S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

* * * * *

In the matter, on the Commission’s own motion, ) of the investigation into the marketing practices of ) Case No. U-15509 UNIVERSAL GAS & ELECTRIC CORPORATION. ) )

) In the matter of the application of ) UNIVERSAL GAS & ELECTRIC CORPORATION ) Case No. U-14732 for a license as an alternative gas supplier. ) ) At the February 22, 2008 meeting of the Michigan Public Service Commission in Lansing,

Michigan.

PRESENT: Hon. Orjiakor N. Isiogu, Chairman

Hon. Monica Martinez, Commissioner Hon. Steven A. Transeth, Commissioner

ORDER COMMENCING INVESTIGATION

Over the last year, the Commission has received an unusual number of customer contacts1

raising concerns about Universal Gas & Electric Corporation’s (UGE) marketing practices under

its alternative gas supplier (AGS) license that Commission granted in an order dated December 20,

2005 in Case No. U-14732. The Commission observes that the total number of customer contacts

is disproportionate to UGE’s customer base, as is evident from a comparison with the customer

contact frequencies recorded by the Staff for the state’s two largest gas utilities, and other AGSs

1Customer contacts refer to issues and concerns communicated by customers to the Commission Staff (Staff). A customer contact is coded in the Commission’s customer service database as either an inquiry or a complaint. They are not the more formal type of complaint filed under the Commission’s Rules of Practice and Procedure, R 460.17101 et seq., which triggers a contested case proceeding under the Administrative Procedures Act of 1969, MCL 24.201 et seq.

Page 2 U-15509 et al.

during the same period. The Commission further observes that customer contacts raising concerns

about UGE have trended sharply upward since August 2007, reaching 140 for December 2007,

272 for January 2008, and 284 customer contacts from February 1 through February 20, 2008.

Many of the customers who have contacted the Commission allege overreaching sales tactics or

misleading representations made by UGE agents to solicit residential customers. UGE customers

have contacted the Commission alleging problems including, but not limited to, the following:

• UGE has secured residential customer authorization to switch to UGE by misleading or false representations.

• UGE has made representions that a contract with the company signed by a non-account holder is binding on the actual account holder.

• UGE has made various misrepresentations regarding the amount of savings a customer will initially realize by switching the customer’s gas service to UGE.

• UGE has made statements regarding future prices and savings that are misleading or false.

• UGE has failed to clearly disclose that purported savings apply only to the commodity portion of the total gas bill.

• UGE has failed to clearly inform customers that they are entering a contract for five years.

• UGE has failed to inform customers of their right to cancel the contract within 30 days and of the $250 early termination fee for cancellation after 30 days.

• UGE has failed to provide customers with copies of executed contracts and has failed to provide customers with contract confirmation within seven days as required by Commission tariffs.

• UGE has obtained from customers their current utility bills and failed to return the bills within the 30-day cancellation period, thereby depriving customers of information necessary to evaluate UGE’s prices and determine whether or not to cancel UGE’s gas service during the cancellation period.

While the existence of a few isolated customer contacts would not, by itself, equate to a

finding of institutional misconduct, the number, trend, and types of concerns recently received by

the Staff indicate potential problems that warrant Commission investigation.

Page 3 U-15509 et al.

2002 PA 634; MCL 460.9(6) provides:

An alternative gas supplier or natural gas utility shall not solicit or enter into contracts subject to this section with customers in this state in a misleading, fraudulent, or deceptive manner.

MCL 460.9b authorizes the Commission to establish by order “a licensing procedure for all

alternative gas suppliers participating in any natural gas customer choice program approved by the

commission.” Licensing procedures were established by the Commission in its March 12, 2003

order in Case No. U-13694. Among other things, the AGS licensing procedure requires disclosure

of the following:

(9) Has the applicant or any agent of the applicant within the past three years committed any violations of law or business ethics in connection with provision of energy or energy related products or services anywhere that resulted in a conviction or acceptance of a penalty for such behavior by a court or an administrative agency? If the answer is yes, explain the violations in an attachment to this application. Subsequent violations must be disclosed within 30 days.

* * * (11) Outline of staffing and procedure for responding to customer inquiries and customer complaints.

(12) A separate legal affidavit, signed by a corporate officer with proper authority, which shall attest to the competence of the company’s employees to market natural gas as an AGS.

