A $14 million settlement agreement in a class-action lawsuit alleging fraud and deceptive practices in marketing electric power to Maine customers is set for a final approval hearing in U.S. District Court on Wednesday, but the issue remains active before state utility regulators and lawmakers.

The lawsuit alleges the company promised in its marketing that customers would pay no more than the state-sponsored “standard offer” price for electricity, but then it increased rates sharply – to well above the standard offer price – after an initial period with lower rates.

Electricity Maine has agreed to pay up to $14 million in damages to customers who collectively spent millions of dollars more than they would have between 2011 and 2019 if they had stayed on the standard offer supply. Still, the company and its Houston, Texas-based corporate owner, Spark Energy, deny the allegations of wrongdoing.

Meanwhile, Electricity Maine is in negotiations to settle similar charges at the Maine Public Utilities Commission. In the state case, the Maine Public Advocate’s Office is asking the PUC to fine Electricity Maine at least $1 million and suspend its operating license for a year, saying the energy provider engaged in fraudulent and deceptive marketing practices.

Kira Jordan, a vice president at Spark Energy, said Tuesday that the company doesn’t comment on pending regulatory matters. But she said that Electricity Maine is committed to supplying power in full compliance with all laws and regulations.

“We continue cooperating with the Maine Public Utilities Commission on any outstanding matters,” Jordan said.

Lawyers for the customers directed questions to the settlement website, veilleuxsettlement.com.

Maine adopted a competitive retail electric market for all customers in 2000. The goal was to open a new market that would lower prices and improve service. Utilities such as Central Maine Power and Versant Power still distribute electricity, but they no longer generate or supply it.

That system has largely failed to meet its promises, though, especially for residential customers. The share of homes getting power from competitive energy providers began falling after 2013, according to PUC data, when it was around 30 percent. Today, fewer than 13 percent of home and small business customers in CMP’s service area shop for power. The majority are on the state’s default standard offer, in which the PUC receives annual bids for the lowest rates.

By doing nothing, most Mainers are saving money. Home customers on the standard offer in CMP’s service territory are paying 7.3 cents per kilowatt hour in 2020. By contrast, a home customer signing up today for a 12-month plan at Electricity Maine called Simple Power would pay about 8 cents. A six-month plan is even costlier, at about 8.8 cents, and carries a $100 early termination fee.

In all, Mainers spent $132 million more than they had to over the past seven years on power supplied by competitive providers, according to data compiled for a story this year in the The Maine Monitor.

Another problem is that Maine’s competitive provider market has failed to provide the kind of real-time pricing for home customers that the PUC envisioned when it approved CMP’s conversion to smart meters. The resulting shortfalls were noted in a Maine Sunday Telegram investigation of CMP’s billing system, which found that millions of dollars in promised savings never happened.

Barry Hobbins, the state’s public advocate, said the allegations against Electricity Maine and the ongoing price difference from the standard offer point to the need for the Legislature to re-examine the system and see if changes are needed.

“I think we should review, after all these years, whether the competitive energy process has been beneficial to ratepayers,” Hobbins said.

Measures that could have enhanced consumer education functions at the PUC, as well as prohibited door-to-door marketing of electricity contracts, did receive initial consideration earlier this year. But they were carried over until 2021, after lawmakers abruptly adjourned in March during the pandemic shutdown.

Adding to the interest among policy makers is the ramping up of a new energy supplier in Maine – the subscription-based,  community solar farm. Various companies have begun marketing locally produced solar power in Maine, promising up to 15 percent savings over the standard offer. Offers such as these are common in other states, where solar energy is growing.

Neither the PUC nor the public advocate has reported any complaints about community solar marketers, but they advise residents to carefully read any contract before signing. Those companies also have to abide by PUC disclosure rules.

“We don’t want to discourage community solar,” Hobbins said. “We just want to make sure it’s done right.”

ADVOCATE’S ALLEGATIONS

In a brief filed with the PUC last year, the Public Advocate’s Office made several allegations against Electricity Maine, including:

• During a door-to-door marketing campaign conducted from November 2017 through July 2018, it received over 70 complaints about fraudulent or deceptive marketing tactics perpetrated by Electricity Maine’s sales agents.

• Some sales agents posed as Central Maine Power auditors or claimed to be CMP employees.

• Other agents said they were from Electricity Maine and promised lower bills if the customer signed up. One agent promised “free service” for a year.

• Some sales agents promised lower rates, even though Electricity Maine’s rates were higher than other available options, including the standard offer.

• The campaign targeted vulnerable populations, including the elderly.

In March 2018, the PUC’s general counsel issued an explicit warning letter to Electricity Maine regarding such practices, but the practices continued, according to the public advocate.

In response last year, Electricity Maine said it had taken numerous steps to make sure its direct marketing program was in compliance with Maine law.

“(The company) takes seriously its obligations to operate in a customer-friendly, compliant manner that goes well beyond merely suspending, retraining and sending back out into the field … sales agents alleged to have engaged in serious misconduct,” the company wrote in a filing at the PUC.

In the federal lawsuit, the plaintiffs allege that Electricity Maine engaged in deceptive marketing practices that caused roughly 200,000 home and small-business customers to purchase electricity, with the promise of substantial savings that never materialized.

Electricity Maine was started in Maine in 2010 and was sold to Spark Energy in 2016. The settlement will resolve claims against Electricity Maine, Spark HoldCo LLC, Provider Power LLC, and Electricity Maine co-founders Kevin Dean and Emile Clavet. It applies to all individual residential and small-business consumers who purchased electric supply from Electricity Maine at any time from Jan. 1, 2011, through and including Nov. 30, 2019.

Customers had to submit a claim by early September to receive a payment. They will be compensated based on the amount of power they used during the period.

A publicly traded company, Spark Energy does business in 19 states and sells contracts for natural gas in some of them. Recent investor information notes that the company had a strong second quarter, with $23.8 million in adjusted earnings. But it noted customer numbers were shrinking, due in part to the loss of “marketing channels” such as door-to-door sales in the pandemic.

On the Electricity Maine website, the company calls itself “Maine’s most trusted energy supplier” and says its mission is to educate consumers that their energy choices matter.

Electricity Maine adds: “They don’t call us New England’s most trusted electricity supplier for nothing.”