Helen Ramirez-Odell thought she’d done her research when she decided to sign up to have her Chicago home supplied with electricity from Spark Energy. She was surprised when her electricity rates suddenly jumped up by 50 percent.
“When I realized it, I called Spark Energy to ask for an explanation, and they said their rates weren’t guaranteed, they were variable,” she said.
In response to spiking complaints from electricity customers about price gouging, Citizens Utility Board and the city of Chicago Wednesday petitioned the state's electricity regulator to launch a statewide investigation into misleading marketing tactics by some electricity suppliers.
At the same time, the City of Chicago said Wednesday it has issued subpoenas and launched investigations into six companies it suspects of price gouging, according to Maria Guerra Lapacek, commissioner of business affairs and consumer protection for Chicago. She would not name the companies that are under investigation.
CUB executive director David Kolata said they are seeing prices on variable rate plans as high as 35 cents per kilowatt hour with little to zero explanation of how those charges are derived. That's more than four times the going utility rate and was six times ComEd’s rate at the time.
“The companies we have received complaints about are the smaller companies in the market,” Kolata said. “People get tricked into signing up for them at the door and sometimes don’t realize they’ve even signed up.”
The law requires consumers to be informed about where charges come from and some consumers are on variable rate plans, Kolata said, that change from month to month. While electricity rates have increased recently, CUB said it seems that some companies are pushing expenses onto consumers that have nothing to do with the price of electricity, without explaining how those rates are derived.
The concern for policymakers and the vast majority of alternative suppliers on the market that are abiding by the law is that bad experiences could make electricity customers fearful about comparing prices in the future.
Shopping for electricity is still a relatively new idea to Illinois residential customers. The first company to offer itself as an alternative electricity supplier for residential homes entered the market here just four years ago.
Since then more than 3 million Illinois customers have switched.
Ramirez-Odell said her experience with a variable rate has made her wary of switching again from ComEd (which gets paid to deliver electricity regardless of who supplies it) even though she knows she could probably get a better deal if she shopped around. ComEd doesn’t make money from the electricity itself, which is simply passed through to consumers for the price it pays on the market.
Spark Energy did not return a call for comment Wednesday.
“If I ever did switch again, I’d really look at the fine print,” said Ramirez-Odell. “I just got a pair of bifocals, and I’m still getting used to them, but I think I could read fine print,” she said.
Julie Soderna, director of litigation for CUB, said the state's regulator -- the Illinois Commerce Commission -- has the power to issue cease and desist letters to companies that are taking advantage of consumers and can issue fines. The ICC was expected to receive the petition for an investigation Wednesday.
In the meantime, Soderna said, CUB has been doing its best to keep up with the more than 350 complaints it has received from customers who have purchased electricity from suppliers offering alternative prices to ComEd and downstate utility Ameren.
That’s up from 163 at this time last year, according to CUB, in part due to misleading marketing by unregulated electricity suppliers. It says consumers have complained of increased rates after low introductory rates disappear, hidden fees and high-pressure sales pitches.
“A lot of these customer complaints we’ve looked at, the customers can’t even cancel their contracts because they can’t get a hold of the companies. And even after they do get a hold of them, it takes one to two months to switch to another supplier,” Soderna said.
James Robinson, 71, of Chicago, said two “college kids” came to his door and signed him up for an electricity plan with Starion Energy he didn’t recall agreeing to participate in. His bill one month jumped from about $50 on average to about $200 and he had no idea why, he said. Starion Energy did not return a call requesting comment.
“All of a sudden I had these ridiculous prices,” he said.
With Commonwealth Edison’s recent disclosure that the average customer will see monthly bills jump 21 percent starting June 1, the board worries more consumers might be tricked.
The board said that there are still many alternative suppliers that can save customers money, but on average, prices from alternative electric companies competing against ComEd are more than 20 percent higher than they were this time a year ago.
The ICC is expected to rule in the coming week on whether to conduct a widespread investigation. Non-compliant companies could face fines of up to $30,000 of the Public Utilities Act and possibly have their state certifications revoked.
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