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Pennsylvania House Passes Bill Requiring $1 Million In Security For Retail Suppliers & Brokers, Broadly Expands Applicability
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The Pennsylvania House of Representatives has passed HB 1578 which requires retail energy suppliers and brokers marketing to residential customers, under a broad variety of sales channels (in an expansion from the originally filed bill), to maintain additional security in the amount of $1 million, while also requiring suppliers and brokers engaged in a broad variety of residential marketing to undergo and pass training conducted by the Pennsylvania PUC
Unless otherwise specifically noted below, the provisions of HB 1578 are applicable to both electricity and natural gas suppliers (including brokers) in the same manner. For brevity, ECM at times may quote the bill's text which refers to only either electricity or gas (with an identical section related to the other commodity found elsewhere in the bill), and such quoting should not be read as such provision being exclusive to either electricity or gas unless specifically stated by ECM to be "exclusive".
All provisions discussed below (including the $1 million additional security and the required training) apply to "electric generation suppliers" and "natural gas suppliers", as the terms are defined in Pennsylvania's statutes, with no explicit carve-outs in the bill for non-LSE entities
While non-LSEs are typically granted a lower bonding amount by the PUC for a license versus the bond required from load-serving retail suppliers, nothing in the current statute sets forth a specific bonding level for EGSs or NGSs, and thus the PUC is able to set different amounts of financial security for LSE suppliers versus brokers in terms of licensing. In contrast, HB 1578 would, in statute, set a specific bonding level for residential marketing by all EGSs and NGSs.
Specifically, under the Pennsylvania statutes, the term, "electric generation supplier" includes an entity that, "brokers, arranges or markets electricity or related services...", and the PUC recognizes this broad definition in licensing brokers/marketers and aggregators as "electric generation suppliers". (An LSE or retail supplier is an electric generation supplier which acts as a "supplier of electricity")
Similarly, a natural gas supplier as defined by statute includes an entity providing "natural gas supply services" with the term natural gas supply services explicitly defined by statute as including, in addition to the sale of supply itself, the, "arrangement of the sale of natural gas to retail gas customers." As such, and as recognized by PUC licensing under a "natural gas supplier" license, the term "natural gas supplier" includes various non-LSE entities, including brokers, marketers, and aggregators
HB 1578 requires that electric generation suppliers and natural gas suppliers (hereafter, "suppliers" but with the term including brokers, etc as discussed above) must post an additional $1 million in security if they market to residential customers on a person-to-person basis, with person-to-person defined as including via phone and via certain digital channels as discussed further below
The required $1 million, in the form of a "bond or security", for the defined person-to-person residential marketing, would be in addition to any other security currently required by law or regulation
The bill's text states that the required $1 million in additional security is for "person-to-person" residential sales.
However, the passed bill broadly defines person-to-person residential sales, both in terms of the sales channels it includes, and the persons to which it applies
The term person-to-person is defined as, "an interaction when a
person, including an employee, representative or contractor of
an electric generation supplier, directly engages with
residential customers in person, by telephone or through a
digital platform to market, sell or promote the electric
generation supplier." [emphasis added]
Several provisions of this definition are notable.
For one, the definition includes interactions over the telephone as well as those under a digital platform to the extent the "person" acting to market or "promote" the supplier is directly
engaged with the residential customer
This broad applicability departs from the originally filed bill which would have limited the additional bonding (and training) requirement to sales conducted at a customer's residence
Moreover, the definition applies to any "person" taking the described actions in support of a supplier -- not only an employee, representative, or contractor of the supplier
Further, the definition includes activities to "promote" the "supplier" -- not only the marketing of a specific product, service, or offer
Taking these two elements together, the definition ostensibly includes network marketing, referral marketing, and affiliate marketing in which any person generally promotes a supplier (e.g. the supplier's general brand) directly to a residential customer, even where not making an offer
This broad definition may ensnare multi-level marketing agents within the training requirement discussed further below, depending on how that provision is read
HB 1578 requires that, for a supplier engaged in "person-to-person" residential marketing (as defined above), an employee, representative, or contractor of such supplier must complete online training concerning Pennsylvania's retail market consumer protections and other rules. Such training is to be conducted by the PUC, and the employee/representative/contractor must pass an online exam administered by the PUC
As written, it appears that only one employee/representative/contractor at a supplier must complete such training and testing
However, ECM observes that the bill's language is vague due to its phrasing stating that the testing program, "shall require that an employee, representative or contractor of an electric generation supplier engaging in person-to-person sales of electricity to residential customers," shall complete the training, as the phrase "engaging in person-to-person sales of electricity to residential customers" could be read as describing and applying to the individual employee/representative/contractor, rather than describing and applying to the supplier itself. Read in the former manner, the phrasing could be interpreted as requiring every employee, representative, or contractor engaged in person-to-person residential sales to complete and pass training.
The bill's fiscal note, sponsor memo, and prior statements from supporters are not helpful in answering this question
The original bill's text was clear that training would only be required for one designated representative of the supplier, but this language was amended prior to passage.
The bill's language, as passed by the House, concerning treatment of current suppliers suggests that the training is not meant to be completed by every individual sales rep, but rather, that training is conducted at the supplier level. Still, the language in the House-passed bill gives ECM pause for its ambiguity
Specifically, with regards to current suppliers, the passed version of the bill requires that, "A natural gas supplier engaging in
person-to-person sales of natural gas to residential
customers that holds a natural gas supplier license before or on the effective date of this paragraph shall ensure that an
employee, representative or contractor of the natural gas
supplier successfully completes the program no later than 180
days after the commission develops the program." [identical language used for electric generation suppliers]
ECM notes that, here, the bill is clear that the term "engaging in
person-to-person sales" refers to the supplier, and not the individual sales agent, with the bill providing only that "an employee, representative or contractor of the natural gas
supplier" -- and not an employee, representative or contractor engaged in person-to-person sales -- shall complete the training [emphasis added]
While elsewhere in the bill the term "an" employee/representative/contractor is used to describe the required training, in such other context the use of "an" is not clear, and could be read as "any".
Under the bill, the PUC would be prohibited from granting a license to a new supplier which wishes to engage in residential person-to-person sales until such time as at least one employee/representative/contractor has completed and passed the training.
The bill would allow a certification of completed training and a passed test by an employee/representative/contractor of one supplier to follow such employee/representative/contractor to another supplier
House Bill 1578 authorizes the PUC to establish the frequency of the required training and testing.
HB 1578 also allows the PUC to fund the training program via assessments on retail suppliers
For residential customers, HB 1578 would grant the PUC the authority to order that suppliers shall provide refunds to customers for non-compliance with the bonding or training requirements
HB 1578 still requires passage by the state's Senate
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October 25, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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