The Need for Consumer Protection in The Need for Consumer Protection in Retail Energy MarketingRetail Energy Marketing

2011 NASUCA Annual Meeting2011 NASUCA Annual MeetingSt. Louis, MissouriSt. Louis, Missouri

November 15, 2011November 15, 2011

Clare McGuireClare McGuireDirector, Consumer Energy ProgramDirector, Consumer Energy Program

Georgia WatchGeorgia Watchcmcguire@georgiawatch.org

404-525-1085 ext. 14404-525-1085 ext. 14

Natural Gas Deregulation in Georgia

• July 1, 1998 – Atlanta Gas Light Company became a “pipes only” (storage and distribution) natural gas distribution company (today serves 1.5 million customers throughout Georgia)

• HB 1568 (eff. Sept. 2002) – recognition that consumers needed more protections

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• All consumers must have the right to receive All consumers must have the right to receive accurate, easily understood information about gas accurate, easily understood information about gas marketers, services, plans, terms and conditions, marketers, services, plans, terms and conditions, and rights and remedies. The information must be and rights and remedies. The information must be unbiased, accurate, and understandable in a written unbiased, accurate, and understandable in a written form, which allows for comparison of prices and form, which allows for comparison of prices and terms of service.terms of service.

• PSC rule 515-7-9-.01 et seq. (Terms of Service; PSC rule 515-7-9-.01 et seq. (Terms of Service; Disclosure Statement; Right to Rescission; Record Disclosure Statement; Right to Rescission; Record Retention)Retention)

O.C.G.A. §46-4-151: O.C.G.A. §46-4-151: Natural Gas Consumers Bill of RightsNatural Gas Consumers Bill of Rights

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• All consumers must be protected from All consumers must be protected from unfair, deceptive, fraudulent, and unfair, deceptive, fraudulent, and anticompetitive practices, including, but anticompetitive practices, including, but not limited to, practices such as cramming, not limited to, practices such as cramming, slammingslamming, and providing deceptive , and providing deceptive information regarding billing terms and information regarding billing terms and conditions of service.conditions of service.

O.C.G.A. § 46-4-151 (cont’d.)O.C.G.A. § 46-4-151 (cont’d.)

Georgia PSC’s Interim Certificate Order: Stream Energy

• Natural Gas Competition and Deregulation Act requires gas marketer to receive a certificate of authority to market and provide natural gas commodity sales service to retail customers who receive firm service. (OCGA § 46-4-153)

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Certificate of Authority RequirementsCertificate of Authority Requirements

Georgia PSC Rule 515-7-3-.01 et seq. Georgia PSC Rule 515-7-3-.01 et seq.

Must show Must show financial and technical financial and technical capabilitycapability, including whether certificates , including whether certificates of authority for the sale of natural gas of authority for the sale of natural gas have ever been issued by any other have ever been issued by any other state(s) and whether any application for state(s) and whether any application for certification has ever been certification has ever been denieddenied and and whether any certificate of authority issued whether any certificate of authority issued to it or an affiliate has ever been to it or an affiliate has ever been suspended, revoked modified or suspended, revoked modified or sanctionedsanctioned

cal capabilitycal capability

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Certification Standards (cont’d.)

The Commission may deny and The Commission may deny and application for a certificate of authority application for a certificate of authority upon a showing that a marketer or upon a showing that a marketer or anyone acting in concert with a marketer anyone acting in concert with a marketer has a history of violating laws, rules, or has a history of violating laws, rules, or regulations designed to protect the regulations designed to protect the public. (GA PSC rule 515-7-3-.04)public. (GA PSC rule 515-7-3-.04)

Source: www.psc.state.ga.us

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Revocation, Suspension, and Modification of a Certificate of Authority; Sanctions

• Georgia PSC Rule 515-7-3-.07. Any certificate of Georgia PSC Rule 515-7-3-.07. Any certificate of authority issued by the Commission is subject to authority issued by the Commission is subject to revocation, suspension or modification where the revocation, suspension or modification where the Commission finds after notice and hearing that marketer Commission finds after notice and hearing that marketer has:has:

• Repeatedly or willfully failure to meet the obligations of Repeatedly or willfully failure to meet the obligations of GA law or PSC rule;GA law or PSC rule;

• Engaged in unfair competition, abused its market position Engaged in unfair competition, abused its market position or engaged in conduct prohibited by the Georgia Fair or engaged in conduct prohibited by the Georgia Fair Business Practices Act (OCGA 10-1-390)Business Practices Act (OCGA 10-1-390)

• Engaged in activities that serve or could serve to mislead, Engaged in activities that serve or could serve to mislead, deceive, or work a fraud on the publicdeceive, or work a fraud on the public

Stream-Georgia’s application (writing on the wall?)

• Stream intends to solely rely upon the MLM program of its affiliate, Ignite, to promote its natural gas commodity sales service in Georgia. Ignite will promote the MLM strategy and deal directly with all persons involved in the marketing and promoting of Stream-Georgia as a natural gas marketer in Georgia. Upon cross-examination, Stream-Georgia admitted that it had been signing up Independent Associates in Georgia prior to becoming certified to sell natural gas.

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Stream-Georgia’s MLM model

• Individuals paid $329 to become an Ignite Associate (“IA”) and an additional $19.95 each month for support from Stream-Georgia that would include a website.

• IAs are not employees of Stream or Ignite, but rather act as independent agents working in their own business (e.g., an IA could live anywhere in the US and have the ability to earn commissions by persuading natural gas customers in GA to switch to stream.)

