Blue Pilot Energy, LLC v. Pa. Pub. Util. Comm'n

241 A.3d 1254

BLUE PILOT ENERGY, LLC, Petitioner

v.PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent

No. 1054 C.D. 2019

Commonwealth Court of Pennsylvania.

Argued May 13, 2020

Decided October 27, 2020

Karen O. Moury, Harrisburg, for Petitioner.

John M. Abel, Harrisburg, for Intervenor Office of Attorney General.

Tanya J. McCloskey, Harrisburg, for Intervenor Office of Consumer Advocate.

Terrence J. Buda, Assistant Counsel, Harrisburg, for Respondent.

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge, HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE ANNE E. COVEY, Judge, HONORABLE ELLEN CEISLER, Judge, HONORABLE J. ANDREW CROMPTON, Judge

OPINION BY JUDGE BROBSON

Blue Pilot Energy, LLC (Blue Pilot), an electric generation supplier (EGS),¹ has invoked this Court's appellate jurisdiction, asking that we reverse the July 19, 2018 and July 11, 2019 Orders of the Pennsylvania Public Utility Commission (PUC). Blue Pilot contends that the PUC exceeded its statutory authority by engaging in contract interpretation and granting across-the-board refund relief to all Blue Pilot customers. Blue Pilot also challenges the $1,066,900 civil penalty that the PUC imposed as unconstitutionally excessive in violation of the Excessive Fines Clauses of the Pennsylvania Constitution and the Eighth Amendment to the United States Constitution.² Upon review, and for the reasons set forth below, we conclude that the PUC acted within its jurisdiction in adjudicating the matter before it. We reject Blue Pilot's constitutional challenge to the civil penalty in this case. We find merit, however, to Blue Pilot's challenge to the refund remedy fashioned by the PUC and, therefore, reverse that aspect of the PUC's Orders.

I. BACKGROUND³

The PUC licensed Blue Pilot as an EGS in Pennsylvania on June 10, 2011, to supply electricity to consumers within the service territories of all EDCs operating in Pennsylvania. Blue Pilot began its advertising and marketing efforts directed toward Pennsylvania retail customers in 2012. Blue Pilot offered only variable rate plans. Generally, these plans included an enticing fixed introductory rate that converted to a variable rate at the conclusion of the introductory period, typically 60 to 90 days. The variable rate could change on a month-to-month basis. Blue Pilot ceased marketing activity in Pennsylvania in March 2014. The PUC suspended Blue Pilot's license on March 14, 2016.

This matter relates to the sharp increase in the price/cost of electricity that Blue Pilot and other EGSs charged retail Pennsylvania customers under variable pricing arrangements during a period of sustained cold weather in early 2014 referred to as the "Polar Vortex of 2014."⁴ Blue Pilot's disclosure statement to its customers purported to link its variable rate determinations to wholesale electric prices within the PJM Interconnection LLC (PJM) service area⁵ :

You have a variable rate plan with a starting price set at RATE cents per kWh. This initial rate will be effective for at least the first ninety (90) days of service. Thereafter, your price may vary on a month-to-month basis. This price includes Transmission Charges, but excludes applicable state and local Sales Taxes and the Distribution Charges from your local EDC. At any time after ninety (90) days of service, but not more frequently than monthly, Blue Pilot may increase or decrease your rate based on several factors, including changes in wholesale energy market prices in the PJM Markets. Your variable rate will be based upon PJM wholesale market conditions . Please log on to www.bluepilotenergy.com or call Customer Service at 877-513-0246 for additional information and updates.

(Reproduced Record (R.R.) at 21a (emphasis added).) The Polar Vortex of 2014 caused higher-than-normal wholesale electricity prices in a large portion of PJM's service area, including Pennsylvania. As noted above, retail variable rates also sharply increased during this time. The sharp increase in retail prices under variable rate arrangements prompted many consumers to file complaints with the Pennsylvania Office of Attorney General (OAG) and the Pennsylvania Office of Consumer Advocate (OCA), alleging that Blue Pilot and other EGSs were overcharging their customers.

The OAG and the OCA jointly commenced proceedings before the PUC against Blue Pilot by filing a Formal Complaint on June 20, 2014.⁶ The Formal Complaint, in five separate counts, contended that (1) Blue Pilot failed to provide accurate pricing information to its customers, (2) Blue Pilot's pricing did not conform to its disclosure statement, (3) Blue Pilot made misleading and deceptive promises of savings to its customers, (4) Blue Pilot lacked good faith in handling customer complaints, and (5) Blue Pilot violated the Telemarketer Registration Act.⁷ Generally speaking, the Formal Complaint targeted alleged improper conduct by Blue Pilot in its marketing practices, its handling of consumer complaints, and its adherence to the terms of its disclosure statement to its customers.

