PhotoAdd New Jersey to the growing list of states looking at third-party energy suppliers with a sharper eye — or even taking them to court.

Pretty much everybody in the United States has the option to buy electricity from their local regulated utility provider — that's why most people still talk about “the electric company” rather than “an electric company.” In most places, that regulated utility provider has a legal, regulated monopoly: nobody else is allowed to enter the business.

Economics 101 says that monopolies are generally bad for consumers, but the consumer disadvantages of legal utility monopolies are supposed to be offset by strict regulations on them: if you don't like the electric company, you cannot take your business elsewhere (short of moving out of the area), but you can complain to various government agencies established specifically to oversee the electric company and other utility monopolies.

However, customers in some states have the option of choosing their electric provider: instead of your local regulated utility, you can sign on with a third-party energy provider — usually electricity, though in certain areas with natural-gas utilities, third-party gas providers are also allowed. There may be many reputable third-party energy providers out there, whose customers genuinely enjoy bargains compared to their local regulated utility (or at least don't pay anything more than the regulated customers).

After the fact

Unfortunately, there's also a lot of third-party energy customers who say they're paying unfairly high rates. Part of the problem is that electricity and other utilities tend to be pay-after-the-fact services: you don't get the bill until after you've used the electricity, by which point it's too late to back out upon realizing you can't afford it. And – as many third-party customers have learned to their dismay – entering into a third-party service contract is often much easier than getting out of it.

Legislators in Connecticut recently passed a bill to protect third-party residential customers from unannounced rate increases and similar tricks, and in May, the Illinois Citizens Utility Board released a damning study of certain third-party energy providers in that state after reporting a 115% increase in customer complaints about them.

And on June 4, the New Jersey attorney general's office, working with the state's Division of Consumer Affairs and the Board of Public Utilities, announced their filing of a lawsuit against three unregulated energy suppliers, listed as Palmco Power NJ, LLC & Palmco Energy NJ, LLC (collectively, “Palmco”); HIKO Energy LLC (“HIKO”); and Keil & Sons, Inc., d/b/a Systrum Energy (“Systrum”), all of whom allegedly “defrauded hundreds of consumers through misrepresentations of monthly bill reductions.”

Indeed, if you've read any of our previous coverage of third-party energy complaints, you'll recognize what Acting Attorney General John J. Hoffman said about those three Garden State companies: “These three companies allegedly lured consumers with promised monthly savings that turned out to be fictional. Even worse, consumers who hoped to save money instead saw their bills increase to unconscionable levels.”

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