AG HEALEY CALLS FOR SHUT DOWN OF INDIVIDUAL RESIDENTIAL COMPETITIVE SUPPLY INDUSTRY TO PROTECT ELECTRIC CUSTOMERS
Two-Year Study by AG’s Office Shows Competitive Supply Customers Paid $176.8 Million More; Companies Appear to Have Targeted Low-Income, Minority Neighborhoods in Gateway Cities
BOSTON – Citing aggressive sales tactics, false promises of cheaper electric bills and the targeting of low-income, elderly, and minority residents, Attorney General Maura Healey today issued a report calling for an end to the competitive electricity supply market for individual residential customers in Massachusetts.
AG Healey made the announcement today standing with Quincy Mayor Thomas Koch, along with consumer and civil rights advocates. The report found that Massachusetts electric customers who switched to a competitive electric supplier paid $176.8 million more than if they had stayed with their utility company during the two-year period from July 2015 to June 2017.
“Competitive electric suppliers promise big energy savings but are actually burdening customers with hundreds of dollars in extra costs,” said AG Healey. “In two years, Massachusetts residents lost over $176 million to these predatory companies. I’m calling for an end to this industry because that’s the best way to protect our seniors, low-income residents, and minority communities from these persistent scams.”
According to the AG’s report, nearly 500,000 residents in the state receive their electricity from a competitive supplier, but certain communities are particularly hard hit. The report found that 36 percent of low-income households received their electricity from a competitive supplier, double the rate among other customers. The study found that competitive suppliers appear to have targeted low-income and minority residents in many of the state’s gateway cities including Worcester, Springfield, Brockton, Lynn, Lowell, Lawrence, Fall River, Quincy and New Bedford. Participation was greatest in zip codes with the highest percentage of low-income and minority populations.
“Door-to-door competitive electric suppliers have been such a problem in our city that the Quincy Police Department has issued warnings to the public,” said Quincy Mayor Thomas Koch. “For too long, these companies have sold Quincy residents, particularly seniors, a bill of goods. I am proud to join with Attorney General in an effort to stop these scammers.”
“The competitive market for electricity was supposed to lower prices for households in Massachusetts, but for years it has done the opposite," said Jenifer Bosco, staff attorney at the National Consumer Law Center in Boston. “As the Massachusetts Attorney General has documented in this report, millions of dollars in overcharges have been picked from the pockets of Massachusetts families, especially low-income families, as the result of this failed deregulatory experiment. The Massachusetts Department of Public Utilities and our Legislature should act now to protect Massachusetts families from further financial harm."
“For far too long, these energy companies have been preying on the city’s vulnerable residents. They send door-to-door salespeople that take advantage of our elderly and non-English speaking residents and sign them up for costly contracts that rob them of hundreds of dollars,” said Marci Pina-Christian, Executive Director of the Human Relations Commission & Human Services Coordinator for City of New Bedford’s Department of Community Services and Executive Board Member of the New Bedford NAACP. “We stand with the Attorney General in her efforts to stop this scam practice.”
In Massachusetts, residential customers, like commercial and industrial customers, can “shop around” for electricity rates. Customers can choose to get their electric supply from their utility – National Grid or Unitil or Eversource – or from a “competitive supplier.” When customers do not choose a supplier, they receive "basic service" electricity from their utility. The utilities buy basic service electricity in bulk through a competitive bidding process. Utilities pass the wholesale cost of basic service to customers and are not allowed to earn any profit from basic service rates. Under state law, the Department of Public Utilities reviews utilities' basic service rates but does not review the rates charged to residential customers by competitive suppliers.
The AG's report found that the average low-income customer enrolled with a competitive supplier paid $231 more than if the customer was receiving their electricity from their utility company. The report found some low-income households lost more than $541 by switching to a competitive supplier.
In the last three years, the AG’s Office has received more than 700 complaints about competitive suppliers engaging in aggressive and deceptive tactics. Complaints include suppliers pretending to be a utility company to induce customers to turn over sensitive information; suppliers harassing customers with repeated calls or home visits; and door-to-door salespeople forcing their way into elderly customers’ homes and refusing to leave without a signed contract.
As a follow on to the study, the AG’s Office will work with the Legislature, the Department of Public Utilities, the energy industry and civil rights and consumer advocates to close down the market for individual residential competitive electric supply in Massachusetts. The AG's Office does not propose any changes to Massachusetts cities’ and towns' municipal aggregation programs or the markets for commercial and industrial competitive supply.
Today’s announcement is part of the AG’s ongoing efforts to address unfair and deceptive practices in the competitive electricity supply market, including ongoing investigations into third-party suppliers who violate the state’s consumer protection laws.
Earlier this week, AG Healey announced a $5 million settlement with Viridian Energy, LLC for deceptive marketing and sales tactics that misled residents into contracts with high electric supply rates. The settlement requires the company to pay $4.6 million in restitution to affected customers and an additional $400,000 to the state’s general fund, to offset the cost of the investigation, and to fund future enforcement actions by the AG’s Office against deceptive electric suppliers.
In December 2014, Just Energy agreed to pay $4 million in restitution to over 40,0000 consumers for deceptive marketing and sales, entering consumers into agreements without their consent, and charging costly termination fees.
Any consumer or retailer with concerns about these deceptive marketing practices should file a complaint with the AG’s Office or call the consumer hotline at (617) 727-8400. Consumers with questions can also contact the Consumer Division of the Department of Public Utilities at (877) 886-5066.
The AG’s report was prepared by the Susan M. Baldwin Consulting firm.
This matter is being handled by Assistant Attorneys General Elizabeth Anderson, Joseph Dorfler, Alexander Early, and Elizabeth Mahony, and Deputy Division Chief Nathan Forster, Division Chief Rebecca Tepper, and all of AG Healey’s Energy & Telecommunications Division, along with Energy and Environment Bureau Chief Melissa Hoffer.
