Maryland must crack down on utility companies that entice people into bad, pricey contracts

The often aggressive pitches come in the mail or through sales people who canvas neighborhoods, knocking on doors looking for new customers. Sometimes they call on the phone with their sly spiel. Switch your utility company, they say, and see hefty savings on your gas and electric bill.

Except Maryland’s top utility customer advocate says too often these promises are empty. Instead of savings, customers are getting enticed into contracts that end up costing them more. Hefty fees, sometimes as much as $150, await anyone who tries to get out of these so-called cost saving deals.

The Office of People’s Counsel filed a series of complaints with the Maryland Public Service Commission, which regulates energy companies, on behalf of citizens who have gotten caught up in such scrupulous practices. It’s a good thing because the commission seems to have fallen down on its enforcement duties.

The PSC must do a better job of investigating these companies accused of bad business practices and ban more of those who can’t seem to follow the rules and appear determined to prey on unsuspecting customers, many of them low-income and already struggling to pay their bills. A full investigation should be conducted on whether these companies are targeting the most vulnerable.

Sky high utility bills from third party companies are costing Marylanders. Reports last year by the Office of People’s Counsel and the Abell Foundation found that deceptive marketing tactics had landed people with companies that charge them 50 to 75% more than they were paying prior. From 2014 to 2017, Maryland households paid tens of millions of dollars more per year in aggregate to third-party electricity suppliers — or about $255 million more in all than if they had stayed with their previous company.

Based on the complaints by the people’s counsel, The Public Service Commission delegated concerns about three companies to administrative law judges, who plan to hold hearings next year.

The three companies named in complaints — Smart Energy, Direct Energy and Maryland Gas and Electric — have mostly denied the allegations, and said some laws and regulations are being misconstrued.

This brings us to another point. Perhaps, its time for the General Assembly to call for a study into whether deregulation has had the intended impact of increasing competition, expanding consumer choice and lowering utility prices. Under law passed in 1999, Marylanders still have their power delivered by BGE and other utilities, but can buy energy from BGE or from other private companies that own power plants or buy power from the grid on the wholesale market.

If there are loopholes in the law that allow unfair pricing the General Assembly needs to close them.

The Abell Foundation in its report, provided several proposals to better protect consumers from predatory utility companies that we could get behind. For one, it said the PSC should be required to annually collect and report detailed billing data for consumers by zip code. This would help identify how many people are being overcharged. They also suggest that residential customers who want to use third party energy suppliers only be served by some form of aggregated supply that would ensure lower costs. Ohio and Delaware have such programs that guarantee savings to low-income households.

In addition, the Abell Foundation said that contracts with variable rates should not be permitted for residential customers. Consumers should be allowed to terminate third-party energy supply contracts without early termination fees, and utility bills should prominently display how much the consumer saved — or how much more they paid if there were no savings. We say take it a step further and require contracts to show how much or less bills will be. Lawmakers should also prohibit these third parties from price gauging.

Advocates also say that some overly aggressive companies won’t take no for an answer and will sign up consumers without their permission. Identity theft is illegal, and salespeople who engage in this should be prosecuted for criminal activity.

If these companies aren’t doing anything wrong, an investigation will confirm it. But lax enforcement means we don’t know the extent of the problem. The PSC needs to do its job and get a handle on companies that may be preying on consumers with fake promises. Quite simply, the PSC needs to pay attention.