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Illinois Gas Marketer Targeted Again by Consumer Group

March 10, 2008
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Salespeople for U.S. Energy Savings Corp. falsely promised savings, circulated bogus petitions "to lower heating bills" and claimed to work for regulated utilities and the government to lure people into "some of the worst natural gas deals in Illinois history," a consumer coalition charged in a complaint filed last week. The company, however, denied the allegations and said it will "vigorously defend the action."

The complaint was filed by the Citizens Utility Board (CUB), AARP Illinois and Citizen Action/Illinois. It asks the Illinois Commerce Commission (ICC) to ban U.S. Energy's "deceptive tactics," wipe out illegally high "exit" fees, levy fines of up to $10,000 for each violation of Illinois' alternative gas supplier law, and consider revoking its certification to operate in Illinois.

"Enough is enough," said CUB Executive Director David Kolata, whose organization has received about 2,500 inquiries/complaints about U.S. Energy since September 2003. "We want the ICC to do everything in its power to stop U.S. Energy's shady practices. Illinois should protect consumers from being scammed out of hundreds of dollars at their own doorstep."

This is CUB's second complaint against the Canadian company in as many years. After a 2006 settlement that won relief for many customers (see NGI, May 1, 2006), U.S. Energy promised to improve. However, CUB said it has gotten a steady stream of complaints -- more than 1,500 since January of 2007 -- as the company pushed high-priced plans for the winter heating season. U.S. Energy, which has an "unsatisfactory" rating from the Better Business Bureau of Chicago and Northern Illinois, currently locks its customers into a price of about $1.11 per therm to nearly $1.18 per therm for four or five years. Market prices have only reached those levels for a few months in the winter of 2005-2006, the most expensive heating season in Illinois history. CUB's Gas Market Monitor, an on-line tracking tool, shows that about 99% of U.S. Energy's plans have lost or are losing customers' money -- on average about $750.

The complaint alleges that U.S. Energy's sales tactics violate a number of Illinois laws, including the Consumer Fraud and Deceptive Business Practices Act. Customers have alleged that U.S. Energy sales representatives guaranteed savings. One customer wrote that he was "tricked" into signing a contract by a salesman who said it was a petition for "lower gas prices." A U.S. Energy salesman claimed the company was a government entity working with Peoples Gas to "lower long-term gas prices." In another case, a representative pitched a "government program to protect people from rising gas prices." U.S. Energy employees also were seen wearing badges that prominently displayed "Illinois Commerce Commission" or "ICC."

According to CUB, U.S. Energy has threatened to charge high "exit" fees to get out of the company's contracts: $1,800, $740, $400, $890 -- and more than $1,500 for one couple who had signed up for U.S. Energy service thinking they were enrolling in the Peoples Gas "budget plan." These "unreasonably high" fees are an "illegal penalty for cancellation of service under Illinois law," the complaint alleges.

"Providing a value-added service to customers in Illinois is paramount to our business," countered U.S. Energy President Ken Hartwick. "[U.S. Energy] customers have signed up at rates as low as 73.9 cents/therm, 87.5 cents per therm and 90.5 cents per therm. We have tens of thousands of customers paying less than the current utility rates -- all because they signed up with [U.S. Energy]. Current utility rates in Illinois are between 95 cents and over one dollar per therm. There is no doubt in my mind that freedom from the volatility of market rates is of real benefit to our customers."

The company said it has attempted to work with CUB to ensure that CUB's website is accurate and up to date "so that customers are not misinformed about our prices. The CUB's lack of cooperation in this regard has made it difficult for [U.S. Energy] to work with them in a positive and constructive manner," the company said. "Even today, the CUB website contains depictions of [U.S. Energy] pricing and representations about [U.S. Energy] offerings that could mislead customers."

A recent CBS 2 undercover probe backs up the coalition's complaint, it said, revealing that sales trainees were encouraged to promise savings and offer protection from any of the upcoming price increases. This is misleading because all consumers must pay the utility -- Nicor Gas, North Shore Gas or Peoples Gas -- to deliver gas to their homes, the coalition said. Those "delivery" prices could be subject to rate hikes that customers can't escape.

The company said it has recently made a number of enhancements to its business processes and materials to maintain quality. Changes include an extended cancellation period and language that reiterates the consequences of canceling a contract.

CUB has not been a fan of competitive natural gas plans. In 2006 it said customers "lose money" under most retail gas plans (see NGI, April 3, 2006). Last year CUB said utilities and not competitive marketers offer the best deal for natural gas consumers (see NGI, Sept. 24, 2007).

U.S. Energy sells energy to residential and commercial customers under long-term, fixed-price contracts. The company is part of Energy Savings Group, a group of North American retailers collectively serving nearly 1 million natural gas and electricity customer accounts in Illinois, Indiana, Texas and New York, as well as Ontario, Alberta, Manitoba, Quebec and British Columbia. U.S. Energy is a subsidiary of Energy Savings Income Fund.

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