PUC Rules On Initial Decision Which Had Found That Retail Suppliers Were Subject To Regulations Applicable To Utilities, Including Requirement For "Reasonable" Service

February 22, 2024

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Updated, 1:10 pm ET, Feb. 23

Direct Energy provided the following statement concerning the matter:

"Direct Energy is committed to complying with the Commission’s regulations and to providing our customers with excellent service. In this case, Direct Energy took prompt action after the customer’s inadvertent switch and repeatedly attempted to help the complainant re-enroll with the company. It is unfortunate that PECO’s processes cannot accommodate manual overrides to correct honest mistakes made by customers. Retail suppliers do not have the ability to reject drop requests received from the utility. Ultimately, we are pleased that the Commission noted we acted in accordance with their standards in this matter, that no civil penalty was warranted, and that this customer’s concerns have been resolved."

--- Statement from Direct Energy

Earlier:

The Pennsylvania PUC has reversed the part of an initial decision from an ALJ which had found that retail natural gas suppliers are subject to 66 Pa.C.S. § 1501, which sets forth certain service standards and obligations for public utilities, including a requirement that service be "reasonable"

A full written order was not available as of publication time, but the PUC adopted a motion from Vice Chair Kimberly Barrow which holds that Direct Energy Services, LLC (and other retail natural gas suppliers) are not public utilities, and therefore are not subject to the provisions of 66 Pa.C.S. § 1501

66 Pa.C.S. § 1501 provides that every public utility shall furnish and maintain, "adequate, efficient, safe, and reasonable service and facilities..."

The matter involves a complaint filed against Direct Energy, as well as PECO, by a customer (Mr. Naborn) concerning an inadvertent switch away from Direct Energy as the customer's gas supplier

According to the initial decision, after a PECO customer indicates interest in alternative energy suppliers, PECO’s IVR system allows customers to use the telephone keypad to change their NGS only, their EGS only, both their NGS and EGS, or to remain with their current suppliers. According to the initial decision, PECO’s IVR system does not explicitly indicate or reiterate to the customer whether the changes requested and being confirmed by the customer relate to the customer’s EGS, NGS or both.

The initial decision states that PECO’s systems will not allow a PECO customer or a PECO customer service agent to reverse an inadvertent or erroneous NGS or EGS selection made via IVR and return the customer’s account to the customer’s supplier prior to the selection on the same day the inadvertent or erroneous supplier selection occurred.

The initial decision states that if a PECO customer inadvertently or erroneously indicates a wish to change natural gas and electricity supply to PECO via PECO’s IVR, and the PECO customer contacts their then-existing NGS or EGS on the same day, due to batch processing by PECO, the customer’s then-existing NGS or EGS would not yet have been notified of the change.

The initial decision states, "On July 22, 2022, Mr. Naborn contacted PECO via telephone to discuss enrollment with PECO as the EGS for the service address."

The initial decision states, "On July 22, 2022, Mr. Naborn was connected to PECO’s IVR system and responded to a query regarding choosing PECO as the EGS and NGS for the service address by selecting the keypad response corresponding to selecting PECO for both gas and electric service. On July 22, 2022, when Mr. Naborn confirmed his IVR responses, he was unsure what choice he was confirming because the IVR did not identify with specificity which energy supplier choice, EGS, NGS or both, he had made via the IVR system."

The initial decision states, "On July 22, 2022, upon transfer from PECO’s IVR system to a PECO customer service representative, Mr. Naborn explained that he did not wish to change gas and electric service to PECO and requested that any NGS selection he had made via the IVR be 'reversed' and that the NGS for the service address be returned to its status prior to the call."

The initial decision states, "Also on July 22, 2022, Mr. Naborn contacted Direct Energy to inform Direct Energy that he did not wish to change his selection of Direct Energy as his NGS."

The initial decision states, "Mr. Naborn requested that PECO and Direct Energy’s customer service representatives he spoke to on July 22, 2022, note in their respective service records his notice that any NGS switch made that same day, had been made inadvertently or in error, and that he wished to retain Direct Energy as his NGS."

The initial decision states, "On July 25, 2022, Direct Energy received a cancellation notice from PECO indicating that Direct Energy’s status as the NGS for the service address would end as of August 22, 2022. PECO began serving as the Complainants’ NGS on August 23, 2022."

The initial decision states, "On August 25, 2022, a customer service representative for Direct Energy informed Mr. Naborn that the selection of Direct Energy as the NGS for the service address had been changed as of August 22, 2022, and a new enrollment would be required to reinstate Direct Energy as the NGS for the service address."

The complainant contended that neither PECO nor Direct Energy provided adequate service in response to the complainant's report and dispute of an unauthorized or inadvertent change of their NGS.

During the proceeding, a Direct Energy witness had stated, "Under Chapter 59 of the [Commission’s] regulations, Direct Energy is obligated to comply with PECO's inbound cancellation request and to return the account to PECO's service. If Direct Energy does not comply with PECO's inbound cancellation request, it would've been a violation of the Commission's regulations, and Direct Energy would have been at risk of legal enforcement consequences, regardless of whether the customer called and stated their intention that Direct Energy did not honor PECO's request".