Because of concerns about the number of contacts that the Commission has received

pertaining to UGE’s gas marketing under the Gas Customer Choice Program, MCL 460.9 et seq.,

the Commission determines that it should open a formal investigation into the marketing and

customer service policies and practices of UGE. To that end, the Commission directs UGE to file

a series of reports in Case No. U-15509, describing its marketing practices including, but not

limited to, the following information:

1. A listing of each customer contact relating to its AGS service, including the issue or concern raised by the customer, open date, close date, how the issue was resolved, and if a

Page 4 U-15509 et al.

refund was issued, the date and tracking number of the check sent. Upon request by the Staff, UGE must make additional customer information related to the report readily available.

2. A description of common types or patterns of misconduct alleged in the customer contacts,

actions taken by UGE management to identify root causes of concerns, and measures implemented by UGE to correct company policies, practices, or inactions underlying root causes.

The first report is due 30 days after the date of this order and subsequent reports are due every 3

months thereafter for a year from the date of this order. UGE shall also submit a proposed action

plan to the Service Quality Division Staff addressing in detail the company’s marketing

procedures and methods used to avoid the alleged problems that have arisen under the company’s

current marketing efforts. The proposed action plan is also due 30 days after the date of this order.

Progress reports on implementation of UGE’s action plan shall also be submitted every three

months in conjunction with the investigation report. All reports shall be filed in Case No.

U-15509.

After UGE files its first report and proposed action plan, the Service Quality Division Staff

shall conduct a review of UGE’s customer contact history since the date of this order. The Service

Quality Division Staff shall also review and evaluate UGE’s proposed action plan and recommend

to the Commission modifications or additions to the plan. The Service Quality Division Staff shall

also review each subsequent report and evaluate UGE’s progress on implementation of the action

plan since the previous report and shall determine whether, and to what extent, UGE has

eliminated the root causes of customer contacts and otherwise complied with AGS regulatory

requirements. If at any point the Service Quality Division Staff determines that UGE is not

making satisfactory progress in correcting alleged problems with its marketing and customer

service, the Staff shall file a report in Case No. U-15509 recommending further action by the

Commission. If necessary, the Staff may recommend that the Commission hold a hearing to

Page 5 U-15509 et al.

determine the appropriateness of the imposition of fines and costs on UGE or whether the

Commission should commence a proceeding to revoke UGE’s license to operate as an AGS in

Michigan.

Despite today’s action by the Commission to commence an investigation into allegations of

misconduct by UGE, the Commission remains committed to promoting competition in the retail

market for gas service. The Commission further observes that the vast majority of AGSs licensed

by the Commission provide excellent service to thousands of satisfied customers

All documents filed in this case shall be submitted electronically through the Commission’s

Electronic Case Filings Web site at: https://efile.mpsc.cis.state.mi.us/cgi-bin/efile/login.pl.

Requirements and instructions for filing electronic documents can be found in the Electronic Case

Filings Users Manual at: http://efile.mpsc.cis.state.mi.us/efile/pdfs/usersmanual.pdf. An

Application for account and letter of assurance, required of all first-time users, are located at:

http://efile.mpsc.cis.state.mi.us/efile/pdfs/assurance.pdf. The Staff can be contacted prior to

e-filing at 517-241-6170 or by e-mail at: mpscefilecases@michigan.gov.

The Commission has jurisdiction over this matter pursuant 2002 PA 634, MCL 460.9 et seq.;

1909 PA 300, MCL 462.2 et seq.; 1919 PA 419, MCL 460.51 et seq.; 1939 PA 3, MCL 460.1

et seq.; 1969 PA 306, MCL 24.201 et seq.; and the Commission’s Rules of Practice and Procedure,

1999 AC, R 460.17101 et seq.

THEREFORE, IT IS ORDERED that:

1. Universal Gas & Electric Corporation shall file its first report in Docket No. U-15509 by

March 24, 2008 and every three months thereafter for a year from the date of this order. The

reports shall address the following:

Page 6 U-15509 et al.

A. A listing of each customer contact relating to its gas supply service, including type of

issue or concern raised by the customer, open date, close date, how the issue was resolved, and

if a refund was issued, the date and tracking number of the check sent. Universal Gas &

Electric Corporation shall also submit a proposed action plan addressing in detail plans for

avoiding the alleged problems that have arisen under the company’s current marketing efforts.

