energy slammingOn February 6, 2014, the Pennsylvania Public Utility Commission (PUC) rejected a settlement agreement between its independent Bureau of Investigation & Enforcement (I&E) and Pennsylvania Gas & Electric (PaG&E) over the company’s marketing practices. I&E alleged that an agent of PaG&E, along with an accomplice, switched 108 commercial electric and natural gas accounts without proper authorization. To make matters worse, PaG&E failed to self-report the violations to the Commission.


Apparently, the agent was involved in a scheme to obtain third-party verifications by directing the verifications to an accomplice who posed as the customer. Although audio recordings were made, the “authorizing” party on the other end was not the customer. In addition, the agent did not make calls to the customers that resulted in sales transactions. The agent skipped the transaction process and proceeded straight to the third-party verifications service, with an accomplice who acted as the customer on the line.


In order to settle the allegations, PaG&E had agreed to pay a $75,000 penalty, issue customer refunds, and implement additional procedures to prevent similar situations from occurring in the future. Due to the egregiousness of the slamming allegations, the PUC voted 5-0 on the motion to reject the settlement, and the matter will be referred back to I&E for further action.


Although it’s possible for any supplier to fall victim to unscrupulous agents, exposure can be minimized by having operational safeguards in place. Examples include conducting background checks on potential agents and ensuring agents are reminded of regulations prohibiting slamming. It is also important to maintain adequate records to verify a customer’s enrollment authorization, such as written contracts signed by the customer and audio recordings of customer authorizations.


Switching requirements vary by state and may include record retention requirements, or specific letter of agency content and language requirements. Washington, DC and Illinois, for example, identify specific information that must be elicited when third party verification methods are used. It is important for energy suppliers to understand each state’s switching requirements and have internal controls in place to prevent potential penalties.




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