Electricity Seller to Refund $250,000 in Billing Dispute

Electricity marketer Commonwealth Energy Corp. has tentatively agreed to pay about $250,000 in refunds and to remove its former chief executive from the company’s California operations to end a six-month state investigation into alleged billing irregularities.

The Tustin company also will pay the California Public Utilities Commission $100,000 to fund a consumer education program, agency officials said Wednesday.

“This has been a costly blunder for Commonwealth,” said Larry McNeely, deputy director of the PUC’s consumer services division. “The settlement makes customers whole and . . . sets a standard in this fragile, brand-new market.”

Commonwealth executives still dispute the PUC’s contention that the company improperly billed customers but said they settled to avoid an expensive legal battle.

“We think it’s in our best interest to move on,” said Jay Goth, Commonwealth’s vice president of marketing. “We’ve already issued refunds to many customers and whoever hasn’t received one will.”

Commonwealth is the largest of about three dozen service providers that emerged after California’s electricity market was opened to competition on March 31, 1998. The company grabbed consumers’ attention by advertising aggressively and touting environmentally friendly energy sources and discount prices.

The company’s billing problems occurred from July to December 1998. After realizing it had underbilled about 19,000 customers, Commonwealth sent them a second round of bills ranging from a few cents to $2,000.

“You can only do that if you get prior approval and if the customer understands the terms and conditions in advance,” said William Schulte, director of the PUC’s consumer services division.

More than 150 customers complained, many contending that the additional bills wiped out the 15% to 25% savings the company had promised in persuading them to switch from their former providers.

Under the settlement, Commonwealth will issue credits to about 12,000 customers who paid the makeup bills or have the charge on their records, Schulte said.

The deal also requires Commonwealth’s founder and former chief executive, Fred Bloom, to have no role in the company’s California operations for at least two years.

Bloom failed to disclose in Commonwealth’s registration application that he had been ordered to stop selling unregistered securities or commodities by five states, including California, since 1988, the PUC’s investigative report said.

Under state law, Commonwealth could have lost its license for filing a false statement, McNeely said. Regulators agreed to the ban on Bloom instead because they were convinced that the current managers were reliable.

Bloom was replaced as Commonwealth’s chief executive last year as part of a broader restructuring.