After the parties developed a record through administrative proceedings before the ALJs, the ALJs issued their Initial Decision on July 7, 2016, concluding that Blue Pilot failed to comply with several PUC regulations. With respect to the first count, the ALJs concluded that Blue Pilot failed to comply with 52 Pa. Code §§ 54.5(c)(3)(i)-(ii) (requiring that disclosure statements for variable pricing include "[c]onditions of variability" and "[l]imits on price variability"), 54.43(1) (requiring EGSs to use "plain language and common terms in communications with consumers"), 54.43(f) (holding EGSs responsible for fraudulent, deceptive, and other unlawful marketing practices), and 111.12(d)(2) (prohibiting false or misleading representations of rates or savings). With respect to the second count of the Formal Complaint, the ALJs concluded that Blue Pilot "charged its customer[s] prices that did not conform to its disclosure statement in violation of 52 Pa. Code §§ 54.4(a) and 54.5(a)."⁸ (R.R. at 160a.) The ALJs also concluded that the violations of the foregoing regulations supported the charges set forth in the third count of the Formal Complaint.

With respect to the alleged mishandling of consumer complaints during the Polar Vortex of 2014, the fourth count of the Formal Complaint, the ALJs determined that Blue Pilot failed to act with good faith, honesty, and fair dealing, as required by 52 Pa. Code § 56.1(a) and the terms of Blue Pilot's license. The ALJs further concluded that Blue Pilot failed to adhere to the dispute resolution procedures set forth in the PUC's regulations, made applicable to Blue Pilot under the terms of its license, specifically 52 Pa. Code §§ 56.141(1) (requiring adherence to dispute resolution procedures in regulation); 56.151 (requiring, inter alia , investigation of customer complaints and report to customer within 30 days), and 56.152 (setting forth required contents of report to customer). Finally, on the fifth count, the ALJs concluded that Blue Pilot violated the Telemarketer Registration Act by failing to provide customers with a written contract and failing to obtain customer signatures agreeing to enrollment. (R.R. at 161a-62a.)

In terms of remedy, the ALJs, inter alia , assessed a civil penalty against Blue Pilot of $2,554,000. The ALJs further ordered Blue Pilot to deposit $2,508,449 into a "refund pool," $100,000 of which would be used to compensate a third-party administrator (TPA) chosen by the OAG and the OCA. The ALJs directed the TPA to use the refund pool "to provide at least 2,516 consumers refunds of all charges that were over and above the Price to Compare of their respective [EDCs’] service territories for amounts charged from December 2013 through March 2014."⁹ (R.R. at 163a.) The ALJs ordered the TPA to use "best efforts to distribute the funds from the refund pool within 180 days" of receipt from Blue Pilot and to provide monthly reports to the OCA, the OAG, Blue Pilot, and designated PUC staff. (Id. ) Any undistributed funds were to be forwarded to the Pennsylvania Treasury as unclaimed property. The ALJs also permanently revoked Blue Pilot's license.

The parties filed exceptions to the Initial Decision. In its July 19, 2018 Opinion and Order (Merits Order), the PUC largely overruled the exceptions. Relevantly, the PUC sustained Blue Pilot's challenge only to the amount of the civil penalty and, instead, assessed a reduced civil penalty of $1,066,900. Blue Pilot filed a Petition for Reconsideration, which the PUC denied in its July 11, 2019 Opinion and Order (Reconsideration Order). In this appeal, Blue Pilot does not challenge the PUC's evaluation of the evidence, its fact finding, or its legal conclusions. Instead, Blue Pilot purports only to challenge the relief imposed by the PUC, specifically the creation of the "refund pool" and the amount of the civil penalty.¹⁰

II. DISCUSSION

A. Power/Authority of PUC

The first two issues on appeal relate to the power and/or authority of the PUC. First, Blue Pilot contends that the PUC acted beyond its authority when it determined that Blue Pilot had failed to adhere to the terms of its disclosure statement. According to Blue Pilot, the PUC essentially determined that Blue Pilot breached its contracts with its customers. Citing the Pennsylvania Superior Court decision in Allport Water Authority v. Winburne Water Company , 258 Pa.Super. 555, 393 A.2d 673 (1978) (en banc), Blue Pilot contends that the PUC lacks jurisdiction to rule on private party contract disputes. Rather, the courts are the proper avenue to resolve private party contract disputes.¹¹

In response, the PUC contends it appropriately adjudicated the charge in the Formal Complaint that Blue Pilot violated PUC regulations in failing to charge its customers consistent with the terms of its disclosure statement. The PUC points specifically to its...