I don’t vote lightly for an order assessing disgorgement and civil penalties as high as the Commission does in this matter. But we have never been faced before with a scam that robbed ratepayers of hundreds of millions of dollars in this way. When we are—and the evidence here makes abundantly clear that we are—it’s the right thing to do to hold American Efficient accountable and to fight for the ratepayers they stole from.
American Efficient’s business model: The company paid mere cents to get sales data for products like energy efficient light bulbs and appliances. That’s it. That’s the extent of their business model. The result was an astronomical profit return in exchange for zero real-world effects in reducing demand through increased energy efficiency use.
In fact, for years American Efficient admitted that they were not even trying to make changes in the market; their program wasn’t interested in reducing load through any energy efficiency gains. They were simply capturing what they saw as an untapped gold mine from reductions that were already happening. Yet despite repeated, candid admissions that they knew their business didn’t do anything real, they told PJM, MISO, and ISO-New England that they were a bona fide energy efficiency program—which by the tariffs means American Efficient represented that they had a program designed to achieve reductions and that they had an ownership interest or control over the load-reducing components of the products at issue.
When they started to get caught out for their fraud, they did two things. First, they chose not to tell other markets when they got kicked out of ISO-NE and then MISO. Second, they changed nothing about their business model, instead continuing in their egregious “something-for-nothing” scam. The only thing they changed was they started to claim, despite everything they’d said to the contrary for years, that paying a few pennies for product sales information was somehow designed to encourage more energy efficient product sales.
It’s extremely unlikely these “micropayments” moved the needle, especially when compared to common elements in legitimate energy efficiency programs, like meaningful direct customer rebates or product advertising or marketing. Regardless, even that argument doesn’t matter because American Efficient had an obligation to design their program to achieve results. And we know they did not design their program that way because they told people exactly the opposite for years—and then changed nothing about the program’s original design when they had no remaining excuse not to know better. Worse still, they never even purported to buy rights to lightbulbs’ or appliances’ energy-reducing capabilities from the customers who put those products to use. So even if there was any “there there” in American Efficient’s program—and to be clear, there was not—their entire model turned on selling “energy attributes” that they never even owned.
Why does this matter? Because for years, American Efficient got checks totaling almost half a billion dollars for its “contributions” to the capacity markets and purported “green benefits.” All of that was imaginary. The only thing not imaginary was the money PJM and MISO paid to them at ratepayers’ expense.
American Efficient has fought with every legal tool they can muster at every step of this process. It’s easy to understand why, because their entire business is at stake. But that entire business is a scam. American ratepayers have been victim to it for too long.
I commend our enforcement staff and so many others who have worked diligently on this matter for so long. I also agree with my colleague Commissioner LaCerte in his separate statement that civil remedies may not be enough in response to this flagrant scheme. In the end, this is a sobering vote. But we have a duty to act to bring daylight to a shocking fraud that needs to end.