Government welcomes Direct Energy to Alberta
The Direct Energy Story, part 4 of 4
Calgary Herald - Sunday, May 16, 2004
When Direct Energy was caught forging customer signatures on utility contracts in Ontario last year, the timing couldn't have been worse.The company was in the midst of regulatory hearings in Alberta, trying to make a good impression with the province's Energy and Utilities Board (EUB).
Direct Energy needed the board to approve its purchase of ATCO Ltd.'s household natural gas and electricity business, which would pave the way for the company's Alberta expansion.
But the problems could not be ignored. When the EUB inquired about the Ontario forgeries, the company told the board not to worry -- those issues had already been addressed.
"I think you will see from our records that we've obviously tried to be as open and honest as we possibly can," said Paul Massara, vice-president of North American operations for Direct Energy's parent company, Centrica.
When Alberta's regulator asked for details about the fines Direct Energy and its U.S. affiliate -- Energy America -- have faced elsewhere, the company told the board of its sanctions in Ontario and Michigan.
However, consumer advocates told the EUB that Direct Energy failed to disclose Energy America was also facing hefty fines in Texas and Georgia over similar allegations -- information that was known by the company.
Direct Energy also gave no indication of the extent of the problems in Ontario and Michigan, where consumer complaints outnumbered other firms by a wide margin.
When asked later about the omissions at the Alberta hearings, Massara said the company responded with specific answers to the board's questions.
"People asked us questions about where we'd been fined -- and we responded to them with where we've been fined," Massara said in an interview.
If the company didn't talk about its other problems, that was because no one asked.
Consumer groups were alarmed by the company's approach.
In documents filed by the Consumers' Coalition of Alberta, an independent watchdog organization, Direct Energy was accused of trying to "hide behind definitions" in order to conceal information about its past. "Alberta consumers deserve better," the group said.
The role of enforcer in Alberta's energy market rests with the provincial government.
Companies caught breaking the rules in Alberta -- through misleading consumers or forging contracts, for instance -- can face fines of up to $100,000 per violation, although such a levy has never been imposed.
Coincidentally, the provincial government has been a key backer of Direct Energy's retail expansion into Alberta.
By the time the Ontario sanctions were announced last June, the Alberta government had already pledged its support to the company, both in public and behind closed doors. Documents obtained through access to information laws show Direct Energy was talking to the government for nearly a year before the company decided to enter the province.
"We are prepared to make a significant investment in an energy supply business in Alberta," Roy Gardner, chief executive of Direct Energy's British owner, Centrica, said in letter to Alberta Premier Ralph Klein in May 2002. "Before we can do this, however, government must create a competitive environment in which retailers are ready and able to participate."
The province's response, written by Alberta Energy Minister Murray Smith in a July 2002 letter, commended the company for its success in Ontario. That letter, and subsequent correspondence, made no mention of Direct Energy's extensive problems, which were public record in Ontario and Michigan.
"I am encouraged that a retailer of your experience is interested in entering the Alberta marketplace and I look forward to welcoming Centrica/Direct Energy to Alberta and all the benefits of the Alberta advantage," Smith said in a letter obtained by the Herald.
The government soon began promoting the company to consumers.
In the spring of 2003, Smith tabled copies of Direct Energy's advertisements in the legislature and praised its marketing campaign. He also encouraged Albertans to wait for Direct Energy's arrival before signing new contracts for electricity or natural gas service.
"Impulse shopping never works out," Smith said, reading from the company's brochures during question period. "So wait for Direct Energy before rushing into an energy contract."
Months later, the province opened its doors to the company. Direct Energy's deal with ATCO received provincial approval in December.
Direct Energy's sales agents are now knocking on Alberta doors, selling long-term natural gas and electricity contracts.
ATCO customers are being transferred to Direct Energy in the next few weeks. The company's bills, which are orange in colour, begin showing up in June.
In an interview last month in Calgary, Direct Energy executives said they acknowledge the concerns in Alberta over the company's conduct elsewhere.
"I am keenly aware of the reputation that has surfaced in other jurisdictions and how that may impact us here," said Lori Topp, Direct Energy's western region senior vice-president.
"We want to be judged on our performance here."
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Read the other 4 parts in this series about Direct Energy: