Electricity retailers regularly charging more than local utilities

If an elec­tricity salesman knocks on Mel­anie Cooper’s door here these days, he might hear the sound of a door slamming – or get a heated commentary.

What it boils down to for Cooper is energy retailers visit homes, promise huge savings if hydro costs go up, use that possibility as a scare tactic, and sign as many customers as they can. Those customers then often pay far more on their bills than they would if they had stayed with their local utility. In Cooper’s case, local is Centre Wellington Hydro.

Those energy retailer sales groups can be very aggressive. Collingwood Mayor Christo­pher Carrier has had them knock on his door, too. He said he has had to threaten to call the police after telling them three times to please leave his property.

Carrier, 44, is young and fit, and he wondered, “If these people are being that aggres­sive with me, how aggressive are they with other people?”

The answer appears to be very aggressive.

Carrier wrote his concerns to Minister of Energy George Smitherman and cited the huge number of people and large number of dollars that fall into the hands of energy retailers every year. He cited a CBC TV program, Mar­ket­place, which showed how some en­­ergy re­tailing salesmen op­erate.

In his letter to Smitherman following that TV show, Car­rier wrote, “I requested an ac­counting of how many of Col­lus Power [Collingwood owns the local company] cus­tomers have sign­ed agreements with an elec­tricity retailer and what the cost comparisons would be … the results of the review provided to me by our [local distribution company] were ex­treme­ly shocking.

“It turns out that at present approximately 1,800 or 12% of our account holders have sign­ed contracts with electri­city re­tailers. Through the 12 months in 2008, those 1,800 residential and small com­mer­cial custo­mers paid $1,007,569 more for the energy portion of the bill than the true cost of pow­er.”

What might really infuriate some people is the staff of their local utilities are not permitted to explain to those customers the huge costs they may face if they sign with energy re­tail­ers.

Centre Wellington Hydro General Manager Doug Sherwood ex­plained why. His utility gets its power through the Independent Electricity System Operator (IESO), and it flows through Centre Wellington lines to the customers.

Centre Wellington Hy­dro does not sell that hydro – it only distributes it, pays for the hydro and collects the money in the form of a hydro bill.

So, the Ontario Energy Board and the provincial government have laid down rules stating the doings of energy re­tailers are none of the local distributors’ business, and it has set down tough penalties for anyone at a local utility who advises a cus­tomer seeking information about retailers.

The issue goes back to the turn of the century when the On­tario government split On­tario Hydro into two. One part creates and delivers hydro, and the other maintains the lines. And energy retailers were al­lowed to sell hydro contracts.

Cooper, a single mom who lives on Hill Street in Fergus, has twice signed with an energy retailer in order to save money on her hydro bill. The first time, she signed with Direct Energy, but that contract was voided be­cause it was signed prior to re­tailers even being allowed to register custo­mers. The second time around though, she signed and then was was forced to buy her way out of a contract with Universal Energy. She paid that company to get out – in order to save money.

Cooper said she was five days past some surgery and not thinking too clearly when she signed with Universal Energy. On her first bill, she paid $81.17 more than she would have paid had she remained with the local utility. The next month, the extra cost was $27.63 higher, and the months after that were $38.09, 56.45, and 36.86 above the local rates.

Cooper said of the sales pitch she received, “They were going to save me hundreds of dollars if I worked with them. Everything [hydro cost] was going to skyrocket.”

That is the premise and promise behind many sales, and energy re­tailers often use it as a sales pitch. They might even state their price is a little higher now, but prices will jump later, and those who buy now will save money. Many of those contracts have fees far higher than the highest rates for power ever charged in Ontario.

Cooper said after a while, she wondered where the sav­ings were, and called the local hydro and found out how much more she had been paying. With three years and nine months left on her five-year con­tract, she paid $554 to get out of it, and she said, after paying off, “I felt I was ahead of the game.”

She considered herself lucky because she has a job and had the money to pay her con­tract penalty. She worries, though, that others who do not have the cash will be stuck for the duration of the contract.

Cooper had also become wary during her bid to drop the contract. She called the retailer and every time she spoke with someone, she insisted on get­ting their name and position.

“They threatened me with legal action if I didn’t pay the penalty,” she said. She got out of the deal in January, and, “So far, so good.”

Cooper said she felt she was paying an average of $30 to $50 per month more for electricity with the retailers. She added that she was speak­ing publicly about sign­ing that contract because “I know there’s people in my position. I worry about my parents.”

She said speaking about her experience with electricity re­tailers is “a public service. If I don’t tell people, that’s almost a disservice.”

She is especially concerned for people on social assistance with children who sign the contracts. She said they have very little extra mon­ey, and pay­ing those extra costs for hydro might mean less food on the table.

Cooper also signed with a natural gas distributor a few years ago, but in that instance, she was lucky. She purchased when the price was very low, and actually did save some money when the price went up.

Marketplace report

CBC’s Marketplace, with host Wendy Mesley, had cameras waiting in homes when retail hydro and natural gas sales­men made their pitches, and caught their exaggerations and intimi­dation tactics on camera. The show noted that only 44% of natural gas pur­chasers  actually saved any money – but, since 2005, not one residential customer who signed an electricity contract saved a cent. They all paid more.

To view that report, go to www.cbc.ca/marketplace.

Universal Energy was even­tually charged from the evi­dence provided in Market­place’s Power of Persu­a­sion pro­­gram.

