A new scam is costing innocent people hundreds, if not thousands of dollars. Here’s what you need to know to protect yourself.
Several suppliers of electricity that service various markets in the United States recently more than doubled their rates without any warning to customers. Some of the firms involved apparently claim that the skyrocketing prices resulted from unusually cold weather in the Northeast USA which caused their supply costs to increase. This claim, however, is suspicious, as other providers of power did not make similar increases, leading one to wonder whether these firms mismanaged their purchasing processes, or if something more sinister is at play. I tried to reach one of the suppliers, but, not surprisingly, my email and phone messages went unreturned.
Regardless of the reason for the increases, however, people should think twice before paying their bills, as, in many cases, the firms may not have the right to charge the exorbitant rates. As part of its marketing and sales process, one supplier promised that its rates would never suddenly increase by large amounts. One provider’s website continued to advertise “we make your savings our responsibility,” “The Same Service & Reliability. Simply Pay Less.,” and “you can enjoy low energy rates” – while it was charging more than double the price of the publicly-regulated utility with which it competes. Another provider continued to advertise rates on its website that are far lower than what some customers claim they were being charged. And, of course, other agreements may also have been broken. Furthermore, in areas in which States of Emergency were recently declared due to weather – for example, Pennsylvania and New Jersey, both of which have residents reporting severely inflated electric bills – price gouging may have violated other laws.
Many people routinely pay their utility bills without checking the specifics. Because people typically use far less electricity in the winter than they do in the summer, even people being scammed may find the total due for electricity in January or February to be a number that they have seen in the past.
So, as step one: Before paying your power bill make sure you are not being overbilled. If inflated rates violate an agreement that you had with your supplier, check the cost (per kWh) and make sure it is similar to the rate charged by your public utility. Some bills tell you what the public utility would have charged; in other cases the information is easily obtainable online or by phone.
If you are being overcharged, make sure to dispute the validity of the charges with the party that bills you. It is best if you resolve the issue directly with your supplier, but, if my experience described above is any indicator, your supplier may be unreachable. In many cases, however, you may have another party to whom to turn, as the billing for the third-party provider is actually handled by the local public utility; scammers may be relying on the fact that some utilities put warnings about shutting off power on the bills of people who fall behind in payments – providing a strong incentive for people to pay their bills even when overcharged. Aggravating matters is the fact that some customers who called their utilities have apparently been told that the utility does not handle consumer disputes with third-party energy providers, and that the full amount must be paid.
I spoke several times with a representative of the media relations department at PSEG – the utility servicing millions of people in New Jersey and New York. She informed me that while customers should first try to resolve billing issues with their suppliers, PSEG’s customer call center will take disputes, and that (perhaps as a result of our conversations back and forth) PSEG has recently reiterated its policy regarding disputed bills to its customer service personnel. If a different utility services your area, you will, of course, need to contact its appropriate customer service team.
You may also wish to contact your state’s Attorney General and Public Utilities Commission (or their equivalents). In Pennsylvania, the Attorney General is already looking into this matter, and the State Legislature is also launching an investigation.
As a final step, if you are using a third-party supplier that is overbilling you, you should obviously switch to a better supplier ASAP. Because of inefficiencies in the system, the actual switchover can sometimes take months to complete, a deficiency that scammers may also be seeking to exploit. So act quickly.
Of course, regulators, legislators, and law enforcement also need to take action. Third-party providers should not be allowed to overcharge and then attempt to use public utilities as “enforcers” threating to cut off heat in the winter if their bills are not paid. Unless changes are made to the current system, the entire third-party supply model could collapse; if overcharging scams repeat themselves, people fearing potentially significant aggravation and price gouging will simply refuse to switch providers of power. Jobs will be lost, and prices will rise. To preserve the capitalistic market in energy we need better oversight and enforcement.