Remember the time when your local public utility had a monopoly on the natural gas and electricity markets? Today, as a result of the deregulation of these markets in more than a dozen states, residential consumers have the ability to choose from a number of alternative or private energy service companies (“ESCOs”).
The impetus for deregulation was the premise that a free market would lower costs to consumers. However, consumers are complaining that ESCOs are taking advantage by engaging in unscrupulous, deceptive, and unfair competition practices, such as:
High pressure and misleading telemarketing and door-to-door sales tactics;
Slamming, i.e., switching customers’ providers without their knowledge and authorization;
Impersonating consumer's existing utility providers;
Telemarking to people who registered their numbers on federal and national Do-Not-Call lists and using pre-recorded messages, artificial voices and automatic dialing systems to place these calls, without prior consent of the consumer;
False and deceptive advertising, such as unexpected spikes in utility bills after promising discounted rates and significant savings;
Bait and switch tactics: luring consumers with initial low fixed rates only to impose variable rates in a short period of time; and
Charging undisclosed termination fees when consumers try to cancel.
ESCOs often target lower income residents, communities in which English is a second language, and the elderly. They lure consumers into switching energy suppliers by promising discounted energy rates. However, studies have shown that, on average, ESCOs charge consumers more than traditional utilities. For example, some consumers complain that their bills doubled after switching energy suppliers. In fact, studies have shown that collectively, consumers have been overcharged over a billion dollars as a result of switching to retail energy:
CONNECTICUT: For the period of June 2016 through May 2017, Connecticut residential customers who purchased electricity through competitive supply companies paid $66,736,598.41 more that they would have paid their regulated public utility companies for the same electric service.
ILLINOIS: In Illinois, residential customers who purchased electricity from competitive supply companies spent an additional $152,108,081 from June 2016 through May 2017 over the prices charged by regulated public utility companies.
NEW YORK: residential and some small commercial customers overpaid by $817 million between January 2014 and June 2016, and low-income customers overpaid by almost $96,000,000 during the same period, compared to the prices charged by regulated public utility companies.
MASSACHUSETTS: Massachusetts’ customers paid $176,800,000 more than what they would have paid for electricity from their utility, during the period of July 2015 through June 2017.
See Competing to Overcharge Consumers: The Competitive Electric Supplier Market in Massachusetts, NCLC (April 2018).
These predatory practices have come under increased scrutiny by state attorneys general and other state agencies. However, the practices are so pervasive and the ESCOs are so numerous that public officials cannot effectively police all of the abuse. For example, a Chicago newspaper reported that the Illinois "attorney general conceded she has only been able to pursue the worst of the worst among 100 authorized alternative retail energy suppliers doing business in Illinois — an industry she said is rife with fraud." See https://chicago.suntimes.com/news/lisa-madigan-sues-to-shed-light-on-alternative-electricity-supplier-fraud.
What’s even more alarming is that consumers often do not realize they are victims of retail energy fraud. Many consumers are given the false impression that they are signing up for discounted rates with their existing public utility, only to find that they have entered into a new contract with a third-party energy provider.
In addition, some consumers who switched energy providers (knowingly or unknowingly) still receive one consolidated bill from their local public utility. This consolidated bill includes charges from both the ESCO and from the local utility company. This is because the public utility may still manage the delivery of the electricity and/or natural gas service, but the supply or generation is provided by the ESCO.
This is why it is so important for consumers to pay close attention to their energy bills for spikes in rates, overcharges and undisclosed fees. If consumers are not paying close attention, they may be unaware that they are being overcharged. Consumers may be surprised to learn that low fixed, introductory rates end after only a few months and are replaced with high variable rates, which can double their energy bills.
Parasmo Lieberman Law is investigating the alternative energy markets in California and New York. Some of the companies we are investigating include:
If you have experienced predatory practices by these or another alternative energy supplier, please call us at 844-200-5623 or submit your information here.