John Spears
Toronto Star
March 9, 2002

For perhaps the 15th time in 90 minutes, Vicky Sipidias is pounding home the message — energy sales agents must at all times be clear with consumers who they are working for.

They do not work for Toronto Hydro. They must never forget that, either.

A group of 20 trainee energy marketers hangs on every word, as she demonstrates the pitch at the doorstep.

"Hi, I’m Vicky Sipidias. I’m from Toronto Hydro Energy Services."

"You do not short-form that in any way whatsoever," she says sternly, as the recruits squirm on folding chairs in a Mississauga office mall.

"Once you leave this room, no one will refer to Toronto Hydro again. We are Toronto Hydro Energy Services."

"There is zero tolerance on this one," she warns. There is only one punishment for disobeying: "You will lose your job."

At the doorstep

"Hello. I’m from Toronto Hydro. I just need to see your electricity bill. I’m here to protect you from price increases."

That’s the way Paul Politi says he introduced himself for months as he sold electricity contracts door-to-door on behalf of Toronto Hydro Energy Services.

So did Jason Johnson, who worked for a time on Politi’s sales crew. The two former agents, who both decided to quit the game in December, say there’s a big difference between the training class and the reality of selling contracts door-to-door.

Leaving the impression that they came from Toronto Hydro, the 90-year-old utility, ensured a better reception at the door than explaining they represented Toronto Hydro Energy Services Inc., a two-year-old, unregulated retail energy marketer also owned by parent Toronto Hydro Corp.

The two say that the combination of a public that’s poorly informed about imminent changes to the electricity market, some policy confusion and weak policing make it tempting for unscrupulous agents to use questionable practices. Among them:

• Providing price comparisons that were misleading.

• Showing customers how power prices soared in Alberta following deregulation, without showing how they subsequently dropped.

• Encouraging customers to sign multiple contracts, on the understanding that they could pick the one they wanted when Ontario’s competitive market opens May 1.

Politi and Johnson marketed electricity and natural gas while wearing jackets and badges bearing the green and yellow logo of Toronto Hydro Energy Services Inc.

That would be your very own electricity marketing company, if you live in Toronto: Toronto Hydro Energy Services Inc. is a non-regulated energy marketer owned by Toronto Hydro Corp., whose sole owner is the City of Toronto. The parent firm also owns Toronto Hydro-Electric System Ltd., the regulated utility that owns and operates the electric wires that deliver power to homes and businesses in the city.

Since the city was granted ownership of Toronto Hydro Corp. in 1999, it has pushed to maximize returns from the company, which has annual revenue of $2 billion. The city hopes to reap income of more than $100 million a year from the utility and retailing operations combined.

Toronto Hydro Energy Services tried to do its marketing exclusively by mail. But last September, worried at the success of aggressive door-to-door selling by competitors such as Direct Energy Marketing Ltd., it contracted with first one and then two door-to-door marketing firms to sell fixed-rate electricity contracts.

Dashbros Inc., which markets gas and power in the Ottawa area, was in the Greater Toronto area until Jan. 1; Elite Marketing Group Inc., headed by retired Toronto Hydro employee Lorne Codell, took over that local role on Jan. 1. Both sell under a licence granted to Toronto Hydro Energy Services.

Codell and his staff say they’re rigorous about ensuring their agents market openly, honestly and in accordance with the code of conduct established by the Ontario Energy Board.

At the same time, Toronto Hydro Corp. is openly ambivalent about its decision to get into the rough and tumble of selling door to door, using agents who are paid only when they sign a customer.

Courtney Pratt, chief executive of parent Toronto Hydro Corp., puts it this way: "Quite frankly, if we had our druthers, we probably wouldn’t have done that, wouldn’t have gone there at all. But that’s the way this marketplace has evolved … There were so many people out there doing it, it was really a defensive tactic. We had to be there."

The problem, says Pratt, is the nature of door-to-door selling.

"With all the best of intentions, you’re not on the doorstep with these people and you can’t control everything that happens.

"So we know that some of our salespeople, and certainly some other people’s sales representatives, have been doing things that are wrong. We have worked very hard to take corrective action whenever we have heard of it. It’s not something we’re proud of, or condone."

Hydro officials say sharper training and better monitoring have curbed abuses. While Politi and Johnson stopped selling energy contracts in December, training sessions such as the one run by Vicky Sipidias appear to be addressing the sales problems they observed.

