“Door-to-door hucksters and telemarketing boiler rooms: Welcome to the deregulated electricity market”
A must-read recent investigative piece examined the “shady operators lurking in the retail power market.”
We recommend you read the piece in full, but here’s an excerpt:
A market that lacks both regulation and transparency, with a product everyone buys and few people really understand, has proven a target-rich environment for the kind of operators previously drawn to mortgage rip-offs, long-distance schemes, and multilevel-marketing (MLM) companies. One consumer advocate likens it to the “Wild West” of the mortgage business before 2008.
Retail electric companies aren’t really power companies. Instead, they’re middlemen who buy power in the wholesale market, largely from the same power plants once owned and operated by the monopoly utilities that were broken apart in the late 1990s and early 2000s. Retail firms then sell the electricity to consumers, delivering it via the transmission lines still owned by traditional utilities. All that really changes is the name on your bill.
But there’s one major difference: A traditional utility like Con Ed can’t raise electric rates without justifying the need to regulators and the public. Retail companies have no such requirement, meaning they can jack up prices at will. These companies have aggressively employed telemarketing, door-to-door visits, TV ads, and pamphlets, luring customers into restrictive contracts promising savings that did not materialize. The problem has gotten so bad in New Jersey that legislators are considering a bill to restrict the number of calls an electric company can make to a consumer. In January 2013, New York’s attorney general told the state public service commission that 91.5 percent of upstate low-income consumers who’d switched over were paying higher rates than if they’d stuck with the traditional utility. (by Stephanie Mencimer in the January/February 2014 issue of Mother Jones)