Utility Firms Settle Deception Charges With New York

Under utility deregulation, consumers have more choices in energy companies. That can be a good thing, except when the companies competing for business aren't truthful with consumers.

New York Attorney General Eric Schneiderman says that was the case with two utilities operating in his state, Columbia Utilities LLC and Columbia Utilities Power LLC. In a settlement with New York, the companies have agreed to pay $2 million in restitution to New York consumers and $200,000 in penalties to the state.

In addition, Columbia will observe new restrictions on its marketing practices to prevent future fraudulent sales conduct.

False promises of savings

“Consumers were lured by Columbia’s false promises for huge savings and other deceptive practices, only to become burdened by more costly energy bills,” Schneiderman said. “These are difficult economic times, and predatory companies that exploit New Yorkers looking to save their hard-earned money will be held accountable. This settlement puts energy providers on notice that such consumer abuses will not be tolerated.”

Columbia sells electricity and natural gas through telemarketing and door-to-door sales to residential and business customers. According to the state's complaint, Columbia claimed in sales presentations and advertising that consumers would realize significant savings by purchasing electricity and natural gas from Columbia instead of from their local utility company.

Variable-priced contracts

Most Columbia customers were given variable-priced contracts, which did not limit the company's ability to change the price at any time. Though Columbia’s sales representatives promised savings of anywhere between 15 and 20 percent, customers generally ended up paying substantially more than they would have if they had stayed with their local utility, Schneiderman said.

The state entered the picture when consumers noticed they were paying higher, not lower, prices for energy and tried to cancel their contracts. It was then they learned they had signed up for 12 months, a detail Schneiderman says the companies failed to point out during the sales process.

As part of the settlement, current customers who signed a contract may cancel it without any early termination fee. All future contracts will be month to month.