Province told of consumer concerns in U.S.Direct Energy
Alberta's newest utility vows 'zero tolerance for improper conduct'
The Direct Energy Story, Introduction
Calgary Herald - Sunday, May 16, 2004
As Direct Energy -- Alberta's newest household utility company -- prepared to make its landmark entry into the province this spring, American authorities were busy alerting provincial officials to troubling consumer problems at the firm's U.S. affiliate, Energy America.
Direct Energy begins selling electricity and natural gas to over a million Alberta homes this month. But its sister company in the United States has triggered extensive consumer complaints in several American markets.
Energy America agents have been caught giving misleading sales pitches, forging signatures on contracts and using the names of dead consumers to open utility accounts.
Company officials say they've clamped down on the problems. But investigators in Georgia -- where Energy America has paid hefty fines for deceiving consumers -- were concerned Alberta regulators didn't know enough about the U.S. affiliate's past violations.
"I was asked by our executive director to contact (Alberta), just to make sure that everybody knew what was going on and had the full story," said Mike Nantz, an investigator with the Georgia Public Service Commission.
"We had a lot of problems with that company."
Direct Energy, which completed its purchase of ATCO Ltd.'s retail electricity and natural gas businesses in Alberta this month, says it will have "zero tolerance for improper conduct" in the province.
"There is nobody who questions the need for us to ensure that those things do not happen in Alberta and that is what we'd like to be judged upon," said Lori Topp, Direct Energy's western region senior vice-president.
Direct Energy's dramatic expansion into Alberta's household utility market was approved by the province in December.
By purchasing ATCO's utility businesses for $90 million, Direct Energy automatically becomes the supplier of natural gas to four of every five Alberta households.
Direct Energy and its U.S. affiliate -- Energy America -- have faced fines totalling more than $2.2 million in Ontario, Michigan, Georgia and Texas. But as Georgia regulators told the Alberta Energy and Utilities Board in February, the nature of Energy America's violations is what concerned the state's investigators most.
In Georgia, agents were caught giving misleading sales pitches and coercing homeowners to buy utility contracts. Some consumers were enrolled with the company despite refusing Energy America's offers.
Though U.S. regulators have kept in close contact with each other to monitor such problems, officials in Georgia were surprised when they got minimal response from their Alberta counterparts three months ago.
Aside from a single telephone conversation with the Alberta Energy and Utilities Board, Georgia regulators say the province has shown little interest in exploring the matter further.
"To be honest with you, I expected a call back," Nantz said.
An EUB spokesman told the Herald the province's energy watchdog isn't the organization Georgia officials should have been contacting. Because the EUB deals strictly with regulatory matters, not consumer problems from the unregulated energy-selling business, U.S. authorities should have contacted the Alberta government, said Bob Curran, spokesman for the board.
"We just don't deal with those issues," Curran said.
Georgia authorities were surprised by the province's response.
"That was news to me," said Nantz. "I wasn't asked to contact anybody else to share this information with."
Alberta Government Services, the branch of the provincial government that deals with consumer concerns, hasn't spoken with Georgia regulators. But it's not only outside authorities that have expressed concerns to the province.
The City of Calgary is seeking to appeal the EUB's decision to approve the ATCO purchase, allowing Direct Energy to enter the Alberta utility market. However, Direct Energy has dismissed the city's appeal as an effort to protect Calgary-based Enmax Corp. from new competition.
The city, which owns Enmax Corp., alleges the EUB failed to consider the problems at Energy America before approving the Direct Energy deal.
Both companies will be fighting to lure electricity and gas customers from each other while trying to retaining their own share of the market.
Paul Massara, vice-president of North American operations for Direct Energy's British owner, Centrica PLC, called the city's protests a waste of municipal money.
"Who is the City of Calgary to speak on behalf of all Albertans?" Massara said last month when Direct Energy announced the closing of the deal with ATCO.
According to EUB documents, the city has already spent more than $175,000 contesting the sale at regulatory hearings in the province.
Alberta Energy Minister Murray Smith said in December the province has done its "due diligence" on Direct Energy's Alberta expansion.
Smith said the government is satisfied with Direct Energy's assurances the problems at its U.S. affiliate won't surface in Alberta.
However, Georgia regulators say they heard the same assurances from Energy America when the complaints began in the southern state.
Nantz said the Georgia Public Service Commission offered to document its problems with Energy America for Alberta officials, but state authorities are still waiting to hear back from the province.
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