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Stream-Georgia’s MLM model

• The IA can also sign up additional IA’s and earn additional income through sign up bonuses and residual income from the individual efforts of those IA’s, which is part of the MLM strategy.

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Ordering Paragraph from the PSC’s Interim Certificate for Stream-Georgia

• Ordered Further, that Stream-Georgia may not avoid its obligations under this interim certificate, applicable laws, rules or regulations, by contracting with intermediary agents whose practices would result in violations if undertaken by Stream-Georgia, or by contracting in any manner that results in customers not receiving the full protection of these obligations. The Ignite Associates, and any other similar associates, will be considered to be such intermediary agents and the Commission shall hold Stream-Georgia responsible for their actions.

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Uh-oh• April 2008 - PSC issue Interim Certificate • July 2008 – after PSC Staff referred several

complaints to the company, Stream tells PSC staff that a number of customers on Atlanta Gas Light Company’s system may have had their gas service switched to Stream without their consent.

• Problem with third party verification calls resulting in slammed service.

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What happened?What happened?• A group of customers (“Group B”) requested A group of customers (“Group B”) requested

enrollment with Stream.enrollment with Stream.• Stream ordinarily would have required either Stream ordinarily would have required either

a deposit a deposit oror (in lieu of a deposit) an automatic (in lieu of a deposit) an automatic bank draft from such customers.bank draft from such customers.

• A number of Group B customers A number of Group B customers did not did not agreeagree to an automatic bank draft but were to an automatic bank draft but were switched anyway.switched anyway.

• PSC staff reviewed 910 TPV phone calls; PSC staff reviewed 910 TPV phone calls; determined that 288 customers had been determined that 288 customers had been slammed by Stream-Georgia.slammed by Stream-Georgia.

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May 2009 Stipulation to resolve May 2009 Stipulation to resolve slamming issueslamming issue

• Approximately $104,760 in restitution to Approximately $104,760 in restitution to slammed customers ($100 plus $5 per day slammed customers ($100 plus $5 per day from date of slam through date on which from date of slam through date on which Stream attempted to switch each customer Stream attempted to switch each customer back to his preferred provider and, where back to his preferred provider and, where applicable, repayment of any early applicable, repayment of any early termination fee assessed against slammed termination fee assessed against slammed customers)customers)

• $50,00 donation to organizations that provide $50,00 donation to organizations that provide direct assistance to natural gas customers direct assistance to natural gas customers needing bill payment assistance.needing bill payment assistance.

O.C.G.A. 46-4-160(k)O.C.G.A. 46-4-160(k)

• Any consumer determined by the commission to be the victim of slamming shall be able to switch back to his or her desired marketer without any charge. No marketer responsible for slamming a consumer shall be entitled to any remuneration for services provided to that customer, and any refund owed to such a consumer by the marketer who switched the consumer without his or her consent shall be paid within 30 days of the date the commission determined the consumer was a victim of slamming.

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O.C.G.A. 46-4-160(k), cont’d.O.C.G.A. 46-4-160(k), cont’d.

• No marketer responsible for slamming a consumer who is determined to be a victim of slamming shall report to a credit reporting agency any moneys owed by such a consumer to such marketer; any marketer who violates the prohibition set out in this sentence shall be required by the commission to pay such a consumer $1,000.00 for each such prohibited report.

PSC rule and State law regarding record retentionPSC rule and State law regarding record retention

• Rule 515-7-10-.03: All letters of agency, copies of Rule 515-7-10-.03: All letters of agency, copies of enrollment materials, recordings or other evidence enrollment materials, recordings or other evidence that a consumer either newly established or initiated that a consumer either newly established or initiated a change in service a change in service shall be maintained by a shall be maintained by a marketer for at least nine (9) months from the marketer for at least nine (9) months from the date on which the customer’s service begandate on which the customer’s service began. . Failure to maintain such records shall constitute Failure to maintain such records shall constitute prima facie evidence that consent from the customer prima facie evidence that consent from the customer was not obtained to establish or switch service.was not obtained to establish or switch service.

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Georgia PSC Rules

• Go to www.psc.state.ga.us: see “PSC Proceedings column” on the far right

• Click on “Georgia PSC Rules” link

• This will bring you to the Georgia Secretary of State’s website, at which you can review PDF versions of all Georgia PSC rules.

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Official Code of Georgia Annotated (O.C.G.A.)

• Go to Georgia State Legislature website:

• www.legis.ga.gov

• In the upper left-hand corner, click “Georgia Code” link

• This will take you to lexisnexis site, for free public access to the O.C.G.A.

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Resources at GA PSC website

• www.psc.state.ga.us : “Consumer Protection” column • Click on “Natural Gas Marketers’ Prices” link for a

monthly comparison of all eleven (11) marketers’ offerings (fixed, variable and senior rates). Columns include: Total Monthly bill for typical customer; Monthly apples to apples price per therm; Marketer filed rate; Customer service charge; and Early termination fees.

• Natural Gas Marketer scorecard (raw numbers only); 3 categories of complaints: billing, service and deceptive marketing

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Georgia WatchGeorgia WatchContact InformationContact Information

Phone: (404) 525-1085(866) 33-WATCH(866) 339-2824

Fax: (404) 526-8553 Address: 55 Marietta Street, NW

Suite 903Atlanta, GA 30303

Website: www.georgiawatch.org