Meanwhile the Ontario Energy Board, which licenses sales agents and can levy penalties against firms that misbehave, acknowledges that it needs more investigative staff to police sales activity, and now must rely on complainants to gather solid, accurate information about shoddy sales practices.

The board has yet to use its power, granted in October, to fine retailers for breaking its code of conduct.

The name and structure of the Toronto Hydro companies is at the root of some of the marketplace confusion.

Toronto Hydro Corp., Toronto Hydro Energy Services and Toronto Hydro-Electric System share the same green and yellow corporate logo; all have the words "Toronto Hydro" in their name.

Sales agents working for Dashbros or Elite Marketing wear badges bearing the Toronto Hydro logo, with the words "under contract to" in small print above the Toronto Hydro Energy Services name.

Politi says that exploiting the similarity in names, though forbidden, was a temptation for agents who are given a quota of signing a minimum 32 electricity customers plus eight gas customers a week.

Leslie Ferrari, who oversees the training for Toronto Hydro Energy Services, acknowledges it can happen.

"Maybe Paul sold that way," she says. "It wasn’t endorsed by Toronto Hydro Energy Services."

Politi says he took Elite Marketing’s Codell on sales calls when he introduced himself as simply being from "Toronto Hydro."

At the time, Codell was still an employee of Toronto Hydro’s utility wing.

Codell’s recollection is that Politi did identify himself properly.

Codell says he walked into several businesses with Politi and watched him work his pitch unsuccessfully. Then they went to another business complex and Codell stayed outside. Politi emerged with several signed contracts.

Codell, after watching Politi, says he was "very disappointed in his selling skills" because he wasn’t courteous with some customers, but says Politi did have a successful sales record.

In the classroom

Sipidias is emphasizing the selling points of Toronto Hydro Energy Services.

"We don’t condone any lies, any untruths," she tells the recruits.

The firm is in the market to build long-term relationships, she points out; slick or dishonest sales tactics can only damage long-term prospects.

"We are ethical, we are trusted, we are known to be reliable," she says.

The product the recruits are selling is not simply a contract with a fixed price; the real product is price protection, stability and security.

On the street

Jason Johnson says his opening gambit after introducing himself was to throw a bit of a scare into the customer.

Sales agents are supplied with a graph pointing out that Alberta wholesale prices had zoomed to over 20 cents a kilowatt hour following deregulation. (The comparable price in Ontario is about 4.3 cents.) The graph is complete with the Toronto Hydro corporate logo in the corner.

The graph is badly out of date. Prices in Alberta did indeed run up steeply in the fall of 2000, to over 22 cents a kilowatt-hour. The graph fails to show that by November, 2001, when Johnson was knocking on doors, the price had plummeted back to the 3-cent range, lower than Ontario’s.

In the classroom

Sipidias has moved on to price comparisons. She has a big chart with pictures of apples and oranges.

The lesson is clear: Make sure price comparisons are fair — apples to apples, not apples to oranges.

She notes that the "energy charge" on a Toronto Hydro bill is 6.46 cents a kilowatt-hour; marketers, including Toronto Hydro Energy Services, are offering power for less than 6 cents.

But that’s a misleading comparison, stresses Sipidias. The 6.46 cents includes transmission costs and other regulated charges. Although the figure appears nowhere on the current bill, customers are actually paying about 4.3 cents a kilowatt-hour today.

Consumers are paying a premium over today’s price for the security of knowing their price is guaranteed for three years. The agent’s job is to sell security and stability in the face of an uncertain future.

On the doorstep

Life doesn’t work quite like the classroom, says Politi, who supervised whole sales crews and also trained sales recruits. In training, he kept to the rules. Outside could be a different matter.

The most effective sales tactic is to ask customers to get a recent bill. (This is standard procedure for all marketers, since they need a customer’s account number to register a sale, and to get paid their commission.)

"You show them that rates are 6.46 cents a kilowatt hour," says Politi. "Then you show them we’re charging only 5.79 cents. We tell them we’re going to lower their rate, which is not true."

It isn’t.

As Sipidias has explained, the true comparative cost is 4.3 cents a kilowatt-hour — though that’s not guaranteed beyond May 1.

Johnson says he used the same tactic, although he’d generally say the current charge was "6.46 cents bundled." Most customers wouldn’t ask what "bundled" meant.

