Initial Decision Would Rule Retail Supplier Violated Market Rules When It Prematurely Ended Fixed Rate Contract (Drop To SOS)

March 21, 2023

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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An initial decision from a Pennsylvania ALJ would conclude that Sunwave Gas and Power Pennsylvania Inc. violated certain of the state's retail market regulations and rules when Sunwave prematurely ended the fixed rate contract of a customer by dropping the customer to default service; however, the initial decision's finding may be of little precedential value because Sunwave did not offer a defense to a a customer complaint concerning the matter, and thus the facts were deemed admitted by Sunwave per PUC regulations

A respondent who fails to file an answer to a complaint within 20 days may be deemed to be in default and the facts set forth in the complaint may be deemed admitted

As such, the initial decision does not engage in an interpretation of the behavior of prematurely ending fixed rate contracts, and what events may or may permit such action (e.g. determination of what constitutes a change in law or regulation, etc.). Sunwave dropped the relevant account to default service as it exited the market

The initial decision is not final and parties may file exceptions to the initial decision

As previously reported, Sunwave exited the Pennsylvania market last summer, and dropped customers to SOS

In the instant case, an individual customer complainant alleged, among other things, that the Sunwave (the Respondent) engaged in 'illegal activity' by: (1) prematurely terminating his fixed-term, fixed-price supply contract with the Respondent (Supply Contract) for a reason not specified in the Respondent‘s disclosure statement

The initial decision would find that Sunwave engaged in fraudulent advertising as a result of the termination of the fixed contract

The Complainant alleged that the premature termination of the Supply Contract violated Commission regulations because under the disclosure statement provided by the Respondent, premature termination was permitted only if the Respondent’s ability to perform its obligations under the Supply Contract was impaired by changes in applicable law or regulations. Stated otherwise, the rationale for the early termination given to the Complainant by the Respondent and its representatives in a termination notice, i.e., withdrawal from the Pennsylvania market and/or abandonment of its EGS license, were not identified in the disclosure statement as events justifying early termination of the Supply Contract. The Complainant testified that Sunwave‘s advertising on PAPowerSwitch.com, indicated that he would receive 'budget certainty and predictability [and would] receive the same price per kilowatt hour for every hour [of] use . . . throughout the duration of [the] contract term . . . regardless of economic factors or market conditions.'

As Sunwave did not answer the complaint, Sunwave under the initial decision was deemed to be in default and the facts set forth in the complaint were deemed admitted under the initial decision

"Having admitted that it failed to provide accurate information in the disclosure statement made to the Complainant, engaged in false and misleading advertising, and failed to adhere to the termination terms of the Supply Contract promoted in its advertising, the Respondent is deemed in default of Commission regulations)," the initial decision would find

The Complainant also alleged that the Respondent violated Commission regulations relating to the transfer of his account because the termination notice 'was effective immediately.' In addition, the ALJ said that Complainant provided unrebutted testimony that he received no prior written notice from the Respondent of the early termination of the Supply Contract or Sunwave’s withdrawal from the Pennsylvania energy market.

"It is axiomatic that termination of the contract for a reason other than a reason contemplated by the agreement constitutes a change in the terms of the agreement i.e., its duration. The same is true with respect to the premature termination of a fixed-term contract. Therefore, Commission regulations relating to changes in terms of an EGS contract are applicable to the facts at issue in this matter," the ALJ said

Commission regulation 54.10(1) requires licensed EGSs to provide 45 to 60 days’ notice to customers of any change in the terms of a fixed duration contract. In addition, subsection (2) of that regulation requires licensed EGSs to provide customers an 'options notice' at least 30 days’ prior to any change in the terms of a fixed duration contract, informing the customer of the customer’s ability to accept the proposed changes, to choose another product offering, to select another EGS or to return to default service.

"As noted above, by failing to file a timely answer to the Formal Complaint, failing to retain counsel, and failing to appear at the hearing in this proceeding, the Respondent admitted that it failed to provide the Complainant timely written notice of its intent to terminate the Supply Contract and his options as a consumer. Therefore, I conclude that the Respondent violated Commission regulation 54.10(1) and (2)," the ALJ said

The ALJ's initial decision would impose a $6,000 civil penalty on Sunwave.

"I conclude that a civil penalty in the amount of $1,000.00 for each Commission regulation violated is appropriate in this matter. The Respondent violated the following six Commission regulations: 54.5, 54.43(f), 54.122(3), 54.10(1) and (2), and 54.41(b); therefore, a penalty of $6,000 is imposed," the initial decision would provide

The initial decision would dismiss breach of contract claims due to the PUC's lack of jurisdiction over civil EGS contract disputes. The initial decision would also dismiss claims of fraudulent advertising with respect to other customers, as the complainant did not show that the complainant represented any such customers

Case F-2022-3034509

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