On Appeal, PSC Addresses Whether All Telesales (Including Inbound In Response To Mailer) Are Subject To Statute Requiring A Signed Contact (Except In Certain Exemptions) -- EnergyChoiceMatters.com

Updated: On Appeal, PSC Addresses Whether All Telesales (Including Inbound In Response To Mailer) Are Subject To Statute Requiring A Signed Contact (Except In Certain Exemptions)

PSC Rules On Draft Order That Proposed To Require Retail Supplier To Obtain Signed Written Contract For All Future Telephonic Sales (Regardless Of Exemption)

PSC Directs Supplier To Obtain Signed Contracts For Prior Enrollments, Or Customers Will Be Dropped To SOS

May 4, 2022

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Reporting by Paul Ring • ring@energychoicematters.com

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Update:

Direct Energy provided the following statement concerning the matter:

"Direct Energy is evaluating the ruling."

Earlier:

The Maryland PSC issued an order on appeal addressing a proposed order concerning a PSC Staff complaint against Direct Energy Services, LLC regarding telephonic enrollments, and the applicability of the Maryland Telephone Solicitations Act (MTSA) and its requirement for a signed contract except under certain exemptions

For background on the case and the proposed order's findings, click here for our prior story

In the proposed order, the public utility law judge (PULJ) had concluded that the MTSA applied to the at-issue inbound customer calls to Direct Energy, which were putatively made in response to marketing postcards and other mailed solicitation materials

The PSC affirmed this finding.

In a prior case [SmartEnergy] concerning another, unaffiliated, retail supplier, the PSC had specifically highlighted the fact that the mailers in that case were deceptive, in applying the wet signature requirement to the inbound sales calls putatively made in response to the mailers.

However, the PSC said that the fact that Direct's mailers were not deceptive does not distinguish the case with respect to the MTSA.

"The MTSA applies to all inbound calls, made pursuant to marketing materials, where the sale takes place entirely over the phone," the PSC held

"Here, the Commission not only finds that the MTSA applies to Direct Energy‘s inbound sales calls but also agrees with the PULJ that the applicability of the SmartEnergy holding should not be limited to instances of deceptive or misleading marketing," the PSC said

In sum, "the Commission concludes that the MTSA applies to all inbound calls made in response to a supplier/merchant‘s particular marketing effort (e.g., postcard, direct mail, or other advertising), and these customers should be sent a valid contract to sign."

The PSC also agreed with the proposed order's finding that Direct Energy did not qualify for one of the exemptions from the signed contract requirement that is listed in the MTSA, such as having a pre-existing business relationship

"The Commission affirms the PULJ's finding on the MTSA § 14-2202(a)(2) preexisting relationship exemption because there is no evidence of a preexisting business relationship with regard to the customers that are the subject of this complaint, and the mailings themselves do not create such a relationship. Direct Energy‘s arguments notwithstanding, the evidence in this case does not show that its mailers were directed to prior or current customers -- or anyone -- with whom Direct Energy had a preexisting relationship," the PSC said

The PSC stressed that, "in the future, the Commission will not consider an invalid enrollment that has not been remedied by acquiring a valid contract as a qualifying 'prior sale' or 'preexisting business relationship.' Therefore, Direct Energy may not rely on its history with an individual customer to satisfy the MTSA exemption in § 14-2202(a)(2) unless it can properly document the initial (prior) enrollment."

Another MTSA exemption is for contracts made as a result of a consumer examination of an advertisement or mailer that, among other things, includes a description of the goods or services being sold and any limitations or restrictions that apply to the offer

"The Commission also affirms the PULJ's finding that the MTSA § 14-2202(a)(5) marketing exemption does not apply, since customers were not enrolled under circumstances in which they had the opportunity to examine Direct Energy‘s services beforehand, particularly considering that the marketing information may not have contained all the important information needed to understand the offering such as price, contract term, renewal term, or other limitations," the PSC said

While the PSC affirmed the proposed order's interpretation of the MTSA, the PSC rejected certain of the proposed order's proposed remedies

Specifically, the PULJ had proposed that Direct Energy shall obtain a signed written contract for all future telephonic sales in Maryland, whether outbound, or initiated by inbound calls in response to mailers or other marketing

The PSC rejected this proposal, stating that this remedy exceeded its authority and conflicts with statute.

"[T]he Commission rejects the PULJ's determination that Direct Energy cannot contract under the exemptions in the MTSA going forward. Should the Commission prohibit Direct Energy‘s access to the exemptions, it would in effect be denying a portion of a Maryland statute‘s provisions to a particular business. The Commission cannot alter the terms of a statute and therefore cannot prohibit Direct Energy from satisfying the MTSA exemptions in the future," the PSC said

As a result of its conclusions discussed above, the PSC found that all Direct Energy Services, LLC Maryland customer enrollments pursuant to inbound calls from 2016-2019 are invalid

The PSC is providing Direct Energy with a time period to resolve the invalid enrollments by acquiring signed contracts for affected customers who are still served by the company.

The PSC ordered that Direct Energy shall send a letter to all of its Maryland customers who were solicited and enrolled by telephone during the complaint period (2016-2019), informing them of the invalidity of their contracts and to provide them with three choices: (1) enroll with Direct Energy by signing a valid contract (which comprises all terms and conditions, contract term, rates, and right of rescission); (2) return to their utility‘s standard offer service (SOS); or (3) switch to service from a different retail supplier.

"Once the Commission has reviewed Direct Energy‘s compliance plan it will determine a process by which any customers who do not have valid contracts must be returned to SOS within 180 days," the PSC said

The Commission affirmed the PULJ's decision not to assess additional civil penalties. As first reported by EnergyChoiceMatters.com, Direct Energy previously paid $125,000 under a settlement in the proceeding

Case 9614

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