Regulator's Staff Seeks $3 Million Penalty Against Retail Supplier -- EnergyChoiceMatters.com

Regulator's Staff Seeks $3 Million Penalty Against Retail Supplier

May 6, 2024

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Copyright 2010-24 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Office of Education, Outreach, and Enforcement (EOE) of the Connecticut Public Utilities Regulatory Authority (Authority or PURA) requested that the Authority issue a Notice of Violation (NOV) against Major Energy Electric Services (Major or Company) as EOE alleged that Major violated certain statutes, marketing standards and PURA rulings by, as alleged by EOE, accepting enrollments from Utiliz Services, LLC (Utiliz), with EOE alleging that Utiliz impermissibly acted as an agent for Major while allegedly also acting, or purporting to act, as the agent for the customer

EOE is seeking a $3 million civil penalty against Major and restitution to customers for costs above default service rates

Major Energy provided the following statement concerning the matter:

"We don’t comment on ongoing regulatory matters. However, Major Energy is cooperating with PURA on this matter and remains firmly committed to complying with the rules & regulations in Connecticut."
--- Statement from Major Energy

To the extent PURA were to issue the NOV sought by EOE, Major would have the right to request a hearing and contest the matter

As more fully detailed below, EOE alleges both violations allegedly undertaken by Major itself, and violations alleged to have been undertaken by Utiliz Services, LLC, with EOE stating that Major is responsible for the actions of its agents

In general, and as more specially described below, EOE alleges that Utiliz Services, LLC represented to customers that it acted as the customer's agent, including for a period during which Utiliz Services, LLC held a Connecticut aggregator certificate

EOE alleges that, at the same time, Utiliz Services, LLC acted as an agent for Major, and received compensation from Major for enrollments

As previously reported, in 2011, PURA ruled that an aggregator may not act as a supplier’s agent, but must act solely as a customer’s agent.

PURA subsequently ruled on March 30, 2023 that any entity working as the customer's agent is an aggregator, and must be certified as such. Furthermore, PURA said that aggregators, or customer agents, may not be compensated by suppliers, as compensation from the supplier indicates that the entity is an agent of the supplier, not the customer

Utiliz Services LLC received an aggregator certificate on July 6, 2022. Utiliz maintained its aggregator certificate until Utiliz relinquished the certificate, effective March 30, 2023, EOE said

EOE alleged, "As a result, from July 6, 2022, through March 30, 2023, both Utiliz and Major knew that Utiliz was not permitted to act as an agent for Major because Utiliz held an aggregator certificate."

EOE cited an interrogatory response from Major in which EOE alleges that Major stated that Utiliz was acting as an agent on behalf of Major, and that Major accepted enrollments from Utiliz for 786 customers in December 2022 144 in October 2023

EOE alleged that, as of March 30, 2023, when Utiliz relinquished its aggregator certificate, Utiliz could from that date forward only enroll customers as an agent of specific electric suppliers, and could no longer serve as a customer’s agent

EOE alleged, "Major entered a contract with Utiliz on October 18, 2021, to pay Utiliz to enroll customers for Major. Interrog. Resp. EOE-16 and Attachment A. Major entered this contract with Utiliz before Utiliz became an aggregator and did not alter the contract during the time Utiliz held an aggregator certificate nor after Utiliz relinquished its aggregator certificate."

EOE alleges that Major relied on letters of authorization (LOAs) between customers and Utiliz in enrolling the subject customers

EOE alleged that it appears that Utiliz used the same LOA for years, both before, during, and after it held a valid aggregator certificate.

EOE alleged, "Major uses these LOAs, submitted by Utiliz and in which Utiliz purports to act as the customer’s agent, to validate the customer’s affirmative consent to enroll with Major."

EOE alleged that it, "has reason to believe that none of the LOAs are valid and all enrollments based on them violate the law."

EOE alleged, "Major should have known it could not rely on the LOAs to validate the October 2023 Enrollments since the LOAs indicate Utiliz was the customer’s agent, but Utiliz could not legally represent customers at that time. Major also should have known that the December 2022 Enrollments based on the LOAs were invalid because the LOAs indicate Utiliz was the customer’s agent, but the evidence indicates that Utiliz was functioning as Major’s agent at that time."

EOE alleged, "Although customers may have consented to allow Utiliz to represent them in securing a supplier, this consent was not legal in October 2023 since Utiliz was no longer a registered aggregator at that time. It was not legal in December 2022 since Utiliz was Major’s agent and could not be the customer’s agent at the same time. Further, the consent was never informed since the customer never knew that Utiliz was Major’s agent."

