In settlement, electricity firm’s Conn. customers to get $6M

Former customers of a Connecticut energy company will receive $6 million, after reaching a settlement of their classaction lawsuit from state residents complaining of overcharges.

Spark Energy disclosed the Connecticut settlement agreement on Tuesday, more than two years after acquiring Verde Energy for $65 million. Both companies bill for electricity as an alternative to standardoffer service from Eversource Energy and the United Illuminating division of Avangrid,

with regulators having tightened their scrutiny of the alternative electric market over the past several years after a pattern of complaints.

The original deal included up to $20 million more for Verde management depending on financial milestones. This past June, Spark announced it would pay $6 million in a lump sum as a buyout of remaining payments. In a filing with the Securities & Exchange Commission, Spark Energy indicated the Verde acquisition included an indemnity to cover any financial obligations as a result of the litigation.

Spark Energy’s lead inhouse attorney said the litigation settle

ment was in the works at the time it purchased Verde Energy and when the companies agreed to the early buyout transaction, while declining further comment beyond disclosures Spark Energy made in its quarterly filing with the SEC.

Spark and Verde Energy were among 18 entities that agreed last June to reimburse Connecticut customers for what Attorney General William Tong termed an “egregious billing error by thirdparty electric suppliers” that the AG’s office calculated amounting to $45 a month on average.

The Connecticut Public Utilities Regulatory Authority has a pair of open investigations of Spark Energy, with PURA not required to approve the rates charged by alternative suppliers as it does those of Eversource

and United Illuminating, but with the authority to investigate any claims of market abuses. In July, PURA levied an $800,000 fine on Spark Energy, holding it accountable for marketing calls by an external firm Spark Energy hired to boost its subscriber base. Spark Energy has appealed that penalty in state court.

Two weeks ago, PURA commenced an audit of Spark Energy’s rates after receiving complaints from customers.

Verde Energy USA was sued initially in June 2015, with an amended version of the complaint filed the following year by Naomi Hauschild of Greenwich and Niko Jurich of Vernon, with representation from the West Hartford law firm Izard, Kindall & Raabe.

In court documents, Hauschild and Jurich claimed Verde Energy hit customers with “exorbitant” rates after rolling them off “teaser” promotional pricing for variablerate plans designed to get them to switch electric suppliers.

“Verde consistently and improperly charges an extraordinarily high premium rate for electricity regardless of fluctuations in the underlying market price,” the amended lawsuit stated. “Verde’s rates go up to match spikes in the underlying market price. However, when the market price goes down, Verde’s rate remains at an inflated level several times higher than the market rate ... is intentionally designed to maximize revenue for Verde.”