Texas Electricity Fines: What Do The Fines Mean?

On Monday I saw a couple of different notes over at Energy Choice Matters, both of which discussed a couple of Retail Electricity Providers (REPs) that have been levied fines by the Public Utilities Commission (PUC) of Texas. Fines are nothing new to REPs, and having waded through much of the PURA documentation myself, I honestly think most REPs are probably inadvertently breaking a rule or two every now and then without even realizing they are doing such. So to see REPs getting fined isn’t necessarily a big deal…but that depends on WHY they’re being fined. So lets take a closer look at two different fines issued this week and analyze which exactly of those are for questionable behavior and which might simply be just a run of the mill mistake.

First, lets take a look this fine that was handed down to First Choice Power. First Choice paid $25,000 to settle allegations of unauthorized switching of customers that was being investigated by the PUC. Now, in my opinion, this kind of fine isn’t really a big deal. Unauthorized switching probably happens inadvertently at every single REP occasionally just by accident. It can be a misunderstanding on the phone while ordering, or it can be an overzealous door to door salesman. I see reviews come through complaining about this all the time, and while there CAN be designed, nefarious unauthorized switching to boost quotas and make money by REPs, I’m of the opinion that most of the times when these things happen it is an unfortunate mistake and a misunderstanding. Part of the settlement agreement between the PUC was that First Choice was that settling was not an admission of guilt. It’s also worth noting that the nine complaints in the investigation were dated before Direct Energy purchased First Choice outright in 2011.

Of course, not all fines and issues between REPs and the PUC are quite so harmless. A primary example was the PUC hammering Glacial Energy for $235,000, which I wrote about last year. There were a number of shady activities Glacial was engaging in to warrant that fine, and the PUC would later go on to try to revoke their license entirely. On Monday, the Tuesday fined Payless Power (Young Energy, LLC) $40,000 for enrolling people on a Switch-Hold as soon as they were enrolled.

First, lets quickly explain what a Switch-Hold is, exactly. Switch-Holds are a process where REPs can enroll customers who have’t paid their bills to prevent them from getting service from another electricity provider before they settle their debt. The intention was to keep people from skipping out on their bills.

Payless Power was fined because they were enrolling customers on Switch Hold programs as soon as they were initially signing up for service. In other words, they were preventing them from getting service with another electricity provider even before they had a chance to pay one bill, much less to default on a past due bill. This definitely seems like shady behavior from my point of view. And it seems even more questionable when you take into account that Payless Power is a Pay-As-You-Go provider, which means that customers deposit money with Payless in advance and then receive electricity service until that money is exhausted. Since customers are paying in advance, how is it possible for them to be late on a bill and thus qualify to be placed on a Switch-Hold in the first place?

This definitely doesn’t seem like business as usual to me. Of course, I’m an outsider here and don’t know all the details of the case, but as an innocent bystander this seems like questionable behavior to me. Perhaps there’s something I’m missing, but that’s my impression. Of course it is also worth mentioning that part of the settlement between Young Energy, LLC and the PUC was that there would be no admission of the violations. Nonetheless, I say Good Job to the PUC on this one.

One thought on “Texas Electricity Fines: What Do The Fines Mean?

  1. Payless was offering “No Money Down” or “Pay $50 get $100″ options to start Prepaid Service. However, they considered the initial incentive a loan and therefore the basis for a Switch Hold on a Deferred Payment Plan or DPP.. Essentially, customers were wooed to start service with a $50 or $75 “bonus”. However, Payless was considering this a loan and putting a switch hold until the amount was repaid. It’s NOT what is intended with the DPP. $40k seems minor considering good faith errors in enrollment procedures and disclosures incur $10k to $20k fines.

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