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CUB Files Complaint Against Marketer for 'Misleading Sales Tactics'

Consumer watchdog group The Citizens Utility Board (CUB) filed a complaint last week with the Illinois Commerce Commission (ICC) against retail gas marketer U.S. Energy Savings Corp. for deceptive sales tactics, including posing as gas utility representatives. U.S. Energy Savings issued a statement denying the allegations.

CUB said it issued a consumer alert, warning utility customers to beware that U.S. Energy sales people are going door-to-door posing as representatives of Nicor Gas, Peoples Gas, the ICC or even CUB, or claiming that its services are endorsed by those organizations. CUB said U.S. Energy appears to be targeting areas of Chicago and the suburbs where English is not the native language of many residents and has been urging customers to sign five-year contracts.

U.S. Energy CEO Brennan Mulcahy denied those accusations. "We place great value on our partnerships with consumer groups and regulatory agencies across all the markets we serve," he said. "We are very disappointed that we were not made aware of this concern, or consulted prior to today's announcement. In our view, the announcement is irresponsible and is inaccurate."

However, CUB said it received hundreds of inquiries and complaints about the retail marketer. In its filing with the ICC, the watchdog asked the commission to ban the company's misleading tactics and levy fines for each instance of consumer fraud.

"This company is engaged in the worst kind of consumer fraud, preying on people's fears of rising natural gas bills and resorting to deception in order to boost sales," CUB Executive Director David Kolata said. "Today we are telling consumers if U.S. Energy -- or any other company for that matter -- comes to your home peddling natural gas service, shut the door on them."

CUB said several customers reported the company came to their door with a "petition" to freeze natural gas rates. A few weeks later, they received welcome letters stating their natural gas service had been switched to U. S. Energy. The Chicago Department of Consumer Services also has received complaints about the company.

U.S. Energy's Mulcahy said the company, which operates in Illinois and New York, maintains a "strong focus and commitment to consumer protection." In a statement, he said the company's practices include: requiring that all agents provide customers with a document identifying the agent's name, identification number and company contact information; ensuring that the customer's consent is confirmed by a separate recorded verification call following the sale to make sure customers know that U.S. Energy is an alternative supplier and to go over the term and price of the contract; providing training for sales agents; and offering contracts in both English and Spanish.

Mulcahy also said according to CUB's own analysis, U.S. Energy's fixed-price plans have saved customers money this year. "While we do not promise savings, according to the CUB's own statistics, customers who have signed up with us as recently as September 2005 have already seen a financial savings," he said. "Those who signed five-year contracts with the company in April 2004 have so far saved $290 as of April 2006, according to the CUB."

He said the company will "vigorously challenge the CUB's allegations" before the ICC.

U.S. Energy is one of eight alternative gas suppliers participating in the "customer choice" programs offered to Nicor Gas, Peoples Gas and North Shore Gas. Alternative suppliers generally offer either a fixed rate, locked in for a period of one to five years, or a variable rate tied to an index that changes monthly.

As of April 19, the company was offering to lock in natural gas prices for four to five years at a price of $1.19 per therm, plus a balancing charge of 2.31 cents per therm, for a total price of $1.21 per therm. Marketing materials from the company warn that natural gas prices are rising and lead customers to believe they can save money by locking in prices.

According to CUB's Gas Market Monitor, the majority of consumers who switch to alternative suppliers end up paying more (see Daily GPI, March 30). Sixty percent of the active retail gas sales plans offered by unregulated retail marketers in Illinois are bad deals that would have cost customers more money than sticking with their state utility supplier, according to the CUB analysis.

U.S. Energy Savings Corp. is part of the Energy Savings Income Fund that trades publicly on the Toronto Stock Exchange (under SIF.UN) and operates in Ontario, Quebec, Manitoba, Alberta, British Columbia, New York and Illinois.

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