EOE alleged, "Because the enrollments were based on invalid LOAs, [EOE] has reason to believe that all enrollments Major received from Utiliz were deceptive, that Utiliz failed to correctly identify its affiliation with Major to customers, and that Major failed to properly monitor its agents, resulting in the deceptive marketing and slamming that is the subject of this investigation."

EOE alleged that these actions are violations of General Statutes § 16-245, 16-245o, 42-110b, the Marketing Standards, and the Aggregator Rulings

EOE alleged, "[B]y October 2023, Utiliz was no longer registered as an aggregator. Every contract between Utiliz and a customer that created an agency (regardless of the date on which the customer signed the contract) is now invalid, either because it was voided when Utiliz relinquished its aggregator certificate and could no longer represent customers, or because Utiliz entered the contract illegally after it relinquished its aggregator certificate. As a result, by October 2023, the LOAs were invalid and Utiliz could not rely on invalid LOAs to establish a customer’s consent to enroll with Major. Any enrollment based on the LOAs violates General Statutes § 16-245o(f)(2) and the Marketing Standards because Utiliz did not properly obtain the customer’s consent before enrollment."

EOE alleged, "In October 2023, Utiliz was Major’s agent. Interrog. Resp. EOE-14 (providing the contract in effect between Utiliz and Major in October 2023), EOE-16 (stating that Major was its agent), and EOE-17, Attachment C (classifying Major as an agent). General Statutes § 16-245o(h)(1) makes a supplier responsible for the actions of its agent. As a result, Major is responsible for Utiliz misusing its contracts to enroll customers. Further, Major is responsible for relying on Utiliz’s invalid contracts, in which Utiliz claimed to be a customer’s agent but was acting as Major’s agent, to validate enrollments submitted to Major by Utiliz."

"To the extent the LOAs were executed by the customers (which has not been proven), the document the customers signed indicated Utiliz was representing the customer, not that Utiliz was acting as an agent of Major. The customers did not consent to being enrolled by an agent of Major," EOE alleged

For the December 2022 enrollments, at which point Utiliz still held its aggregator certificate, EOE alleged, "The Aggregator Rulings held that no entity may function as both an aggregator and the agent of any supplier. Parties have been aware of this requirement for more than a decade and this requirement has been in place the entire time Major has held an electric supplier license in Connecticut. As a result, Major was obligated to be aware that Utiliz registered as an aggregator in July 2022, and could not function as Major’s agent while it maintained that registration."

EOE's motion notes that in one interrogatory response, Major said that it did not compensate Utiliz for a subject December 2022 enrollment, and that Utiliz was not its agent at such time. EOE pointed to other interrogatory responses, a contract between Major and Utiliz, compliance documents, and enrollment documents, and alleged, regardless of whether any compensation occurred, "it still appears an agency existed between Major and Utiliz at that time."

As to Major's responsibility for the actions of Utiliz, EOE alleged, "An electric supplier has an affirmative duty to have protocols in place to properly train and monitor its agents. This responsibility of electric suppliers is an active role. In Interrogatory EOE-23, EOE asked if Major had any protocols in place to prevent an agent that was previously an aggregator from using information that it gained in its previous role. In its Response, Major stated that Utiliz signed a contract with Major that required Utiliz to 'represent and warrant that its performance does not and will not conflict with, violate, or constitute a default under… any other…order, statute, law, rule or regulation.'"

EOE alleged, "Blind reliance on the agent’s honesty is not a shield Major may hide behind. As the Marketing Standards explicitly state, it is the responsibility of the electric supplier to ensure that any agent acting on its behalf does not engage in false, misleading, or deceptive trade practices."

In addition to the proposed $3 million civil penalty, EOE proposes that Major be required to return to default service any of its customers enrolled by Utiliz who are paying in excess of the default service rate. EOE proposed that Major shall reimburse the customer the difference between the rate the customer paid and the standard service rate for the entirety of the time the customer’s rate has been greater than standard service.

EOE proposes that Major shall not accept enrollments from Utiliz for at least three years. While Major previously ceased accepting Connecticut enrollments from Utiliz, EOE said that, absent its proposed condition, nothing would prohibit the resumption of such enrollments

As of publication time, no proposed Notice of Violation against Utiliz has been filed by EOE. As noted previously, Utiliz is not currently a licensed aggregator in Connecticut.

Noting that Utiliz is no longer an aggregator and, per a Major interrogatory response, no longer an agent of Major, EOE said in a footnote that, "It is curious, and possibly worth investigation by other state entities, why Utiliz continues to renew LOAs if it no longer represents customers and no longer serves as a supplier’s agent."

Docket 14-03-03

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