Utility pays $900,000 for illegally sharing customer data

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Washington state regulators have penalized Puget Sound Energy almost $1 million for violating consumer privacy laws by sharing customers' private information with an outside marketing partner without the customers' written permission.
PSE transferred more than 65,000 telephone calls from new or relocating residential customers to a firm that then tried to sell them telephone, lawn and newspaper services, the Bellevue, WA, utility said in a settlement reached Jan. 22 with the Washington State Utilities and Transportation Commission.
"Here we conclude that PSE intentionally violated the rule as part of a corporate decision to sell its customers' private information for financial gain," the three-member commission said in its written decision, noting that PSE had participated in the rulemaking process that resulted in the privacy regulation being adopted just one month before PSE began its marketing program.
Puget Sound Energy referred a call for comment from DM News to the commission. PSE is the state's largest electricity and natural gas utility, providing electricity service to 1 million homes and businesses in nine Washington counties. The company also serves 700,000 natural gas customers in six counties. More than 342,000 customers receive both electric and natural gas service from PSE.
The WSUTC is the state agency in charge of regulating private, investor-owned electric and natural gas utilities in Washington.
"This story shows that privacy tends to get pushed to the background when a company has an opportunity to make money using customer data," said Robert Gellman, a privacy and information policy consultant based in Washington and a DM News columnist. "We have seen other instances where someone in a company made a decision to do something inappropriate that violated the privacy of customers. The cost in dollars and bad publicity typically outweighs the benefits by an order of magnitude or two. Not everyone has learned the lesson that activities affecting customer privacy need to be fully vetted inside a company and, sometimes, outside the company, too. An independent review before the fact can avoid a lot of trouble."
The commission accepted a settlement that calls for PSE to pay a $900,000 penalty, contribute an additional $95,000 to low-income heating assistance and permanently cease the marketing program that released private customer information in violation of state law. The contribution to low-income heating assistance reflects the estimated revenue PSE received from the unlawful sharing of customer private information.
The WSUTC also required the company to notify customers of its conduct and the penalties. PSE will not be allowed to recover the penalties in any future rate-increase request.
State regulations prohibit privately owned energy utilities such as PSE from releasing or selling customer information to any outside party for marketing purposes without the customer's written permission.
Under the settlement, PSE acknowledged transferring more than 65,000 phone calls to an outside marketing firm without the customers' written permission over a five-year period. The program, targeting new and relocating customers, also transferred basic customer information to the marketing firm between November 2001 and March 2006. Because of a two-year statute of limitations, however, only 18,992 call transfers were subject to penalties.
In March 2006, the commission began investigating a report that PSE call center employees were transferring some customer calls and information to Allconnect Inc., an Atlanta-based marketing company.
Known as PSE Connections, the program marketed household services to PSE's residential customers. PSE received payment for transferring these residential customers to Allconnect. After PSE transferred a call and customer information, Allconnect would confirm the service order and then market additional services, according to the statement.
When called for a comment, Allconnect referred calls to PSE. The settlement takes no action against Allconnect.
PSE suspended the program in March 2006, when the commission investigation began, pending its outcome.
"In general, given all the privacy restrictions - new and old - that have come to pass over the years, marketers should think about gently asking [the client with whom they are working whether] any privacy rules have been properly evaluated," Mr. Gellman said.

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