Healey: Stop individual residential electricity sales

‘The problem is only getting worse,” AG says

THE COMPETITIVE ELECTRIC SUPPLY INDUSTRY has overcharged Massachusetts consumers for far too long. We’ve all seen these companies in action. They go door-to-door, send letters in the mail, and call over and over with promises of cheaper electricity, or a locked-in low rate that they claim will save you money. They promise if you sign up and switch your electricity service from your utility company, they’ll provide consistent savings and lower bills. But the truth is, they won’t.

After receiving over 1,000 complaints about these companies and their predatory tactics from residents across the state, my office decided to take a close look at what was actually going on in this industry. We crunched the numbers on dozens of companies and thousands of customers in cities like Lawrence, Springfield, Worcester, Quincy, and Boston.

The results were shocking. Two reports issued by my office in 2018 and 2019 found that all across Massachusetts, in nearly every community we examined, hundreds of thousands of residents aren’t paying less with these suppliers, they’re paying more. In fact, they are paying a lot more. These companies are using predatory tactics like forcing their way into residents’ homes, pretending to be from a utility company in order to get consumers to turn over sensitive information, and sending out mailings that resemble communications from a utility.

The problem is only getting worse. Our third report, which will be out soon, shows that between July 2015 and June 2019, Massachusetts residents who switched to a competitive electric supplier paid $340 million more than they would have paid if they had stayed with their utility company. It’s clear the industry hasn’t taken steps to reduce consumer harm. Our newest data shows that consumer losses increased over the previous year from $76 million to $87 million.

The numbers are even worse for low-income residents, who are signed up at double the rate of higher-income households. On average, low-income residents who’ve signed up with competitive suppliers are paying $196 more each year than they should have paid for their electricity. We even found some low-income residents overpaid by $300 a year.

Residents in our Gateway Cities are being hit particularly hard by this industry. Worcester residents signed up with competitive suppliers consistently pay the most. In the month of September 2018, Worcester residents enrolled with a supplier collectively overpaid by $353,000. In Lynn, 10,000 families forked over an extra quarter of a million dollars in just one month in 2018. Similar losses were found in Brockton, where 34 percent of households were locked into contracts with suppliers.

As the state’s ratepayer advocate, it’s my job to protect consumers from the unfair and deceptive practices of misleading and predatory businesses, and that often requires extensive investigations. My office secured almost $20 million through settlements with three suppliers and one marketing firm.  Most of that money goes toward paying back affected Massachusetts customers. Each of these suppliers also agreed to strict injunctive relief for low-income customers and people on variable rate contracts.

My office is also working hard to teach consumers about how to protect themselves from the misleading practices of this industry, and what questions to ask or what to look for when a supplier shows up at their door. In the past six months, my community engagement division has held consumer protection trainings on competitive supply in 25 communities across the state.

But despite these lengthy investigations, sizeable punitive settlements, and consumer trainings, this industry is continuing to deceive and overcharge Massachusetts consumers. Things need to change. Earlier this week, I testified before the Joint Committee Consumer Protection and Professional Licensure on legislation (H 311 and S.195) I filed last year, along with Rep. Frank Moran from Lawrence and Sen. Jim Welch from Springfield, to ban these companies from signing up new individual residential customers.

I understand that competitive supply has been a good thing for commercial and industrial customers. Many towns and cities also have municipal buying programs that are working well. But that’s just not true for individual residential customers.

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The only defenders of these practices are the companies themselves. Unfortunately, while what is happening here in Massachusetts is not unique — the same issues are present in the dozen or so other states that have this type of market — we are delayed in implementing policies to protect our consumers.  In the last year, our neighbors in New York, Connecticut, and Rhode Island each took steps to curtail the consumer harm caused by this industry.

This legislation will stop these companies once and for all from overcharging Massachusetts consumers by barring them from making any more individual residential sales. Four years of data confirms that this problem isn’t limited to a few bad actors. We have the opportunity to act now and stop these companies from preying on our residents.

Maura Healey is the attorney general of Massachusetts.