A retail electricity supplier that said it faced a choice between financial suicide or dishonoring its promises to customers has been ordered to pay $3.8 million in penalties for breaking its word during last year's polar vortex.
The Pennsylvania Public Utility Commission on Thursday ordered Hiko Energy L.L.C. of Monsey, N.Y., to pay $1.8 million in civil fines for doubling and even tripling the rates of customers it had promised would pay less for power than their local utility's standard rate.
That fine is on top of $2 million in refunds the company agreed in May to pay in a settlement with Attorney General Kathleen G. Kane and acting Consumer Advocate Tanya J. McCloskey. On Thursday, the PUC approved both the attorney general's settlement and the fine.
"This outcome today serves as a reminder to the retail supply industry that the commission will not hesitate to take action against bad actors," said Gladys M. Brown, the PUC's chairman.
The commission's Bureau of Investigation and Enforcement said Hiko's misconduct was so brazen that it merited a fine of $14.7 million, or $1,000 for each of the 14,689 times Hiko jacked up its customers' bills.
But Administrative Law Judges Elizabeth H. Barnes and Joel H. Cheskis recommended the smaller fine, which they still called "unprecedented." The judges said they would have moved to revoke Hiko's license had the attorney general not already reached a settlement with the supplier.
The five members of the PUC voted unanimously to accept the judges' decision.
Hiko is one of several suppliers targeted by regulators and prosecutors in several states for misconduct that grew out of last year's severe winter weather, when energy supplies were constrained and electricity prices soared. Thousands of customers with variable-rate contracts were hit with huge energy bills.
In January, Hiko settled claims of deceptive practices in New Jersey, where it agreed to pay $2.1 million, including $1.8 million in consumer restitution. It also faced enforcement actions in other states where it operated, including New York, Connecticut, Maryland, Ohio, and Illinois.
The supplier's problems stemmed from its promises to variable-rate customers that its rates for the first six months of the contract would remain at least 1 percent below the prices that utilities charged. About 5,700 Pennsylvania customers were enrolled in the guaranteed-savings plan during winter 2014.
Harvey Klein, Hiko's chief executive, testified that the wholesale prices it paid soared from about 8 cents per kilowatt hour to 22.7 cents in January 2014 and remained above 13.8 cents for several months.
Hiko "essentially had no choice" but to breach the price guarantee or face financial ruin, the company's attorney, Vincent E. Gentile, said in briefs.
Gentile, a partner with the law firm Drinker Biddle, argued that Hiko had promised to make restitution to its customers, that its business had suffered a significant loss of customers in Pennsylvania, and that the PUC should impose no penalty at all "or at most no more than a minimal penalty."
Gentile did not reply Thursday to an email request for comment.