Upon request by the Service Quality Division Staff, Universal Gas & Electric Corporation

shall make additional customer information related to the report readily available.

B. A description of common types or patterns of misconduct alleged in the customer

contacts, actions taken by management to identify root causes of concerns, and measures

implemented by management to correct company policies, practices, or inactions underlying

root causes.

2. After Universal Gas & Electric Corporation files each report required by paragraph 1 of

this order, the Service Quality Division Staff shall review the reports and, if necessary, make

recommendations for further action to the Commission.

The Commission reserves jurisdiction and may issue further orders as necessary.

Page 7 U-15509 et al.

Any party desiring to appeal this order must do so in the appropriate court within 30 days after

issuance and notice of this order, under MCL 462.26.

MICHIGAN PUBLIC SERVICE COMMISSION

________________________________________ Orjiakor N. Isiogu, Chairman

________________________________________ Monica Martinez, Commissioner

________________________________________ Steven A. Transeth, Commissioner By its action of February 22, 2008. ________________________________ Mary Jo Kunkle, Executive Secretary

P R O O F O F S E R V I C E

STATE OF MICHIGAN ) Case No. U-15509

County of Ingham )

E. David Lechler being duly sworn, deposes and says that on February 22, 2008 A.D. he

served a copy of the attached Commission orders by first class mail, postage prepaid, or by

inter-departmental mail, to the persons as shown on the attached service list.

_______________________________________

E. David Lechler Subscribed and sworn to before me this 22nd day of February 2008

_____________________________________

Lisa Felice Notary Public, Eaton County, Michigan Acting in the County of Ingham My commission expires on April 15, 2014

ALL GAS ORDERS (Subscription List)

MR. LARRY LEWIS MR. MICHAEL BYRNE GENERAL SERVICES ADMINISTRATION SENATE DEMOCRATIC STAFF 670 MORRISON RD. ROOM 209 ROMNEY BUILDING COLUMBUS OH 43230 LANSING MI ID MAIL MR. JOHN PESTLE VARNUM, RIDDERING, SCHMIDT & HOWLETT BRIDGEWATER PLACE P.O. BOX 352 GRAND RAPIDS MI 49501-0352

P R O O F O F S E R V I C E

STATE OF MICHIGAN ) Case No. U-15509

County of Ingham )

April M. Arman being duly sworn, deposes and says that on February 22, 2008 A.D. she

served a copy of the attached Commission orders via E-Mail, to the persons as shown on

the attached service list.

_______________________________________

April M. Arman Subscribed and sworn to before me this 22nd day of February 2008

_____________________________________

Lisa Felice Notary Public, Eaton County, Michigan Acting in the County of Ingham My commission expires on April 15, 2014

Gas ontrea@CHARTERMI.NET The Ontonagon County Rea. Assoc. armana@MICHIGAN.GOV No Name Available mburzych@FOSTERSWIFT.COM Mark Burzych jepalinc@CMSENERGY.COM CMS Energy Resource Mgt Co Jayne@HOMEWORKS.ORG Tri-County Electric Co-Op mkappler@HOMEWORKS.ORG Tri-County Electric Co-Op patessner@HOMEWORKS.ORG Tri-County Electric Co-Op psimmer@HOMEWORKS.ORG Tri-County Electric Co-Op aurora@FREEWAY.NET Aurora Gas Company frucheyb@DTEENERGY.COM Citizens Gas Fuel Company dwjoos@CMSENERGY.COM Consumers Energy Company mpscfilings@CMSENERGY.COM Consumers Energy Company dsawruk@EDISONSAULT.COM Edison Sault Electric Company lbaatz@EDISONSAULT.COM Edison Sault Electric Company charles.forman@EXELONENERGY.COM Exelon Energy Company Nick.kud@EXELONENERGY.COM Exelon Energy Company kdcurry@AEP.COM Indiana Michigan Power Company jim.vansickle@SEMCOENERGY.COM SEMCO Energy Gas Company kay8643990@YAHOO.COM Superior Energy Company gericks@WPSR.COM Upper Peninsula Power Company ronan.patterson@WE-ENERGIES.COM Wisconsin Electric Power Company tharrell@CHARTERINTERNET.COM Alger Delta Cooperative patti.williams@BAYFIELDELECTRIC.COM Bayfield Electric Cooperative tonya@CECELEC.COM Cherryland Electric Cooperative dwozniak@CLOVERLAND.COM Cloverland Electric Cooperative sfarnquist@CLOVERLAND.COM Cloverland Electric Cooperative sboeckman@GLENERGY.COM Great Lakes Energy Cooperative sharone@TEAMMIDWEST.COM Midwest Energy Cooperative mkrause@AIRADVANTAGE.NET Thumb Electric Cooperative cborr@WPSCI.COM Wolverine Power Marketing Cooperative, Inc. rami.fawaz@POWERONECORP.COM PowerOne Corp CommissionMail@WPSR.COM Wisconsin Public Service Corp. jlwitt@INTEGRYSENERGY.COM Peoples Energy Services Corporation lehmniles@NILESMI.ORG Niles Utilities Department kmarklein@STEPHENSON-MI.COM Stephson Utilities Department ralph.dennis@CONSTELLATION.COM Constellation NewEnergy-Gas Division sharonkr@PIEG.COM Presque Isle Electric & Gas Cooperative, INC tsobeck@PIEG.COM Presque Isle Electric & Gas Co-op igoodman@COMMERCEENERGY.COM Commerce Energy dhaubensak@CORNERENERGY.COM Cornerstone Energy mpscfilings@DTEENERGY.COM DTE Energy jeffrey.ruffing@EXELONENERGY.COM Exelon Energy vnguyen@MIDAMERICAN.COM MidAmerican Energy rarchiba@FOSTEROIL.COM My Choice Energy donald.reck@XCELENERGY.COM Xcel Energy crystalfallsmgr@HOTMAIL.COM City of Crystal Falls felicel@MICHIGAN.GOV Lisa Felice nsilvestri@UNIVERSALENERGY.CA Universal Gas & Electric Corporation rstickland@SOUTH-HAVEN.COM City of South Haven

