Pennsylvania Attorney General Kathleen Kane and Acting Consumer Advocate Tanya McCloskey announced a proposed settlement on August 6 with IDT Energy, a retail energy supplier accused of deceptively marketing its variable electric rates to Pennsylvania consumers, many of whom filed complaints about spikes in their rates during the winter of 2014.
Under the settlement, IDT Energy has agreed to pay $2.4 million in refunds to eligible consumers in addition to the $4.1 million the company already has paid in refunds related to the Polar Vortex last year. The company also must pay a civil penalty of $25,000 and make a contribution of $75,000 to the Consumer Advocate’s Electric Distribution Companies' hardship funds.
The settlement with IDT Energy follows two proposed settlements announced earlier this year with HIKO Energy (HIKO); and Energy Services Providers, which does business as Pennsylvania Gas and Electric (PaG&E). The proposed settlements with the other suppliers are similar to the IDT refunds and penalties.
The Office of Attorney General and the independent Office of Consumer Advocate last year jointly filed five legal actions against electric generation suppliers after receiving thousands of complaints from consumers. In some cases, consumers said their costs unexpectedly increased as much as 300 percent.
Under the terms of the proposed settlement with IDT Energy, consumers who were on variable rate plans in January, February or March of 2014 will be contacted directly by a third-party settlement administrator, if they qualify for a refund. The refunds will be based on consumers' usage and the price that ratepayers were charged during that time period. Refunds already received will be a factored into any additional refunds.
The settlement also imposes a 21-month moratorium on the selling of variable rates by IDT Energy. The company must offer fixed-rate products for terms longer than six months during this time period. Additionally, should the company begin to offer variable rate contracts after that time period, IDT Energy will be required, among other things, to disclose to consumers in plain language that prices may fluctuate monthly and that there is no limit to how high the price may go.
IDT has not admitted to any of the complainants' allegations under the settlement. Company CEO Michael Stein emailed the following comments to Retail Energy Buyer regarding the settlement: “This proposed settlement concludes a complex and lengthy investigation, with no finding of wrongdoing by IDT Energy,” he said. “We took extraordinary steps during and after the extreme and unprecedented 2014 winter Polar Vortex to mitigate the impact of unexpectedly high electricity prices on our customers – processing more than $4.1 million in rebates, refunds and rate adjustments. This proposed settlement provides for even more refunds to Pennsylvania customers who were affected by last year’s higher electricity prices. It also allows us to renew our focus on providing quality energy choice options in the markets we serve.
“Like much of the industry, IDT Energy learned valuable lessons from the winter of 2014, and we have implemented new safeguards and introduced new programs that keep the price per unit of power fixed to help protect customers from unexpected electricity price fluctuations in the future,” Stein added, noting, “One of the most dramatic lessons we learned is that there is still a great deal of consumer misunderstanding about energy choice. We have taken this lesson to heart, and are working hard to help educate consumers about the workings of the retail energy markets and the options available to them.”
The proposed settlement with IDT Energy requires approval by the Administrative Law Judges and the Pennsylvania Public Utility Commission. The settlements proposed with PaG&E and HIKO are still pending. The other two legal actions – filed against Blue Pilot Energy and Respond Power – remain in litigation.
