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Citing $177M in overcharges, Mass. AG wants to end retail electricity market

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Citing $177M in overcharges, Mass. AG wants to end retail electricity market

The Massachusetts attorney general wants to end the competitive electricity supply market for individual residential customers in the state after a study found that third-party suppliers overcharged customers by nearly $177 million over two years.

Massachusetts Attorney General Maura Healey called for the shutdown of the retail power supply market with the March 29 release of a two-year study that found retail customers paid $176.8 million more for electricity than if they had received "basic service" power from their local electric distribution company.

"Competitive electric suppliers promise big energy savings but are actually burdening customers with hundreds of dollars in extra costs," said Healey. "In two years, Massachusetts residents lost over $176 million to these predatory companies. I'm calling for an end to this industry because that's the best way to protect our seniors, low-income residents, and minority communities from these persistent scams."

Under current Massachusetts law, the state Department of Public Utilities reviews utilities' basic service rates but does not review the rates charged to residential customers by competitive suppliers. In total, nearly half a million residents in Massachusetts receive their electricity from a competitive supplier, with 36% of those customers living in low-income households.

Jenifer Bosco, a staff attorney at the National Consumer Law Center in Boston, said the attorney general's report shows that the state's "failed deregulatory experiment" in the power market has fleeced consumers out of millions of dollars in overcharges.

"The competitive market for electricity was supposed to lower prices for households in Massachusetts, but for years it has done the opposite," said Bosco. "The Massachusetts Department of Public Utilities and our legislature should act now to protect Massachusetts families from further financial harm."

The report, which studied energy bills from July 2015 to June 2017, found that competitive suppliers appear to have targeted low-income and minority residents in many of Massachusetts' "gateway cities," such as Worcester and Quincy. On average, low-income customers paid $231 more in a year than if they had stayed with their utility company, while some low-income households paid over $541 more annually by switching to a competitive supplier.

The attorney general's office said more than 700 complaints against competitive suppliers have been filed in the last three years, including those reporting suppliers pretending to be a utility company to induce customers to turn over sensitive information, suppliers harassing customers with repeated calls and home visits, and door-to-door salespeople forcing their way into elderly customers’ homes and refusing to leave without a signed contract.

"Door-to-door competitive electric suppliers have been such a problem in our city that the Quincy Police Department has issued warnings to the public," said Quincy Mayor Thomas Koch, who joined Healey in calling for a clampdown on these "scammers."

Healey also announced March 28 a $5 million settlement with Crius Energy Trust subsidiary Viridian Energy LLC for deceptive marketing and sales tactics that misled residents into signing contracts with higher rates. The agreement requires the retail power supplier to pay $4.6 million in restitution to affected customers and an additional $400,000 into the state's general fund to offset the cost of the investigation and fund future enforcement activities.

The attorney general's office said they will follow-up the study by working with lawmakers, regulators, the energy industry, and others to close down the competitive power supply market for individual residential consumers.

In New York, similar studies and cases of price gouging in the retail energy market by some third-party suppliers, known in New York as energy service companies, or ESCOs, have led to a crackdown on ESCOs by state regulators. Actions include an indefinite moratorium on New York ESCOs contracting with subsidized, low-income customers until ESCOs consent to state-supervised audits.

The Retail Energy Supply Association, a national industry trade association representing over 20 retail energy suppliers, rebuffed Healey in a statement for taking "a sharp yet unfounded aim at the competitive electric power industry." The association defended electricity suppliers for delivering quality services at "competitive pricing" since the Massachusetts state legislature "empowered consumers to make their own decisions about buying electricity" by restructuring the electric power industry 20 years ago.

The Retail Energy Supply Association cautioned against rushing through policy changes based on a "solitary and flawed analysis," and asserted that the report's recommendation to terminate residential retail choice would effectively take away the right to choose and leave customers stranded with a monopoly-like utility.