Lorna Francis, vice-president of marketing for Toronto Hydro Energy Services, says sales people are strictly instructed not to use this misleading price comparison approach.

But Politi says when the pressure is on to sign a customer, many sales agents find it works.

Politi says door-to-door marketers got a bonus when the Ontario government imposed an additional charge of 0.735 cents a kilowatt-hour in June, to help retire Ontario Hydro’s debt. That made it easier to persuade customers they need protection from rising prices.

"See, on June 1 you already had an increase of about three-quarters of a cent," Politi would say. "The rates are going to go even higher."

In fact, customers pay the 0.735 cents no matter whether they sign a fixed price contract with a retailer or not.

Francis said she had never heard of agents using this approach. But she reiterates that using such practices is not in her firm’s interest of building long-term good relations with satisfied customers.

Johnson and Politi say that last fall they routinely signed customers knowing that they had previously signed contracts with other marketers. They’d tell the customers that on May 1, the customer could choose the contract they liked.

In part, they were exploiting a policy vacuum. It wasn’t clear for a time how customers with multiple contracts would be dealt with. But the energy board ruled late last year that the contract with the earliest date is the one that will be enforced.

Codell says Toronto Hydro is sometimes the victim of misrepresentation itself.

He recently had complaints from a Scarborough neighbourhood that Toronto Hydro reps had made nuisances of themselves, knocking on the same doors four and five times. In fact, says Codell, it was an area of the city his crews had never covered. Some other firm was evidently trying to scam customers into thinking they were dealing with their trusted utility.

Leslie Ferrari of Toronto Hydro, who designed and oversees the training provided by Elite, says instruction for recruits has become more focused than when the door-to-door sales campaign launched last September.

To curb abuses on the doorstep, she says, crew leaders are ordered to monitor their agents’ sales pitches from time to time.

Customer complaints are followed up quickly, aided by the fact that agents must sign their contracts with name and an ID number.

If they’re not meeting the proper standards, agents get retraining for first offences, and may be fired if bad conduct persists.

Crews visit the office three days a week for review and reinforcement.

The Ontario Energy Board plays the role of sheriff riding herd on rogue marketers. The energy board is the body that licenses the retailers. And since last fall it’s had the power to levy penalties against those that break the board’s code of conduct.

But Mark Garner, who heads the board’s licensing division, says no penalties have been levied so far.

In part, that’s because the board has taken the approach of trying to persuade marketers to change their practises, rather than zinging them with penalties right off the bat. At the board’s prodding, one marketer sent letters to all customers who signed contracts in 2001, giving them a 10-day window to cancel if they had second thoughts.

But the board has no investigative staff seeking out bad marketers.

"We’re not by nature trained investigators," Garner says. "We’re trained regulators."

He has a staff of about 10 who react to complaints, but rely mainly on customers to gather information.

"We aren’t that big," Garner acknowledges. "In this type of market, my best help is an informed consumer."

That means for a complaint to succeed, customers must ask the right questions, and be sure of what the answers were — a tall order for most people suddenly called to the door by an unannounced marketer.

Garner says he has asked for a bigger budget for investigation and enforcement, but it hasn’t been approved. He also says consumers must recognize that marketers have a right to sell their products, and consumers have a responsibility to know what they’re signing.

"I don’t want to leave the impression that we’re waiting," he says. "We’re talking ourselves about how we can be more proactive right now."

But investigation is labour intensive, and involves such hard-to-prove aspects as determining whether a sales agent left a misleading impression.

"Let’s say you’re going to follow door to door," he said. "You’ve got to find where they are, you’ve got to follow them up, you’ve got to talk to the customers, and get a clear indication that there’s a systemic problem that needs to be addressed, as opposed to picking on a marketer and saying: ‘I don’t like your commissioned sales people.’"

Codell says some consumers are being misled simply because they’re not well informed about the coming electricity market.

"It’s not an easy business. I don’t think anyone’s done a good job with the consumer education thing," he says.

That’s one area where he can agree with Johnson and Politi.

"I probably misled a lot of people, I want to apologize to them," says Politi.

Johnson, too, regrets knowing that many of the people he signed to contracts didn’t really understand what they had signed.

"I’d never want to do it again, ever," he says. "You almost want to go back to these people and apologize."