaints. The enrollment documentation that should have been provided with the QRS responses was submitted with their NOAF response. Josco remedied the issues with a refund and appropriate action against the marketing agent, including 15 cases in which the marketer was terminated. The NOAF response included, without explanation, a statement that Josco had 'voluntarily stopped actively marketing and enrolling customers in New York as of November 2019.'"

The PSC stated in its order that, "Their QRS responses refer to a specific third-party vendor in most of these cases, however Josco failed to include this company in their compliance filings with the Department as required by UBP 2.B.1.n."

The PSC stated in its order that, "Staff received 22 complaints from January 1, 2020, through August 25, 2020. The alleged violations were consistent with the previous complaints received from 2016 through 2019. The enrollment or sales contact dates were through October 2019, again indicating that the enhanced quality assurance measures reportedly implemented by Josco did little to ensure valid enrollments and compliant marketing practices. Additionally, the proof of enrollment was missing from 11 of the QRS responses. As discussed above, Staff received 126 complaints during 2019, but only 22 from January 1 - August 25, 2020, which is after Josco ceased new enrollments. Staff has determined that the recent reduction in complaints is likely the result of Josco no longer marketing or enrolling new customers as of November 2019, rather than improvements in sales practices."

The PSC stated in its order that, "In the Company’s response dated March 13, 2020, regarding complaints alleging slamming and questionable marketing practices, Josco stated, that it enrolled all customers in question in accordance with the UBP based solely on the enrollment documentation. Josco provided sales agreements, TPV’s, and detailed responses that, from Staff’s perspective, did not sufficiently address the continuous slamming, misrepresentation, and questionable marketing practice allegations. Josco repeatedly claimed that it would implement improvements in its marketing and complaint handling procedures, however, the complaints decreased notably only after Josco ceased marketing. Additionally, Josco continues to submit incomplete QRS responses."

As such, a proceeding was instituted by the PSC and Josco Energy Corp was ordered to show cause within 30 days why the Commission should not revoke its eligibility to operate as an Energy Services Company in the State of New York, or impose other consequences, as described in UBP §2.D.6.

Case 20-M-0446

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