By Christen Smith

Direct Energy’s regulatory problems didn’t start under Manu Asthana and didn’t end after Asthana — tapped last week as PJM’s new CEO — left. So how much is he responsible for allegations that the company has repeatedly cheated and misled residential consumers?

Asthana, who was president of Direct’s residential division from 2013 through December 2018, will take over as PJM’s CEO in January. (See PJM Taps Ex-Direct Energy Exec as New CEO.)

While his appointment brings an air of hope to stakeholders left shaken by PJM’s exodus of executive leadership over the last year, at least one group finds the Board of Managers’ choice unsettling.

“I am finding it very difficult to believe that the board conducted this CEO search and didn’t investigate any of these issues about Direct Energy,” said Tyson Slocum, director of Public Citizen’s energy program. “Like many competitive suppliers, they engaged in shady tactics.” Although Public Citizen does not hold PJM membership, Slocum said his organization recently joined the Public Interest & Environmental Organizations User Group.

Slocum points to a series of public harangues from regulators across North America against Direct’s retail operations for locking customers into confusing electricity contracts using deceptive business practices.

While he declined a full interview before officially joining PJM, Asthana did respond to Slocum’s criticism. “I take compliance and customer experience extremely seriously,” he told RTO Insider. “I’m very proud that my team’s efforts to continuously improve in these areas led to customer complaints falling by two-thirds during my tenure.”

PJM board Chair Ake Almgren defended Asthana’s hiring in a statement. “The PJM Board of Managers did a thoughtful and deliberate search for a new CEO,” he said. “The board is confident that Manu Asthana is well suited for the position and that stakeholders will find him to be an engaging and positive leader.”

Regulatory Scuffles

With nearly 4 million customers, Direct claims to be “one of North America’s largest retail providers of electricity, natural gas, and home and business energy-related services.” But questions have been raised repeatedly about how it became so successful.

Asthana has been singled out for criticism that one of Direct’s brands, Home Warranty of America, unfairly denies warranty claims.

In 2015, Alberta officials said complaints against the company’s energy units had quadrupled during the last year.

In the company’s home state of Texas, Direct and three other companies it owns — First Choice Power, CPL Energy and Bounce Energy — were penalized $1.8 million in 11 settlements over 13 years, according to a 2017 report in The Dallas Morning News.

Last year, Texas regulators told Direct and other retail suppliers to rework their multitiered pricing plans listed on PowertoChoose.org, a state-sponsored website where consumers shop for electricity.

The Texas Public Utility Commission said it received complaints about contracts that use “price cliffs” to entice customers with low prices that jump sharply when household usage exceeds a predetermined level. The website showed costs at three price levels — 500 kWh, 1,000 kWh and 2,000 kWh — and power providers offered competitive deals at those price points. But going even just 1 kWh over the limit could inundate a customer with exorbitant fees, according to a report from the Houston Chronicle.

Asthana told the newspaper that Direct would remove any offending products from the commission’s website, saying that transparency remained “essential” to the residential market. Jesse Dickerman, a Direct spokesperson, confirmed Monday that the tiered pricing plans were no longer available online and said the company itself alerted the PUC to the practice years before regulators took notice.

In May, the Connecticut Public Utilities Regulatory Authority slapped Direct with a $1.5 million fine for misleading marketing tactics in a scathing decision that restricted the company from signing up new customers over the phone and door-to-door for six months. In the ruling, regulators characterized Direct’s management as unrepentant throughout the authority’s six-year investigation that dated back to 2013.

“Direct’s callousness toward its marketing violations was exhibited repeatedly throughout the hearings,” PURA wrote. “Direct’s management displayed no regard for the customers affected and displayed no contrition for the company’s actions.”

Direct is a subsidiary of the U.K.-based Centrica, which disclosed in its 2018 annual report that total customer accounts in North America dropped by 65,000 during 2018 as it eliminated its “higher-cost door-to-door and third-party telesales sales channels” and replaced them with lower-cost digital channels.

Dickerman said the language used in the PURA ruling surprised the company, given the lengths it went to improve sales procedures during the course of the investigation.

“Direct Energy strongly disagrees with the negative characterization of our company and our sales practices in Connecticut,” he said. “Direct Energy cooperated fully in PURA’s proceeding; immediately upon learning of any customer-specific issues, we took action to ensure satisfactory resolution in favor of our customers. We continue to responsibly serve thousands of electricity and natural gas customers in Connecticut.”

Dickerman declined to verify whether Asthana was part of the management team criticized in PURA’s ruling. He said that most utility companies face fines because of the complexity of regulations governing the industry and that violations rarely stem from malicious intent. In PURA’s itemized list of complaints against electric suppliers, Direct doesn’t even crack the top quartile, he said.

Where Does the Buck Stop?

Slocum acknowledged that Asthana was not named in the PURA decision, but he said the issues relate directly to his role at the company.

“At its core, these are all issues that were under his jurisdiction,” he said. “He’s not going to have his hands on everything at PJM, but as CEO, you are accountable for everything that happens below you. The buck stops with the executive in charge.”

Slocum said that Asthana and PJM’s board should publicly address the company’s practices that helped it acquire such a large share of the market.

“PJM is not just some sort of regular corporation — it is the manager of the grid and it is funded by ratepayers,” he said. “It is therefore operating in the public interest. There’s no benefit of the doubt here. We need certainties.”

Asthana told RTO Insider over the weekend that he stepped down from his role in December but stayed with the company through April to “ensure a successful leadership transition.” He spent the remainder of year immersed in his work as a board member for “some fantastic nonprofit organizations dedicated to serving children and the less fortunate in Houston.”

In addition to claiming customer complaints dropped dramatically under his watch, Asthana also pointed to an endorsement from former FERC Commissioner Nora Mead Brownell, who served for several months on a Direct advisory board. “Manu is an effective and transparent communicator who will carefully weigh stakeholders’ sometimes competing concerns,” she told RTO Insider by email. “He will lead open discussions to [result in the] best outcome for markets and customers.”

Asthana also received an endorsement from former Pennsylvania Public Utility Commissioner John Hanger, who helped lead the state’s introduction of retail choice. “Great choice!” he tweeted.