The New Energy Consumer Protection Act- New Protection For Consumers?

Abstract: This article discusses some of the salient features of the newly enacted Ontario Energy Consumer Protection Act, 2010, Bill 235 ("Act"), in force as of January 1, 2011, and critically evaluates and compares other consumer protection legislation with the Act with a view towards formulating an approach to assess whether or not the Act provides meaningful, additional, or unique protections to the consumer in the area of energy marketing.

The conceptual framework of the Energy Consumer Protection Act, 2010, Bill 235, as it pertains to Electricity Retailing and Gas Marketing:

From a macro perspective, the legislation renders the currently existing Ontario Consumer Protection Act as inoperative as it pertains to Electricity Retailing and Gas Marketing. Concomitantly, the Act, then builds protections, remedies and powers for the consumer in the areas of Electricity Retailing and Gas Marketing from ground zero.

That is to say, the Act terminates the existing protections under the Ontario Consumer Protection Act, and then, the Act renders itself as the controlling consumer protection legislation for consumers as it pertains to the delineated activities of energy sales.

What are the protections, rights and remedies granted to the consumer by virtue of the Act?

The Act, essentially, provides the following protections to the consumer:

1) Prohibition imposed on "suppliers" with respect to "unfair practices".
2) A ten-day cooling off period for consumers on "affected contracts".
3) Special disclosure requirements in respect of "affected contracts".
4) Special sign-on or verification requirements in respect of consumer sign-off on "affected agreements" (that is to say, the contract signed by a Consumer with a Supplier).
5) Remedies for the consumer should the disclosure or verification requirements be violated, namely contract cancellation, refund, and/or commencement of law suit.
6) An ambiguity conflict provision mandating that any ambiguity in an affected contract shall be interpreted to the benefit of the consumer.
7) Statutory protections against signing away the consumer's right to sue either through an arbitration clause or a clause purporting to limit a consumer's ability to bring or participate in a class action.

•Who is the consumer protected from?

°If the consumer is victimized or treated unlawfully, what are the class of entities or persons that the consumer is entitled to seek remedies from or entitled to sue?

In a nutshell, on its face, the Act protects consumers who enter into a contract with a marketer of electricity or natural gas.

To more fully address this question, we must first set-out some building block concepts, that is to say, we need to investigate:

1) What is a "contract"?
2) What is the subject matter that is regulated by the Act?
3) Who are the relevant parties to the contract?

A "contract" is an agreement between a "consumer" and either an "electricity retailer" or a "gas marketer".

The relevant subject matter regulated by the statute is the consummation of a contract for the provision of electricity or gas between a consumer and a marketer of gas or electricity ("electricity retailer" or "gas marketer").

Now, we need to understand what are the meanings of the terms "consumer", "electricity retailer", and "gas marketer"?

A "consumer" is one who purchases or utilizes electricity or gas for personal or household use. In the case of gas, the consumer must purchase less than a prescribed amount on an annual basis.

The more interesting terms are "electricity retailer", and "gas marketer".

An electricity retailer is essentially any person who directly or indirectly offers to sell electricity to a consumer. It does not include a distributor.

What is a "distributor"? A distributor does not include any person that owns any structure that is a part of the electricity infrastructure.

What are the Practical effects of these provisions?

What this means is that if an electricity retailer also happens to be an electricity provider that owns any structure such as a tower or generator, then, that distributor is exempt from the Act.

Innocuous enough, however, these definitions have meaningful ramifications as will be more fully explicated below.

If, assuming for the moment, a distributor (essentially an electricity power company/utility) wishes to also be an electricity retailer, then, it appears that the distributor/would be retailer is exempt from the Act.

This seems like an incongruous result especially if the electricity provider is entering the market place and competing with other electricity retailers. The question may be raised as to why a distributor/would be retailer should be exempt from the Act, whose stated purpose is to protect consumers. This question does not seem to be answered in the Act or surrounding literature.

The Effect of the Act on the Existing Legal Framework in the Area of Consumer Protection and Energy Marketing:

The next facet of analysis is what additional protections, if any, does the Act afford to consumers over and above pre-existing statutory protections available to the consumer. After all, there was an existing Ontario Consumer Protection Act that on the surface provided the same or it may well be even more protections to the consumer than the Act.

To recap, the Act's protections are enumerated above, and can be summarized as: Disclosure, Prohibition of Unfair Practices, Cancellation, Law Suit, No Sign away of Law Suit, and Ambiguity in favor of the consumer.

Let us evaluate the old protections under the Ontario Consumer Protection Act:

1) There are ample disclosure requirements with respect to Future Performance Agreements which likely would cover the current subject matter. See, for example, Sections 5, 21 to 26 and appurtenant regulations of the CPA.
2) There are ample provisions prohibiting unfair practices. See, for example, Sections 14, 15, and 17 of the CPA.
3) There are ample venues for cancellation. See, for example, Sections 23, 92, and 96 and appurtenant regulations of the CPA.
4) There is provision for commencing a law suit. See, for example, Sections 18 and 98 of the CPA.
5) There are ample protections against arbitration or other clauses purporting to limiting access to the court system. See, for example, Section 7 of the CPA.
6) There are statutory interpretation provisions that mandate that ambiguities must be interpreted in favor of the consumer. See, for example, Section 11 of the CPA.

Further, the Ontario Consumer Protection Act appears to possess the following consumer protections which are not in the Act:

1) Section 3 of the CPA provides that a court may disregard the form of a transaction and look to the substance of the transaction in determining its legal ramifications. We will get back to this section later.
2) Sections 4 and 5 of the CPA provide (more accurately provided, past tense) coverage on all electricity retailers and gas marketers irrespective of whether or not the retailer was a distributor. Namely, the CPA covered utilities that went into the marketing business. As discussed above, the Act apparently does not.
3) Section 9 of the CPA provides for statutory warranties for minimum threshold quality of services.
4) Section 13 of the CPA provides for a unilateral right of cancellation to the consumer should there be a material change in the completion of a contract by a supplier.

With respect to points 1 and 2, immediately above, namely, disregarding form over substance, and covering all retailers (regardless of whether the retailer is also a distributor) now fits in well together. Under the CPA, (and now a lost protection to the consumer), a court was permitted to disregard the form and focus on the substance of a transaction. Thus, in substance, if a utility acted in form as a marketer, it would be treated the same as any other marketer and subject to the old protections of the CPA.

Now, under the new Act, a distributor/would be retailer may interpose a branch or division as a marketer and is thus rendered exempt from the Act. This is an interesting result.

Conclusion:

Under the new Act, the consumer has less protections than under the old CPA. Under the old CPA, the consumer had arguably more protections and remedies than under the Act and was able to seek remedies and remuneration from a utility that engages in energy marketing. Under the new Act, the consumer is now unable to sue a credit worthy, well-heeled defendant, namely, a utility that enters the foray as a marketer (distributor/would be retailer). This phenomenon, arguably, constricts the rights of the consumer as opposed to enhancing them, as one may have expected.