In-Person Sales Bans For Competitive Energy Cos. Are Unfair

By Karen Moury
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Law360 (December 10, 2020, 3:13 PM EST) --
Karen Moury
Karen Moury
As the COVID-19 pandemic hit the U.S. earlier this year, many utility regulatory commissions, particularly in the Northeast, took measures to prohibit competitive energy suppliers from engaging in in-person sales and marketing activities, such as door-to-door, retail stores or public event sales.

The Pennsylvania Public Utility Commission was one of the first agencies to ban in-person sales by competitive energy suppliers, on March 16,[1] and was quickly followed by utility regulators in Ohio,[2] Connecticut,[3] New Jersey[4] and Illinois.[5] In March, Massachusetts requested that suppliers refrain from door-to-door sales, but in August, rescinded that request, then reiterated it on Dec. 1.[6]

On Dec. 3, the Pennsylvania PUC granted a petition filed by NRG Energy Inc. to permit energy sales at outdoor public events.[7] The approval was based on Pennsylvania's modifications to increase the size of gatherings, which went into effect on Oct. 9.[8]

Even though the Pennsylvania PUC approved this petition, NRG was deprived of the use of this sales channel for nearly two months after it was permitted by Pennsylvania's public health officials. And this delay occurred during the height of autumn outdoor events, such as harvest festivals and farmers markets.

Notably, sales at public locations where consumers have an opportunity to have direct contact with supplier representatives — at a neutral site that is not their home — have been favorably viewed in the past by the Pennsylvania PUC.[9]

In most states that have restructured their energy industry to allow for retail choice, energy suppliers are competing against public utilities, and each other, to supply electricity or natural gas to retail customers. To make consumers aware of products they are offering, suppliers use a variety of sales channels, which include in-person sales, direct mail, telemarketing, door-to-door marketing and sales at public locations, such as stores or festivals.

Suppliers are generally able to select the channel that works best for their business model, and often only use one or two sales methods. In-person sales and marketing activities are an important sales channel to many energy suppliers.

In-person sales for most products and services have resumed throughout the country. Despite other businesses being free to conduct in-person activities, utility regulators have continued imposing onerous restrictions on energy suppliers for public health reasons. As utility regulators typically do not have responsibility for public health, these limitations, which state public health officials are not placing on other businesses, appear to be overreaching.

Questions are arising as to whether utility regulators have the requisite statutory authority to limit energy suppliers from conducting in-person sales for public health reasons. The limitations raise concerns about fundamental fairness with regard to the treatment of competitive energy suppliers as compared to other businesses.

Further, when the economy is struggling, it seems wise to permit suppliers, their vendors and their employees to resume operations to the extent that is consistent with guidance issued by public health officials. In short, competitive energy suppliers should be subject to the same rules as other businesses.

When states began reopening in May, state governments permitted many nonessential businesses to resume operations. The opening of these businesses remained subject to a number of statewide requirements imposed by public health officials, including social distancing, mask-wearing and the use of sanitizers.[10]

While Ohio[11] and New Jersey[12] utility regulators lifted the bans on door-to-door sales in June, competitive energy suppliers operating in other states are still subject to restrictions imposed by their regulators despite no statewide prohibition on in-person sales by other businesses.

In November, the Illinois Commerce Commission denied a motion from its staff to dissolve its March 18 ban on in-person sales by energy suppliers.[13] In refusing to lift the ban, the agency noted opposition from the state attorney general and the Citizens Utility Board, who had argued that allowing in-person energy marketing presents unnecessary risks during a pandemic.

In response to an earlier petition filed by NRG, the Pennsylvania PUC made a limited exception to the early ban in June, by permitting energy suppliers to resume sales in retail locations which are open for business, such as big box stores that have partnerships with the suppliers.[14] However, in July, when Interstate Gas Supply Inc. sought permission to resume door-to-door marketing of residential customers by its own employees who are home energy consultants, the Pennsylvania PUC refused to lift the ban.[15]

Similarly, in August, the Pennsylvania PUC rejected the request of Direct Energy Business LLC for approval to meet with representatives of commercial and industrial customers about new energy products and services at their places of businesses that are otherwise open to the public.[16]

From a legal standpoint, it is questionable whether utility regulators have the requisite statutory authority to impose restrictions on energy suppliers that are more stringent than public health officials place on other businesses. It is black letter law in Pennsylvania that the Pennsylvania PUC, as a creation of the General Assembly, has only the powers that the Legislature has conferred upon it.[17]

In initially banning in-person sales and marketing activities, the Pennsylvania PUC pointed only to Section 1501 in the Public Utility Code, which empowers it to ensure that services provided by public utilities are adequate, reasonable and safe.[18] However, when the General Assembly enacted the Competition Act, it determined that competitive energy suppliers are not public utilities except for very limited purposes — which are not applicable here.[19]

Indeed, the Pennsylvania PUC did not even analyze its statutory authority to impose these restrictions on competitive energy suppliers, given the focus of Section 1501 on public utilities.