However, the ALJ in the initial decision said that Direct could not rely on its duty to comply with the enrollment regulations to escape what the ALJ said were a retail supplier's obligations to provide reasonable service under Pa.C.S. § 1501

The ALJ said, "[Direct Energy witness] Mr. Halstead’s statement fails to recognize that as a licensed NGS, Direct Energy must comply with all regulations applicable to its activities. It cannot prioritize or rely on the regulation concerning NGS switching while simultaneously ignoring its obligation to supply reasonable service. The regulations relating to customer service and customer choice are consistent and complementary and compliance with both regulations is required. Mr. Halstead provided no explanation as to why Direct Energy would prioritize one regulation over the other or interpret them otherwise. Further, Direct Energy’s failure to contact PECO, alone or with the Complainants, before implementing what it knew to be an inadvertent NGS switch in July 2022 stands in sharp contrast to its later willingness to do so."

The ALJ said, "There is nothing in the record that explains why the Direct Energy representative failed to inform the Complainants that: (1) as the customer, they and only they, could reverse an inadvertent switch; and (2) they could do so simply by following the instructions provided by a confirmation notice that would be sent to them by PECO. Likewise, there is nothing in the record indicating why, after receiving and documenting the Complainants’ request, the Direct Energy representative could not bring the request to the attention of a supervisor or 'flag' the account for prompt follow-up and resolution, if and when Direct Energy received an NGS switch notification for the Complainants’ account, as indeed happened on July 25, 2022."

The initial decision states that a Direct Energy representative at one point represented to the complainant that Direct Energy could not switch the complainant back to Direct Energy without the cooperation of PECO. However, the ALJ said that nothing in the code supports PECO's ability to reinstate a customer's supplier in such a case. As such, the ALJ in the initial decision found that Direct provided inaccurate information to the customer with respect to PECO's ability to reverse the switch. The ALJ further concluded in the initial decision that the provision of such information amounted to unreasonable service under 66 Pa.C.S. § 1501.

Although Direct Energy had communicated several times with the customer about re-enrolling with Direct after the inadvertent switch, the ALJ also noted that it was not until March 31, 2023, that Direct Energy specifically informed the complainant that, upon re-enrollment with Direct Energy as their NGS, Direct Energy would reinstate the terms of the Complainants’ original Enrollment.

The ALJ said in the initial decision, "There is substantial evidence in the record to support the Complainants’ claims that by waiting seven months to inform the Complainants that it was possible for them to re-enroll with Direct Energy as their NGS at the rate and on the terms of the 2022 Enrollment, Direct Energy failed to provide reasonable service."

The ALJ said in the initial decision, "Under Section 1501 of the Code, Direct Energy has an obligation to provide reasonable service to customers."

The ALJ in the initial decision concluded that Direct's actions or inactions with regard to the complaint, "constitute inadequate service under Section 1501 of the Public Utility Code."

"Direct Energy failed to provide reasonable service to the Complainants because its customer service representatives did not give the Complainants complete and accurate information as to how to reverse an inadvertent or erroneous NGS choice selection and misled the Complainants as to PECO’s ability to do so. 66 Pa.C.S. § 1501," the ALJ said in the initial decision

The initial decision would have imposed a fine of $1,000 on Direct Energy for violating the reasonable service standards under 66 Pa.C.S. § 1501

As noted above, the PUC found that Direct Energy is not subject to 66 Pa.C.S. § 1501, and is not subject to any minimum service standards contained therein, since Direct is not a public utility

In adopting Vice Chair Barrow's motion, the PUC found that no civil penalty is appropriate.

Barrow's adopted motion states, "Direct Energy acted in accordance with a reasonable reading of the standards governing its conduct as an NGS in the unique situation where the customer initiated the switch, albeit inadvertently, which was then processed by the natural gas distribution company."

However, Barrow's motion further states "Yet, a commonsense business practice would have been for Direct Energy to offer the original terms and conditions at the outset -- and not several months later. Mr. Nabom immediately notified Direct Energy of his mistaken selection on PECO's automated system and asked that Direct Energy note the issue in the event that it received an order from PECO to cancel Direct Energy's service. Providing Mr. Nabom with the same terms and conditions that he previously received could have avoided the time and expense of litigation as it relates to Direct Energy's involvement in this matter. It is my hope that the spotlight placed on this case will be sufficient to deter the mindlessly mechanistic application of switching processes in future cases where customers clearly do not intend to switch their service."

Commissioner John Coleman concurred in result only, taking issue with certain statements in the Barrow motion

Coleman said in a statement that, "The Motion opines that a commonsense business practice with re-enrollment here would have been for Direct Energy to offer the original terms and conditions to the Complainants at the outset -- and not several months later. I note that Direct Energy did take prompt action after the inadvertent switch and repeatedly attempted to help the Complainants re-enroll with the company. Moreover, I do not believe the Commission should be micromanaging what ultimately was a business decision of the company."

Docket No. F-2023-3037611

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