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| Contact: Deborah Sturm Rausch (518) 473-9472 | For Immediate Release: March 4, 2008 |
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NYS Consumer Protection Board Spotlights ESCO Marketing Practices at 2008 Top Frauds Conference |
| The New York State Consumer Protection Board (CPB) spotlighted the
marketing practices of energy service companies (ESCOs) at the 2008 Top
Consumer Frauds & Complaints Conference held in New York City today, with
troubling complaints against the marketing practices of many of these
companies. The CPB reviewed approximately 1000 complaints regarding ESCOs
that had been received by the CPB, the New York City Department of Consumer
Affairs (DCA), Public Service Commission (PSC) and other entities between
the months of June through November of 2007, and found that approximately
75% of them were related to misleading claims of savings and
misrepresentation of providers.
"New York consumers continue to fall victim to the aggressive and unscrupulous marketing practices used by some ESCOs,” said Mindy A. Bockstein, Chairperson and Executive Director of the CPB. “In December, along with the NYC Department of Consumer Affairs, I called on the Public Service Commission to review existing policies and establish stronger rules governing marketing practices of ESCOs operating in New York State. I am pleased that leadership at the PSC is taking this matter seriously and am hopeful that they will establish new rules that should be accompanied by a range of sanctions, including removing an ESCO’s authorization to do business in New York for repeat offenses.” For more than a decade, ESCOs have sold electricity and/or natural gas services in competition with regulated utilities in New York State. There are approximately 50 licensed ESCOs operating in New York. “We recognize that some ESCOs conduct their marketing activities in an appropriate manner. However, persistent allegations that many ESCOs or their representatives have made false statements, misrepresented themselves as agents of distribution utilities and have engaged in misleading marketing practices continue to surface,” said Bockstein. “We simply can not allow the current practices of some bad apples that are tainting the industry and hurting consumers to continue.” The CPB analysis found that, in 60% of the cases, representatives misrepresented and misled consumers. In many of these cases, consumers alleged that they were "slammed," meaning that their energy service provider was changed without their authorization. In other instances, consumers believed that they were speaking with a representative of the regulated utility, rather than with a representative from an outside ESCO. Approximately 15% of complaints reviewed by the CPB allege that the ESCO has engaged in deceptive practices, such as promising savings that did not materialize. The remaining 25% of complaints were related to billing issues and high prices. The analysis showed that door-to-door marketing practices and aggressive telemarketing were of concern to consumers. Reported complaints likely represent only a small fraction of consumers who have experienced problems, possibly due to factors associated with many of the targeted populations, such as age, language barriers and cultural customs. The complaints received highlight the need for change. One ESCO, U.S. Energy Savings Corporation, for example, employed unfair marketing practices when a door-to-door sales representative visited the Montalvo family's South Bronx apartment in late 2007. The representative identified himself as being with "the energy company" and offered to check to see if the family qualified for discounted energy. “The representative told me that such a check would only necessitate looking over the last utility statement,” said Abelardo Montalvo who holds the account. “The rep said he could provide me with electricity at a better rate and drew up paperwork, all in English. I trusted him, but I am a senior citizen who speaks Spanish, and didn’t really understand what was happening. I signed the papers thinking I was receiving a discount on energy and saving money.” Montalvo’s son, Jorge, a CPB employee, noticed the paperwork from the ESCO during an afternoon visit to his family’s residence, and promptly made sure to cancel the contract before the NY State three-day “cooling-off period for door-to-door contracts” had expired. “As New York’s official consumer advocate to the PSC, the CPB will continue to represent and protect consumer interests, providing oversight and intervention while working with the PSC to assure consumer needs are met,” Bockstein said. ”Mandatory compliance with new marketing rules would facilitate enforcement and thus enable us to better protect and empower consumers seeking alternative energy delivery sources.” In addition to our work at the PSC, the CPB has intervened on behalf of consumers to cancel ESCO accounts opened due to misrepresentation and other questionable practices and relieve rate payers of excessive charges and fees. Consumers who wish to consider obtaining electricity and/or natural gas from a supplier other than their utility, should remember the following tips in order to protect themselves against potential scams:
The CPB, established in 1970 by the New York State Legislature, is the State's top consumer watchdog and think tank. The CPB's core mission is to protect New Yorkers by publicizing unscrupulous and questionable business practices and product recalls; conducting investigations and hearings; enforcing the “Do Not Call Law”; researching issues; developing legislation; creating consumer education programs and materials; responding to individual marketplace complaints by securing voluntary agreements; and, representing the interests of consumers before the Public Service Commission and other State and federal agencies. To file a consumer complaint with the NYS Consumer Protection Board (CPB), call our toll-free hotline at 800-697-1220 or visit CPB’s website at www.nysconsumer.gov. In addition to the online complaint form, the website is home to important consumer safety information. To join the CPB’s Do Not Call Reminder list, send an e-mail to CPB's Do Not Call Reminder list |