Time to hit the off switch on electricity sellers

Consumers shouldn’t be harassed, misled, or lied to

IN 1997, MASSACHUSETTS PASSED the Electric Restructuring Act to “promote the prosperity and general welfare of its citizens . . . by restructuring the electricity industry in the Commonwealth to foster competition and promote reduced electricity rates.” But the residential market for competitive electric supply never worked as hoped, and the competitive market has instead increased the financial burden on Massachusetts households.

We now know that Massachusetts residential consumers are usually worse off after they sign up to receive their electricity from a competitive energy supply company. These consumers frequently report being harassed or misled, and promised savings almost never materialize. Elders, low-income consumers, and consumers who speak English as a second language are often targeted.

In our recent report, the National Consumer Law Center reported that 1,198 consumer complaints about competitive energy supply companies were catalogued by the Department of Public Utilities from August 2015 through August 2017.  Consumers related unwanted telemarketing and in-person solicitations, unauthorized switching of their accounts, undisclosed high or variable rates, and confusing fees. The department helps consumers resolve their individual problems, but has not reported suspending any competitive supplier licenses to sell electricity in Massachusetts.

Add to these consumer complaints another 700 received by the attorney general’s office during a similar time period, documented in a recent report from the AG. There have also been an unknown number of complaints to police departments, legislators, municipal governments, and utility companies.

Consumers have every reason to complain. Both the National Consumer Law Center and AG reports found that consumers usually pay more for their electricity when they switch to competitive electric supply. Low-income consumers fared disproportionately worse, signing up with competitive supply companies at higher rates and losing even more money each year than their higher income neighbors who switched.

Although Massachusetts and other states have taken steps to root out bad actors, case-by-case enforcement has failed to stop the pervasive problems for consumers.  For instance, in 2014, Just Energy agreed to pay $4 million to settle allegations of deceptive marketing practices brought by the attorney general. The company was also fined in Ohio in 2010 and again in 2016. The Better Business Bureau reports a pattern of complaints about deceptive practices by Just Energy salespersons.

In 2008, Spark Energy entered into an agreement with the attorney general’s office to cease deceptive marketing practices, refund customer charges, and pay $55,000 to a customer aid fund.  The company’s problems continue, as Massachusetts consumers made 69 complaints about Spark Energy to the Department of Public Utilities from August 2015 through August 2017.

In March, Viridian Energy agreed to pay $5 million to settle the attorney general’s allegations of deceptive marketing and sales practices in Massachusetts. Earlier this year, the US District Court in Connecticut approved a class action settlement of $18.5 million to resolve claims that Viridian overcharged Connecticut consumers.

By any measure, the competitive electric supply market is harming Massachusetts residential customers. Other states, including Connecticut, New York, and Illinois, have taken steps to protect consumers from high prices and deceptive practices, but despite these additional protections, consumers are still paying too much and receiving little or no benefit.

Meet the Author

Jenifer Bosco

Staff attorney, National Consumer Law Center
It’s past time to turn off the lights on this failed experiment for Massachusetts families. The Department of Public Utilities can and should take action as soon as possible to protect residential consumers and rein in bad actors. [The agency issued a new order regarding electricity sellers on Friday.] The Legislature has the authority to make needed reforms, and we, on behalf of our low-income clients, support Healey in her call to stop competitive electric supply companies from selling to individual residential customers in order to protect consumers throughout Massachusetts.

Jenifer Bosco is a staff attorney at the National Consumer Law Center focusing on energy and consumer protection law.