When an energy company salesman walked into Matthew Huber’s home promising him cleaner energy, Huber knew something wasn’t right.

“The guy was really aggressive and it was actually really difficult to get him out of my house,” said Huber, an associate professor of geography in the Maxwell School of Citizenship and Public Affairs at Syracuse University. “It just seemed really sketchy.”

The salesman, an energy service company (ESCO) representative, tried to sign Huber up for an energy contract that would provide him cleaner energy at a reduced cost. Although he said he considers himself an “environment person,” Huber declined.

In response to an industry-wide review conducted by the New York State Public Service Commission, New York state Gov. Andrew Cuomo announced last month a plan to protect consumers from deceptive business practices in the retail energy service industry. Among the plan’s points is a “do not knock” rule that protects energy consumers from unwarranted intrusion, like in Huber’s case.

“We have zero tolerance for these unscrupulous companies, whose business model is to prey on ratepayers with promises of lower energy costs only to deliver skyrocketing bills,” Cuomo said in a release from his office. “These actions will root out these bad actors and protect New Yorkers from these unfair and dishonest tactics.”

ESCOs are commercial or nonprofit energy companies that compete with utility companies, according to the release. They emerged in the 1970s after the deregulation of the electricity markets, Huber said. Today, there are about 200 ESCOs eligible to provide electricity and natural gas in New York state, according to the release.

But thousands of New York residents have signed contracts with ESCOs, only to later find themselves stuck in contracts with exorbitant prices, according to the release.

Huber said his case highlights the growing problem of ESCOs across New York state. In many cases, solicitors market households, promising low electricity rates. Once they get consumers locked into contracts, they can overcharge for electric and gas service, Huber said.

The New York State Public Service Commission is auditing these companies following the review, according to the release, and prohibiting new ESCO contracts with residential or small commercial customers from taking effect unless the companies provide guaranteed cost savings, or at least 30 percent of the supply comes from renewable energy.

The commission will also strengthen the process for revoking ESCO eligibility to do business in New York if it is found in violation of state regulation, according to the release.

The commission’s review found several ESCOs in upstate New York charged more than double what National Grid, an electric company that provides power to Syracuse and Syracuse University, charges, according to the release. In one case in the Finger Lakes region, an ESCO was found to have charged eight times what Rochester Gas & Electric charged for electricity, according to the release.

Four companies in the Hudson Valley region charged more than double what Central Hudson charged for electricity. In New York City, a company charged more than triple Con Edison’s rate for electricity, according to the release.

The commission also found, according to the release, “several instances where companies were blatantly misrepresenting themselves, such as pretending to represent the local utility in order to trick customers into signing costly and harmful contracts.”

Huber, whose research specialties include resource geography, political economy and energy, said part of why ESCOs have been so successful is because review commission budgets and staffs have been cut, leaving fewer people left to enforce regulations.

He added that customers tend to be ill-versed in the electricity markets, making it easy for companies to take advantage of them.

“Not surprisingly, when you get this multiplicity of small companies, they’re harder to keep track of,” Huber said. “They’re harder to regulate and they’re harder to control, and so it’s not surprising to me that they’re engaging in these kind of predatory price practices.”

Because it’s much easier to regulate a single utility, Huber suggested the possibility of banning ESCOs altogether. But he said Cuomo’s plan is a step in the right direction and that he probably won’t see “these people at my house anymore.”

“The Public Service Commission’s role is to make sure the electricity markets are fair,” Huber said. “And so it looks like they’re trying to do that.”
Companies that fail to comply with the points outlined in Cuomo’s plan will lose their ability to do business in New York state, according to the release.

Published on March 6, 2016 at 10:08 pm

Contact Matthew: mguti100@syr.edu | @MatthewGut21