MASSACHUSETTS UTILITY CUSTOMERS who switched to competitive electricity suppliers paid $177 million more over a two-year period than if they had stayed with the local utility company (National Grid, Eversource, or Unitil) as detailed in a thoroughly documented March 2018 report by Attorney General (AG) Maura Healey. An April 2018 report from the National Consumer Law Center (NCLC) Competing to Overcharge Customers: The Competitive Energy Supplier Market in Massachusetts confirms the AG’s overall findings and provides disturbing examples of how these companies engage in deceptive practices to sell overpriced electric service.
The AG has brought successful unfair practices claims against several of these suppliers, including Just Energy and Viridian, resulting in almost $10 million in refunds to consumers and forcing the defendant companies to cease their unfair practices. The AG, NCLC, and others have asked the Legislature to ban the sale of competitive electricity to individual consumers since so many consumers have been harmed and the deceptive practices have proven impossible to eradicate, here and in other states wrestling with the same problems.
But the Massachusetts Department of Public Utilities (DPU) has yet to take systematic action against a single competitive supplier, even though it has the authority to sanction misbehaving companies by prohibiting them from signing up new customers or even revoking their license to do business in the Commonwealth. It is more than disappointing that utility commissions in 12 of the 14 states that allow competitive supply have taken aggressive enforcement actions while ours has taken none.
Competitive supply companies routinely misrepresent that they are “working with” the local utility company; target their sales pitches to elders and communities with large numbers of people who do not speak English as the primary language; and trick people into signing their names to documents without disclosing that the document is actually a contract to switch to the competitive supplier. Low-income communities in particular have suffered at the hands of unscrupulous competitive suppliers. As the Attorney General found, low-income consumers participate in the market at twice the rate of non-low-income consumers, and suppliers also consistently charge low-income consumers higher rates (17 percent higher, on average) than non-low-income consumers.
Every state that has done the type of analysis done in Massachusetts – including Connecticut, Rhode Island, New York, and Illinois – reached a similar conclusion. While the precise amounts vary, all studies to date show that consumers in a particular state who switched lost tens to hundreds of millions of dollars, and more, in the aggregate. In New York, the Public Service Commission found that consumers paid $1.2 billion more over a two-year period than if they hadn’t switched. Lawsuits, investigations, and enforcement actions by attorneys general and utility regulators were brought in the District of Columbia and in the states of Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, and Texas.
Rather than using its unique authority to suspend or revoke licenses (the AG does not have that authority), the DPU is signaling it may move in the opposite direction. In questions the DPU recently put out for public comment, it is considering ways that the competitive suppliers could more quickly and easily switch consumers away from the local utility – by not, for example, requiring the competitive supplier to even get the consumer’s utility account number. Yet one of the most common complaints found in the DPU’s complaint database is that many consumers were switched without their knowledge or full consent.
The DPU’s lack of aggressive enforcement is inexcusable. It’s time the agency carried out its mandated job of protecting consumers. It’s time the agency sent a strong signal to the market by imposing fines, revoking licenses, or otherwise penalizing the worst market actors.
Aggressive enforcement would help some consumers but will still not be enough. Massachusetts should require a competitive supplier who is selling to a low-income consumer to guarantee that the competitive supplier’s price will beat the price offered by the local utility, a step that the New York utility commission took in 2016 to protect that state’s most vulnerable consumers. At a minimum, Massachusetts should do the same. But protection for all Massachusetts consumers will require even more decisive action. As Healey concluded and as the National Consumer Law Center concurs, it’s past time for the DPU to take action and the Legislature to ban the sale of competitively supplied electricity to individual residential customers.
Charlie Harak and Jenifer Bosco are attorneys at the National Consumer Law Center.