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Palmco to Refund $4.5M to New Jersey Consumers for Deceptive Sale Practices

In a final consent judgment by the Superior Court of New Jersey, Chancery Division, Mercer County, on June 23 (Docket No. MER-C-33-14), Palmco Power NJ and Palmco Energy NJ agreed to pay $5.28 million – including up to $4.5 million in restitution to consumers – and to significantly revise the joint company’s business practices.

Palmco is licensed by the New Jersey Board of Public Utilities to provide natural gas and electricity supply services to residential and commercial customers in the regional service territories of Atlantic City Electric, Elizabethtown Gas, JCP&L/First Energy, Public Service Electric & Gas, New Jersey Natural Gas, Rockland Electric, and South Jersey Gas.

The settlement resolves Garden State allegations that the third-party energy supplier engaged in aggressive and deceptive marketing practices, and failed to provide promised energy rates that were competitive, lower than those offered by local utility companies, or consistent with the pricing mechanisms in Palmco’s contracts.

“Palmco portrayed itself as an affordable alternative for New Jersey consumers looking to lower their energy bills, but failed to deliver on its promises,” commented Acting Attorney General Christopher Porrino. “Through this settlement, Palmco has agreed to significant revisions in its marketing and sales practices that are intended to ensure that consumers are provided with accurate disclosures as to pricing and not misled.”

A complaint filed in May 2014 by the Attorney General’s Office, the New Jersey Board of Public Utilities (BPU) and the New Jersey Division of Consumer Affairs, alleged that the Brooklyn-based Palmco violated the Electric Discount and Energy Competition Act, the Consumer Fraud Act, and multiple regulations concerning energy licensing and registration, retail choice consumer protection, anti-slamming requirements, and advertising, among other things, through its aggressive door-to-door and telephone solicitations, and representations as to “competitive prices” for gas and electric.

Further, although Palmco’s contracts stated that its natural gas price would be based upon monthly New York Mercantile Exchange (NYMEX) closing prices, and the electric price would be based on the monthly locational marginal price (LMP) determined on a day-ahead or real-time basis, the actual monthly charges for gas and electric were greatly in excess of these pricing mechanisms.

Instead of realizing the promised monthly savings, during the severe winter of 2013-2014, consumers’ energy bills rapidly and significantly increased beyond what they would have paid had they stayed with their previous suppliers. The state subsequently filed a First Amended Complaint, which also alleged violations of the Truth-in-Consumer Contract, Warranty and Notice Act.

“The Board of Public Utilities is pleased with Palmco’s settlement, providing restitution to impacted customers,” said Richard Mroz, President of the New Jersey Board of Public Utilities. “The settlement sends consumers the clear message that predatory practices are not tolerated and that a robust market of alternative energy suppliers still exists to provide savings on electric and gas bills.”

“We are satisfied that through this settlement, Palmco has agreed to provide meaningful consumer relief and to significantly revise its marketing and sales practices for gas and electric service,” said Steve Lee, director of the New Jersey Division of Consumer Affairs. “Beyond this settlement, the Division will continue to monitor third party energy suppliers to ensure that they are complying with all applicable laws and keeping their promises to consumers.”

Under the terms of the settlement, Palmco will provide up to $4,502,791.60 in consumer restitution. Palmco has also agreed to pay $786,254.54 to the State, comprising $500,000.00 in civil penalties and $286,000 in attorneys’ fees and investigative costs.

Further, Palmco has agreed to make significant changes to its business practices which include:

  • Revising its website brochures, and/or contractsto ensure that consumers are provided with clear and conspicuous information about Palmco’s variable price for gas and electric;
  • Revising its sales practices, among other things, to: prohibit sales representatives from making false statements or promises regarding gas and/or electric rates or potential savings; ensure that only authorized account holders approve the switch of gas and/or electric service to Palmco; and confirm through a verification call made by an independent third party or Palmco, the consumer’s signature on the contract or an electronic record of an internet transaction, that a consumer has voluntarily agreed to switch to Palmco;
  • Revising customer service, among other things, by: establishing an office in New Jersey where customers can contact a live customer service representative and access their customer records; undertaking good faith efforts to resolve consumer complaints; and notifying complainants that if they are dissatisfied with Palmco’s response, they can contact the BPU to request an alternate dispute resolution procedure or to file a formal complaint; and
  • Implementing methods to ensure compliance with the settlement, among other things by: developing and implementing revised training materials and procedures to ensure that its customer service representatives, regulatory affairs representatives and sales representatives, whether employees of Palmco or third-party vendors, are familiar with the settlement terms, as well as to assure full compliance with all related statutes and regulations; recording all telephone solicitations between its sales representatives and consumers and maintaining all recordings that result in an enrollment, for 18 months; conducting a prompt and thorough investigation of consumer complaints; at least every 7 days, randomly selecting and reviewing no less than 5 percent or 15 recordings, whichever is greater, of telephone solicitations that resulted in an enrollment; and making sales commissions earned by sales representatives and third party vendors subject to forfeiture if Palmco determines that consumers were subjected to deceptive or improper sales practices.

Palmco also has agreed to employ a full-time compliance officer, whose duties will include: developing policies and procedures to ensure that sales representatives and customer service representatives comply with the settlement terms as well as all applicable laws; ensuring that all required personnel receive the necessary training; overseeing the random audits of telephone solicitations and door-to-door solicitations; and overseeing the investigation of all consumer complaints of deceptive or improper sales tactics and taking appropriate remedial action.

Consumers seeking to file a complaint about a third-party energy supplier can contact the New Jersey Board of Public Utilities at 609-341-988, 800-624-0241, or tps.ca-response@bpu.state.nj.us. Consumers can use the form provided here.

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