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State utility regulators fined a Connecticut-based energy retailer $350,000 for multiple violations of state law, including the enrollment of Southern Maryland Electric Cooperative customers without their consent.

Starion Energy has been licensed to sell electricity in Maryland since 2010 but not within SMECO’s service territory. Licensed to provide energy in six states, Starion also has been sanctioned in Connecticut and is under investigation in Delaware, according to a March 7 order from the Maryland Public Service Commission.

The fine is the largest ever doled out by the PSC against an energy retailer. It previously issued fines of $60,000 against Viridian in 2012 and $100,000 against North American Power & Gas in 2011.

The commission launched an investigation in May after receiving a number of customer complaints and noticing discrepancies in the information the company provided in its written contracts and what was shown on its website.

One week after the PSC began its investigation, SMECO asked that the commission look into a “barrage of complaints” that Starion representatives had called co-op customers claiming to work for SMECO, offer SMECO programs or that customers could “eliminate the middleman” by switching to Starion.

The commission ultimately determined that Starion had solicited SMECO customers beginning in November 2012, as well as commercial customers of Potomac Electric Power Co. Starion was allowed to sell within Pepco’s territory but only to its residential and industrial customers.

In total, the PSC found Starion had committed 122 “slamming” violations against SMECO customers and repeatedly had broken state rules during door-to-door sales. “Slamming” refers to the practice of enrolling a customer without his permission or re-enrolling a customer after he has canceled service.

“We fully support customer choice but we will not tolerate our customers to be slammed or misled by alternative suppliers. The commission found that Starion used false and misleading statements to solicit new customers, engaged in an ongoing pattern of switching customers without their permission and operated in Southern Maryland without a license,” SMECO President and CEO Austin J. “Joe” Slater said in a statement. “When Starion began its deceptive marketing tactics, our customers turned to SMECO for guidance and assistance. We responded immediately and stepped up on their behalf to put an end to these flagrant violations. The $350,000 penalty against Starion and the prohibition from enrolling new SMECO customers was appropriate. It sends a clear signal that alternative energy suppliers need to be honest and forthright when they contact potential customers.”

The commission also cited Starion for more than 200 complaints from customers that the company used false and misleading sales tactics to acquire new accounts and found that Starion customers saw a significant increase in their electricity costs for reasons unrelated to the energy prices in PJM, the regional transmission network that covers all or much of 13 states, including all of Maryland.

“In a deregulated market, a customer’s ability to make rational, well-informed choices among competing suppliers — and indeed the stability and growth of the supplier marketplace itself — is directly undermined by deceptive misrepresentations such as those that gave rise to this case,” the commission wrote in its order. “To be clear, this Commission cannot and will not tolerate misleading or deceptive advertising or sales tactics in the retail marketplaces over which we hold jurisdiction.”

Starion claimed that its rapid growth in Maryland had exceeded the company’s ability to handle customer concerns.

“This is not the first time a third-party supplier has attempted to explain to this Commission that its failure of oversight resulted from its unexpected customer growth in Maryland,” the commission wrote. “As found in earlier cases, this excuse does not mitigate the company’s obligation to comply with our regulations or preclude our imposition of penalties in this case.”

In addition to the fine, the PSC also required Starion to make several consumer protection improvements, including firing employees engaged in misconduct, creating a compliance department, hiring counsel to oversee compliance and hiring more customer service personnel.

The company within 45 days also must notify customers solicited via door-to-door sales of their right to cancel their contracts, as well as inform all SMECO and Pepco customers that Starion is not licensed to sell electricity to them and that they are free to switch back to their utility company without having to pay termination fees.

The commission also ordered that Starion provide PSC staff and the Office of the People’s Counsel a list of all statewide customer complaints — along with the nature and resolution of each complaint — every six months until further notice.

jnewman@somdnews.com