When the Advertiser contacted Universal Energy, it was difficult to find anyone to speak to the questions. Twice the phone disconnected while the reporter waited on hold. Finally, a contact name was provided, but that person was away. On Monday, the Advertiser contacted Jan Nybida, a vice president of marketing for Universal.

Universal being sold

She said the company was being sold the following day to Energy Savings Group. She asked that all questions be sent by email.

Her first response to the questions was to ask for more information about the Adver­tiser, and if the report would be on a website.

After all that information was forwarded, the reporter received another email, stating, “I have to check with our legal counsel due to our pending transaction in the next 48 hours. We may be in a press blackout period.”

Defending policies

Direct Energy’s public relations specialist Lynzey Mac­Crae said the company has “taken a good look at” the way it trains its sales staff after it was fined for salesmen breaking various laws and sales codes.

She works in Alberta, and said the company operates “pretty much across Canada and in 21 states. The company offers set hydro and natural gas rates, as well as home service, which includes such things as water heater rentals.

She was asked if sales personnel from other companies work for Direct Energy. Mac­Crae replied in an email, “As with hiring for any type of position, we only know as much as the individual is willing to tell us. If they choose not to tell us about a prior dismissal privacy laws prevent us from requesting information about the individual if they do not give us permission.

“That being said, we do perform criminal background checks and … we have a rigorous training and certification process sales agents must complete before they begin selling door-to-door.”

MacCrae also said Direct Energy is tough on those who fail to follow the rules.

“At Direct Energy, we have long maintained a zero-tolerance policy for misrepre­sentation by sales agents. Inap­propriate sales practices are dealt with in an immediate and thorough manner.

“This case identified in the Marketplace piece is no exception – the sales agent involved in that case was terminated earlier this year for engaging in inappropriate conduct that is contrary to Direct Energy’s sales policies – before we ever heard from reporters at Mar­ketplace.”

MacCrae added, “We have monitoring and control pro­cesses in place to manage our sal­es force, and a rigorous training and certification pro­cess that sales agents must complete before they begin selling door-to-door. We also have an entire team dedicated to quality control and managing all customer experiences.”

MacCrae was also asked what would happen if the energy price increased beyond what her company is selling it. She said in an interview that for its clients “We still guarantee that price.”

In her email, she added, “If the price of energy goes up, we guarantee the customer’s price will remain stable and not go up. This has occurred on several occasions in the past and we have always stood by the price the customer signed at … That being said, we also offer products that fluctuate with market prices. It’s kind of like being able to choose between a fixed and variable mortgage. We encourage customers look at their specific needs and choose which energy plan works best for them.”

Questions in Collingwood

It was that figure of 100% of customers losing money that caused Mayor Carrier to start ask­ing questions about the num­bers in Collingwood. He said he also had a number of people contact him with stories about how their uncles, aunts, and friends have signed with hydro re­tailers and now are paying more.

Carrier said in his letter to Smitherman, “On many occa­sions since I have been elected may­or I have been personally con­­tacted by citizens, friends and family with concerns and ques­tions regarding pushy door-to-door electricity retail­ers. In fact in my own home, I was sub­jected to their aggres­sive tac­tics ignoring many as­sertions that I was not inter­ested. This goes along with the many questions and com­plaints that our local utility, town staff and my fellow coun­cillors have also had to field.”

Not only did those custo­mers pay more, some even had their rebates taken from them and handed to the energy re­tailers.

That really bugged Cooper. She said the fine print of the contract sent her cash rebate to the re­tailer instead of her. She ad­mitted she had not read the fine print too closely.

A check with Centre Well­ington Hydro showed that just under 16% of its customers in Elora and Fergus are signed with an energy re­tailer – and all of them are paying more than the local rates.

Sherwood said the esti­mate is their total payments beyond his utility’s charges is $580,000 more per year.

Carrier said Smitherman’s response to his letter was not exactly comforting.

The minister noted that there is already a private member’ bill being brought forward in the legislature, and the government had no plans to do anything until it was considered.

Private member’s bills are rarely approved.

Marketplace also demonstrated that there is danger in even showing energy retailer salesmen a hydro bill. One woman found herself registered with a company she knew nothing about. The company told her that her husband had signed a contract. The woman responded that her husband had died three weeks prior to the date on the retailer’s contract. His name was allegedly forged, and the company let her out of the contract.

But fines have been minimal in such a lucrative business that has virtually no overhead. On May 5, the Ontario Energy Board gave Direct Energy a $15,000 fine.

The board’s order stated, “The penalty is related to one instance of making false and misleading statements to a consumer, breaching both section 88.4(2) of the Ontario Energy Board Act (unfair practice) as well as section 2.1 of the Code of Conduct for Gas Marketers (false and mislead­ing statements).

The Ontario Energy Board regulates the province’s electricity and natural gas sectors in the public interest.

Universal Energy Corpora­tion was fined $60,000 for contravening certain enforceable provisions of the Act, the Electricity Retailer Code of Conduct and the Code of Conduct for Gas Marketers.

That one came directly from the Marketplace program. The board said in its order “On March 20, 2009 the Canadian Broadcasting Corporation aired its Marketplace program which highlighted the conduct of door-to-door sales agents of electricity retailers and gas mar­keters. Universal door-to-door agents are shown on video making false, misleading or deceptive statements to consumers.”

It noted that a sales representative was “shown making the following false, misleading or deceptive statement to a consumer.”

That statement was, “Now what the protection actually does is it keeps you guys at one price so whenever you guys are using your natural gas, like in the winter time, you guys are actually going to less than what the actual market price is.”