Deregulating The Electricity Market: What Are The Consequences?

Mortgage and Lending with Olympus Labs

Over the last few decades, several US states deregulated their electricity market, allowing retail electricity providers to compete with the local electric company by selling electricity directly to consumers and businesses. Some electricity providers operate as middlemen, buying electricity from the local market to provide to their customers, instead of selling electricity from their own plant—like Enron. Because these middlemen are buying the same electricity from the same market, over the long term, they cannot offer savings.

The deregulated electricity provider business model pushes companies to cut as many corners as they can signing up customers. The Massachusetts attorney general has been calling to shut down the so-called competitive electricity supply market for years, issuing reports that show that retail electricity companies charged Massachusetts residents $253 million more than their electricity utility would have, and disportionately targeted seniors, minorities, and low-income residents. The attorney general reports also showed almost a total of 35 investigations or lawsuits by state agencies, at least 59 class action lawsuits pending against the 13 deregulated electricity provider operating in Massachusetts.

That is a lot of litigation. And where there is litigation, there are lawyers. Enter Eckert Seamans.

Eckert Seamans defended one retail electricity provider, Starion, first in a class action that claimed Starion overcharged its customers. Starion paid $2.58 million to settle. Eckert Seamans defended Starion again when the Massachusetts attorney general sued over the same sales practices, and froze over $3 million in accounts owed to Starion. Starion filed for bankruptcy, but never got its money back. Starion's owners sold all of its assets to a competitor (Spark) in late 2018.

Eckert Seamans represented two other retail electricity providers, Verde Energy and Liberty Power, in many other class action lawsuits for overcharging their customers or for illegal telemarketing. The Ohio utility regulator recently announced an investigation into Verde based on 231 complaints about “enrollment disputes, misleading information, and false representations wherein Verde purported to be another utility.” These complaints included “particularly egregious behavior by Verde,” like making robo-calls with faked telephone numbers and caller identification information portraying Verde as the local utility, and false representations about discounted electricity rates.

Spark also bought Verde in 2017, but continues to operate it as a subsidiary. Spark's acquisition raises new questions about Verde: Spark had senior executives who were witnesses to Enron's collapse and invoked the Fifth Amendment to avoid testifying. Invoking the Fifth Amendment doesn't make a person guilty, but it might require an explanation for executives who work in a heavily-regulated industry like retail electricity.

As for Liberty Power, court records show over 600 complaints to federal regulators about Liberty Power's telemarketing. Court records show some of Liberty Power's telemarketers used fake telephone numbers to hide their identity; Liberty Power relied on the fake telephone numbers to deny responsibility for its telemarketers' calls (“that phone number does not belong to any of our third party vendors”). In fact, Liberty Power kept track of the different fake telephone numbers its telemarketers used . In at least one case, Liberty Power had its telemarketer make screen shots to show it did not make a call after the telemarketer told Liberty Power that it had made that call

Eckert Seamans played rough with the one of the plaintiffs in the Liberty Power class action. It sued him in Florida (that lawsuit was dismissed), served a subpoena on his wife, and tried to inspect his house. It also tried to subpoena email in the plaintiff's Gmail account directly from Google. The court told Liberty Power to knock it off : “Given the absolute clarity of the law in this area, Defendants are warned that similar subpoenas could result in sanctions.”

Before founding Starion, one of Starion's owners was (according to the Connecticut attorney general) an “unscrupulous operator” who ran a “one-stop shopping predatory lending scheme,” and ultimately settled related claims for $750,000. While Starion was in business, its owners lived in million-dollar mansions and partied with (accused sex offender) R. Kelly, and cannabis culture forefathers Cheech and Chong. Ten years ago, an arrest warrant was issued for Liberty Power's chief executive officer for an assault which made (records show) his ex-employee defecate his pants. That attitude has paid dividends. Today, that same executive owns real estate in Palm Beach County valued at over $7 million, including three condominiums and a 10,000 square foot Palm Beach residence (purchased in November 2018 for $3.2 million).

All this is to say, one would expect a white-shoe firm like Eckert Seamans to keep these kinds of clients, and represent them in this way.


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crazy story. Lawyers bills ARE a cost of doing business if you are one of these guys. i wonder how much Verde and Staroin spent before Spark bought them?!

Oct 10, 2019 03:21 PM #1
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David Jackson, MBA

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