11 Nov One Bad Apple
by Jack Doueck
In September of 2016 the New York Public Service Commission alleged that two retail energy providers who were providing LED lighting to customers exhibited a, “pattern of customer deception,” and “egregious” violations of the Uniform Business Practices. The NY PSC said that certain door-to-door marketing agents misrepresented that they were working with the customer’s utility. In at least one case, the customer was specifically asked if the program would affect his energy supplier, and the third-party door-to-door rep promised that the customer’s ESCO would not be changed. The PSC Commissioner said that if the allegations are proven to be true, he is prepared to “throw the book” at the ESCOs.
In a nutshell, if the door-to-door reps were representing either that the LED bulbs were ‘free’ (and that the cost of such lamps wasn’t included in the cost of the commodity –which it was), or that the customer didn’t have to switch energy suppliers, and if he did, would not be locked into a contract with an early termination fee (when, in fact, that was exactly what the deal was), or that the agent represented Con Edison (as opposed to an REP or a third party marketing company) – then this would be a case of outright fraud and the PSC would be protecting consumers from the REPs using these practices.
However, since this announcement and others in New York, many REPs have decided to shy away from working in New York, thinking and saying that the NY PSC is “out to get them”. Other REPs who were about to launch an LED lighting program which would add value for consumers and help differentiate the REPs’ offering – have decided to cancel their plans because “it seems like the New York PSC is not in favor of LEDs or programs such as these.”
After speaking to at least a dozen CEOs, I decided to do an extensive call with the New York PSC. On October 6th 2016 I spoke with Jon Sorensen the Director of Media Communications as well as Michael Corso, Chief Consumer Advocate for the State of New York.
On the call with the PSC we spoke about the recent events. In the spirit of continued open-communications and dialogue, we also spoke about the EMC newsletter. They were interested in potentially writing an article for our newsletter. I sent them some of the slides from our “Bundling and Cross-Selling” Panel and they were very impressed with the strides that the industry is making to add value and not “just sell commodity.”
On our call I mentioned that there were REPs had the impression that “the NY PSC doesn’t like bundling LEDs with the commodity”. They assured me that this was absolutely NOT THE CASE. In fact, they mentioned specifically that they were “highly in favor of LEDs” and that bundling them is a good value-add.
They clarified that what they were against was fraud and misrepresentation. They promised to pursue companies who hire door-to-door agents who commit fraud and misrepresent to customers.
I provided the New York PSC with all the marketing materials on the LED Plus program for small commercial as well as residential customers. They wanted me to convey to the industry that they are “100% in favor of all such value-added programs” and that they are simply against the ‘bad apples’.
At our conference in September I spoke with Chairperson Audrey Zibelman about whether she considered offering customers a fixed price on the commodity was a real “value-add” (enough to make up for a higher price). I argued that even if prices don’t go up, at least the customer can budget better and sleep with peace of mind that his pricing is guaranteed to say fixed (for the length of the agreement). That should be considered a real value-add as well. Ms. Zibelman agreed completely with that premise. On the call in October, Mr. Corso reiterated and confirmed Ms. Zibelman’s response.
According to the PSC, REPs who bundle LEDs and/or other energy efficient products with a fixed price long term contract are providing a double-value-add to their customers: Energy efficiency to reduce consumption and a fixed price guaranty for their peace of mind.
The lesson from all this? There are hundreds of good players in this industry: Companies who truly care about the customer. They work hard to succeed and simultaneously provide their customers with real value. However, there are a few unscrupulous operators that ruin the industry’s reputation with the media, with public service commissions, and most importantly – with customers.
My plea to my readers is: stay away from bad actors (such as unethical marketers who misrepresent who they are or what you are selling). Also, make sure your compliance team and controls are top notch.
My plea to the NY PSC was similar to the one Michael Jackson (or Donny Osmond) made in his song: “Please, I said, don’t let one bad apple spoil (your perception of) the whole bunch (of REPs).”
Jack Doueck is one of the principals of LED Plus, Energy Marketing Conferences, and Advanced Energy Capital.