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<title>November 2005: Connecticut Heating Assistance Law Penalizes
"Unconscionably Excessive" Pricing By "Sellers"</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<p ALIGN="left"><b><u><br>
<br>
</u></b><u><b>November 2005</b></u><font size="6"><b><br>
Connecticut Heating Assistance Law Penalizes "Unconscionably
Excessive" Pricing by "Sellers<br>
</b></font><strong>by Robert Olson and
</strong><b>David J. Shulock</b><strong> -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
2006</em>/01/14)<br>
</font><span style="font-family:Arial"><br>
On October 31, 2005, Governor M. Jodi Rell
of Connecticut signed into law Senate Bill 2100, An Act Concerning Emergency
Home Heating Assistance, as Public Act No. 05-2 (the “Act”). In addition to
generally increasing home heating assistance benefits available to low- and
moderate income households, the Act penalizes “seller[s]” that sell or offer
to sell “energy resource[s]” for “an unconscionably excessive price” during
any period of “abnormal market disruption” or in which “an imminent abnormal
market disruption is reasonably anticipated.” These terms are broadly
defined, and the statute appears to apply to the sale of electricity by
independent generators of electricity. A seller that violates the Act is
subject to equitable remedies, civil penalties of up to $10,000 for each
violation, and, for a knowing violation, double damages.</span></p>
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<span style="font-family:Arial">The Act defines “seller” to include without
limitation:</span></p>
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<span style="font-family:Arial">a supplier, wholesaler, distributor or
retailer involved in the sale or distribution in [Connecticut] of an energy
resource.</span></p>
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<p class="MsoNormal" style="text-autospace: none" align="left">
<span style="font-family:Arial">It defines “energy resource” to include
without limitation:</span></p>
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<p class="MsoNormal" style="text-autospace: none" align="left">
<span style="font-family:Arial">middle distillate, residual fuel oil, motor
gasoline, propane, aviation gasoline and aviation turbine fuel, natural gas,
electricity, coal and coal products, wood fuels and any other resource
yielding energy.</span></p>
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<p class="MsoNormal" style="text-autospace: none" align="left">
<span style="font-family:Arial">An independent generator of electricity
would presumably fall within the definition of “seller” as a supplier or
wholesaler of an “energy source,” i.e. electricity. If so, such a generator
that sells electricity at an “unconscionably excessive price” during a
period of “abnormal market disruption” or when “an imminent abnormal market
disruption is reasonably anticipated” would be subject to the Act’s
penalties.</span></p>
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<p class="MsoNormal" style="text-autospace: none" align="left">
<span style="font-family:Arial">The Act defines “abnormal market disruption”
as:</span></p>
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<span style="font-family:Arial">any stress to an energy resource market
resulting from weather conditions, acts of nature, failure or shortage of a
source of energy, strike, civil disorder, war, national or local emergency,
oil spill or other extraordinary averse circumstance.</span></p>
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<p class="MsoNormal" style="text-autospace: none" align="left">
<span style="font-family:Arial">The Act does not specifically define
“unconscionably excessive price” but instead provides that evidence of each
of two factors constitutes “prima facie evidence that a price is
unconscionably excessive.” The first factor is that there was a “gross
disparity” (undefined) between the price in the subject transaction and the
price that the seller had charged in the usual course of business
“immediately prior to (A) the onset of the abnormal market disruption or (B)
any period in which an imminent abnormal market disruption is reasonably
anticipated.” The second factor is that “the amount charged by the seller
was not attributable to additional costs incurred by the seller in
connection with the sale of [the] product.” It is unclear whether an
additional increment of profit to maintain the seller’s customary profit
margin expressed as a percentage of costs incurred would be “attributable to
the additional costs incurred.”</span></p>
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<p class="MsoNormal" style="text-autospace: none" align="left">
<span style="font-family:Arial">It remains to be seen how the Act would
apply to independent generators that sell electricity under longterm
contracts. The Act should not affect independent generators that sell
electricity under long-term fixed price contracts that were executed prior
to the period of an abnormal market disruption or the period when an
imminent abnormal market disruption is reasonably anticipated, because the
sales price would remain unchanged. But the Act could conceivably apply to
independent generators of electricity that operate under long-term contracts
with variable pricing where, for example, price escalates with cost to
maintain the generator’s profit margin as a percentage of costs incurred.</span></p>
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<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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