2008-08-08 / Columnists

Notes On Consumer Affairs

Commentary By Assemblywoman Audrey Pheffer

AUDREY PHEFFER AUDREY PHEFFER Would you like to save $200 a month on your energy bill? How does saving seven percent on your electricity and natural gas costs sound? If you are a residential or small business energy customer, it is likely that you have received, or will receive, similar sales pitches from an energy company offering to sell you electricity and/or natural gas. Savings promised by Energy Service Companies (ESCOs) are certainly attractive, and switching your energy supplier may be a good fit for some, but, as with any solicitation, it is important to fully review the offer, consider the long term costs (many ESCOs offer introductory, "teaser" rates that end after two or three billing cycles), and ask pertinent questions before signing on the dotted line.

For the past decade, New York State has allowed ESCOs to sell electricity and/or natural gas to utility customers. Consumers who switch to an ESCO purchase their electricity and gas from the ESCO, but continue to have their ener- gy delivered by their existing utility. While increased competition in the energy industry may eventually help to lower rates, ESCOs are largely unregulated, and consumer complaints have risen over the past few years. The Consumer Protection Board (CPB) and the New York City Department of Consumer Affairs (DCA) recently reported an increase in consumer complaints related to ESCO marketing practices and contract terms. Many of these complaints involve situations in which consumers were promised significant savings by savvy door-to-door marketers only to find that their monthly bills actually increased. It is important to be especially wary of introductory "teaser" rates. While you may see savings during the first few months, your bill may return to its original level or increase after a teaser rate expires or the ESCO increases your rate. Also be on the lookout for early termination fees. Some ESCOs require customers to pay hefty fees to get out of multi-year contracts. These fees can be especially frustrating for consumers wishing to switch back to their utility after discovering that their energy bills have increased.

If you are considering obtaining your energy from an ESCO, keep the following tips from the CPB in mind to protect yourself from potential scams. Be sure to ask any marketer offering energy services whom he/she represents. Utilities do not conduct door-todoor marketing. Carefully review any contract with an ESCO, including the fine print, and be sure to make note of any cancellation or early termination fees before signing. Ask for written service and price comparisons between your utility and the ESCO's offer. Lastly, keep in mind that there is a three-day opt out period for energy contracts with ESCOs.

As Chair of the Consumer Affairs and Protection Committee, I have reported legislation that would regulate ESCO marketing practices (A.10180- B), in response to numerous complaints received by the CPB and the DCA. This bill would require ESCO marketing representatives to state that they don't represent a utility and provide each potential customer with a short, plain language "ESCO Consumer Bill of Rights" to be developed by the Public Service Commission (PSC) and the Long Island Power Authority. The bill would also limit the amount ESCOs may charge a customer for canceling his or her account, require all charges to be clearly and conspicuously disclosed, and prohibit ESCOs from changing contract terms without the consumer's affirmative consent. This legislation passed the Assembly, but has not been acted on by the Senate.

If you have specific questions about changing your energy service provider, or would like to file a complaint against an ESCO, visit the PSC's web site at http://www.dps.state.ny.us/ or call the PSC's consumer hotline at 1- 800-342-3377. For more information about ESCO marketing practices, consider visiting the CPB's website at http://www.consumer.state.ny.us/ and clicking on "Protections Regarding ESCO Marketing" on the left-hand side of the homepage under "Consumer Assistance."

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