The bans also raise fundamental concerns about fairness. As Pennsylvania's governor and secretary of health have taken measures to allow nonessential businesses to reopen under specific protocols, they have not banned in-person sales and marketing activities.

No rationale exists for prohibiting energy suppliers from using channels that are available to other businesses. Even other entities regulated by utility commissions have not been similarly targeted. For example, the Pennsylvania PUC regulates taxicabs and transportation network companies, but has not imposed any restrictions or additional requirements on these in-person businesses.

As to business concerns, it is noteworthy that the country is potentially facing serious economic issues that can be addressed, at least in part, by allowing businesses to resume their operations, using their sales and marketing practices of choice. Continuing to restrict the ability of competitive suppliers to operate is harmful to the economy, because of the effect it has on the suppliers and their employees.

With in-person marketing as a channel upon which many energy suppliers rely to sell electricity or natural gas, the prohibitions have disrupted their business operations. Some energy suppliers, including Vistra Corp,[20] Spark Energy[21] and NRG,[22] have pointed to reductions in retail sales due to these restrictions.

It is time for utility regulatory commissions to permit competitive energy suppliers to resume their normal operations, using their sales and marketing channels of choice. Only public health officials should be able to interfere with businesses' decisions to operate during the pandemic.



Karen Moury is a member at Eckert Seamans Cherin & Mellott LLC.

Disclosure: The author formerly represented Direct Energy and NRG Energy in the proceedings discussed in this article before the Pennsylvania PUC.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


[1] Supplier Door-to-Door and In-Person Marketing Moratorium; Proclamation of Disaster Emergency-COVID-19; Docket No. M-2020-3019254 (order entered March 16, 2020).

[2] In the Matter of the Proper Procedures and Process for the Commission's Operations and Proceedings During the Declared State of Emergency, Docket No. 20-0591-AU-UNC (order entered March 17, 2020).

[3] https://portal.ct.gov/PURA/Press-Releases/2020/Third-Party-Electric-Suppliers-Cease-Door-to-Door-Sales-during-COVID-19-Crisis.

[4]http://www.energychoicematters.com/stories/20200319aa.html#:~:text=The%20New%20Jersey
%20BPU%20today,offerings)%20shall%20be%20suspended%20immediately
.

[5] In the Matter of a Moratorium on In-Person Marketing of Services by Alternative Retail Electric Suppliers, Docket No. 20-0310 (Order entered March 18, 2020); In the Matter of a Moratorium on In-Person Marketing of Services by Alternative Gas Suppliers, Docket No. 20-0311 (order entered March 18, 2020).

[6] http://www.energychoicematters.com/stories/20201201b.html.

[7] Supplier Door-to-Door and In-Person Marketing Moratorium; Proclamation of Disaster Emergency-COVID-19; Docket No. M-2020-3019254 (order entered Dec. 3, 2020).

[8] https://www.media.pa.gov/pages/health-details.aspx?newsid=1058.

[9] See, e.g., Natural Gas Distribution Company Customer Account Number Access Mechanism for Natural Gas Suppliers, Docket No. M-2015-2458991 (order entered July 8, 2015), at 19-20.

[10] Process to Reopen Pennsylvania, Commonwealth of Pennsylvania, Office of the Governor available at https://www.governor.pa.gov/process-to-reopen-pennsylvania/; https://www.governor.pa.gov/wp-content/uploads/2020/05/20200504-COVID-19-Business-Guidance.pdf.

[11] In the Matter of the Proper Procedures and Process for the Commission's Operations and Proceedings During the Declared State of Emergency, Docket No. 20-0591-AU-UNC (order entered June 3, 2020).

[12] http://www.energychoicematters.com/stories/20200611ad.html

[13] http://www.energychoicematters.com/stories/20201105y.html.

[14] Supplier Door-to-Door and In-Person Marketing Moratorium; Proclamation of Disaster Emergency-COVID-19; Docket No. M-2020-3019254 (order entered June 4, 2020).

[15] Supplier Door-to-Door and In-Person Marketing Moratorium; Proclamation of Disaster Emergency-COVID-19; Docket No. M-2020-3019254 (order entered July 16, 2020).

[16] Supplier Door-to-Door and In-Person Marketing Moratorium; Proclamation of Disaster Emergency-COVID-19; Docket No. M-2020-3019254 (order entered Aug. 27, 2020).

[17] See City of Phila. v. Phila. Elec. Co. , 473 A.2d 997, 999-1000 (Pa. 1984) ("We begin our inquiry by recognizing that the authority of the Commission must arise from the express words of the pertinent statutes or by strong and necessary implication therefrom. …It is axiomatic that the Commission's power is statutory; and the legislative grant of power in any particular case must be clear").

[18] 66 Pa.C.S. § 1501.

[19] 66 Pa.C.S. § 102 (definition of public utility); Delmarva Power & Light Co. v. PUC , 582 Pa. 338, 352-353, 870 A.2d 901 (Pa. 2005).

[20] http://www.energychoicematters.com/stories/20200805a.html.

[21] http://www.energychoicematters.com/stories/20200805b.html.

[22] http://www.energychoicematters.com/stories/20201106bz.html.

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