Maryland law requires that "suppliers" and "brokers" of electricity be licensed by the Public Service Commission prior to serving customers. This includes all sales agents who broker, arrange or market electricity or electricity supply services to retail customers. The most common confusion among suppliers concerns sales personnel who are not direct employees of the supplier. In most (if not all) cases, salespeople are required to have their own licenses unless the salesperson is a direct employee of a company that is a licensed supplier or broker.
There are many possible explanations for confusion on this issue. Some agents assume that they are not "brokers" if they do not take title to the energy. Other sales agents incorrectly assume that they are covered by their supplier’s license even though they are engaged as independent contractors. Many suppliers incorrectly assume that the independent sales agent does not need a license if the written supply contract is between the supplier and the customer.
According to PSC staff, there are more than fifty electricity brokers operating in Maryland without a license. Enforcement actions against unlicensed salespeople are likely, and failure to obtain a license may result in fines of up to $10,000 for each violation and for each day that a violation continues. There are also indications that the Commission may consider actions against the suppliers working with these agents. The Commission has started a crack down on these licensing violations by issuing data requests to Maryland suppliers.
License applications are available on the Commission’s website, but applicants must read each item carefully, and make sure that the information supplied is both accurate and complete. Failure to fill out the application properly (especially during this period of increased scrutiny) could result in license denial, the imposition of fines, or both.
If sales have been made without the applicable license, then the supplier and the sales agent should consult experienced counsel as soon as possible. Continuing to operate without a license will increase potential liability. However, completion of an application may require the agent to admit that sales were made without a license. It is not yet clear how the Commission will treat belated applications, or whether penalties for past operation will be imposed when the agent admits the violation before PSC discovery.
Electricity suppliers will also want to follow these developments closely since the Commission may impose additional obligations on agents in the future.
If you have questions regarding supplier licensing or other energy issues, the Gordon Feinblatt Energy and Environmental Practice Group is ready to help you.