daustin@IGSENERGY.COM Interstate Gas Supply Inc terry.harvill@CONSTELLATION.COM Constellation NewEnergy Inc. dillonenergy@COMCAST.NET Dillon Energy Services Inc. thartmann@MXENERGY.COM MxEnergy Inc. pnewton@BAYCITYMI.ORG Bay City Electric Light & Power aallen@GHBLP.ORG Grand Haven Board of Light & Power sbn@LBWL.COM Lansing Board of Water and Light jreynolds@MBLP.ORG Marquette Board of Light & Power dmzwitte@CMSENERGY.COM CMS ERM Michigan LLC fountag@DTEES.COM Metro Energy LLC bschlansker@PREMIERENERGY.NET Premier Energy Marketing LLC rcarrier@SEL.COM Strategic Energy LLC nroehrs@STLOUISMI.COM City of Saint Louis shelm@AMERICANPOWERNET.COM American PowerNet Management, L.P. ttarkiewicz@CITYOFMARSHALL.COM City of Marshall rwoller@BAARDENERGY.COM Nordic Marketing of Michigan.com tony@AE2.COM Accent Energy Midwest kunklem@MICHIGAN.GOV Mary Jo Kunkle - MPSC jeffrey.levine@SUEZENERGYNA.COM SUEZ Energy Resources NA, Inc. RDennis@KNOWLEDGEINENERGY.COM Constellation NewEnergy-Gas skm7@ALPENAPOWER.COM Alpena Power trichards@LOWELL-LIGHT.ORG Lowell Light and Power blefevere@CI.EATON-RAPIDS.MI.US City of Eaton Rapids tlringenbach@INTEGRYSENERGY.COM Integrys Energy Service, Inc jcasadont@BLUESTARENERGY.COM BlueStar Energy Services tanya.paslawski@DIRECTENERGY.COM Direct Energy Services galvin@LAKESHOREENERGY.COM Lakeshore Energy Services mrunck@VEENERGY.COM Volunteer Energy Services jfrench@WYAN.ORG Wyandotte Municipal Services kmaynard@WYAN.ORG Wyandotte Municipal Services prezelji@FES.COM First Energy Solutions rboston@SEMPRASOLUTIONS.COM Sempra Energy Solutions pbeckhusen@MUNI.CBPU.COM Coldwater Board of Public Utilities rjrose@HILLSDALEBPU.COM Hillsdale Board of Public Utilities eazimmerman@WPSR.COM Michigan Gas Utilities davidw@BPW.ZEELAND.MI.US Zeeland Board of Public Works * * Total number of users subscribed to the list: 85 * Total number of local host users on the list: 0 *