Most abuses will likely be perpetrated against small customers,
who will be targets for marketers due to their relative lack of
knowledge and sophistication in the area of electric service.
Larger customers generally have the resources and expertise to
do their own market analysis and "shopping" and will
not be the attractive targets for the disreputable forces that
smaller customers will be. Therefore, the types of abuses and
the possible safeguards below may be considered primarily in connection
with smaller customers and those who provide service to them.
A. What type of consumer fraud could emerge in the absence
of regulated/enforced standards?
Customers could be billed by a current service provider (SP) an
unpaid balance from a previous SP without the knowledge or consent
of the customer or without the opportunity to settle the previous
account.
Slamming: Unauthorized, unwanted, unsolicited switching/connection
to a SP without the knowledge or approval of the customer; forged
authorizations to switch (by a "prospective" SP), or
use of promotional schemes and written materials/forms that consumers
sign which are actually authorizations to switch.
Collection of "advance" fees or "deposits"
by irreputable SPs with substandard or nonexistent service.
Sale of long-term energy contracts by nonexistent SPs.
Misleading names of SPs intended to emulate established names
of known, reputable SPs.
Use of plan or product names by substandard SPs similar to that
used by established and reputable SPs.
Misleading and confusing information about services, terms and
conditions of sale.
Sale of long-term energy at promised fixed prices that turn out
to be volatile.
Sale or use of tampered meters which report higher than actual
energy consumption.
Energy theft: diversion of electric current to an alternate meter
and billing customer for higher than actual usage.
(Overly-)Aggressive, perhaps unsolicited, marketing by salespeople
(with high commissions) selling high-rated services to the unwary
and uninformed consumer who could obtain the same service at much
lower price levels.
Sale of defective or non-performing equipment such as meters.
(See 9)
Rate differentials for energy service based upon geographical
locations or other discriminatory practices.
B. What kind of safeguards can/should the Commission consider
to reduce and sanction fraud and other unfair business practices,
marketing abuses, nonperformance and bankruptcy?
The public needs to be educated of the possibility and method
of fraud schemes as well as what questions to ask when securing
service and before signing contracts or agreements.
Require new market entrants to comply with certain minimum standards
of conduct for marketing their services.
Registration/licensing requirements for SPs, including the demonstration
of financial viability. Customers should be able to learn about
owners, location and financial stability of the SP.
No SP should be able to transfer an unpaid debt from another SP
to a customer's active account. In other words, any SP must seek
payment of unpaid amounts by the usual means of debt collection
available to any creditor.
Require current SP to inform the customer if a competitor requests
the customer's name and credit information; customer must approve
in writing.
Establish standards for document and forms format for establishing,
discontinuing or switching service.
Establish standards for solicitation, use and release of customer
information.
Require SP to have on file customer's current choice of SP and
to require a written authorization from customer to switch.
Where a pattern of marketing abuses (sales, slamming, overbilling,
excessive rates) is discovered and proved, the Commission should
be empowered to impose financial penalties, suspension or revocation
of license. Consumers should be made whole with payment of damages
and penalties paid by fraudulent SP.
C. What forum should be available to address market abuse claims?
The function of regulatory oversight must provide a means for
customers to communicate complaints regarding abusive marketing
practices. This forum from which customers will be heard should
1) be conveniently accessible to all customers (for example, by
providing a toll-free telephone number), 2) provide prompt, efficient
and effective redress, 3) be a least-cost alternative for customers,
and 4) be a forum for hearing and solving customer complaint issues
without undue bias, untimely conclusions or any judgments about
a customer's views.
In order for customers' rights to redress to be effective, it
is critical that there be rules and regulations to provide for
regulatory enforcement and penalty power. Real and verifiable
powers serve as a deterrent against negative conduct by fraudulent
SPs and send the message to the SP that misconduct will have consequences.
The process of redress needs to be efficient, calling for prompt
investigations and ensuing resolutions. Rules of accountability
should be established by the Commission whereupon utilities are
encouraged to uphold high standards of marketing practices or
face the consequence of punitive action. To facilitate this element,
it is imperative that the Commission possess and exercise enforcement
powers. The foregoing principles could be implemented through
a consumer protection function at the Commission. Commission staff
could receive complaints, address claims and provide consumer
information on the matter of consumer fraud.
The PUC is already handling utility complaints of all kinds and
taking enforcement action against rule violators. The mechanisms
are in place. The mechanisms work. The Commission would appear
to be the agency of logical choice to continue those functions
in a restructured environment. The Commission should be prepared
to receive complaints of fraud and abusive marketing practices
in the restructured electric industry through the expanded consumer
protection function outlined in the Commission's Vision 2000 plan.
D. How can regulations address market abuse issues without
interfering with well-functioning markets?
Regulations should be written in such a way as to foster voluntary
compliance on the part of the SPs. Regulations should be unequivocal
about enforcement powers of the Commission as well as consequences
of fraudulent behavior. Regulations should not be so restrictive
as to impede free market entrance but should set reasonable standards
of service, service quality and marketing practices in such a
way that places consumer protection among the highest priorities.