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Post date: July 14 2008

Attorney General Cuomo Stops Wny Natural Gas Provider From Deceiving Consumers By Misrepresenting Service Contracts

BUFFALO, N.Y. (July 14, 2008) – Attorney General Andrew M. Cuomo announced today an agreement with a private natural gas seller whose sales personnel deceived Western New York customers into entering into service contracts and paying more for services.

The Attorney General’s settlement with U.S. Energy Savings, which sells gas to residential consumers in place of the local utility, requires the company to waive hundreds of thousands of dollars in residential consumer termination fees and pay $200,000 in costs and penalties to the state. The settlement also implements a series of comprehensive reforms in order to ensure that customers are given accurate, up-front information regarding their service agreements by the company’s sales staff.

“With New Yorkers facing tough economic times and the price of energy at an all-time high, no one – especially hard-working families – can afford to be duped by energy companies using high pressure sales tactics,” said Attorney General Cuomo. “This settlement will protect New York consumers and ensure this company complies with the law. The agreement will also provide Western New York homeowners peace of mind when they are solicited by a natural gas provider.” 

Energy service companies (ESCOs) like U.S. Energy Savings began competing with regulated utilities in 1996 to sell natural gas directly to consumers in New York state. ESCOs, however, are not regulated like utilities and have become the subject of many consumer complaints.

Since 2005, U.S. Energy Savings sold 4- and 5-year “Natural Gas Price Protection Program Agreements” to Western New York and New York City residents door-to-door via independent contractors. Attorney General Cuomo’s office received hundreds of consumer complaints that sales contractors promised immediate savings on utility bills, but the price of gas was actually more than the price charged by the local utility because the price was locked in for a multi-year period.

U.S. Energy Savings’ agreements allowed consumers the right to cancel service within three business days, but that period expired long before consumers received their first bill (usually between 30 and 60 days). When consumers, surprised by the increase in their gas bills, sought to cancel their agreement beyond the three-day window, U.S. Energy Savings required that they pay a termination fee that equaled $600 or more.

The Attorney General’s investigation also uncovered multiple untrue claims made by U.S. Energy’s outsourced sales personnel, including that the company was affiliated with the local utility, and consumers could continue being billed at a set amount each month based on the estimated annual billing (only later to find out that they were being billed for actual or estimated usage for the billing period). Additionally, when consumers tried to cancel their Agreements, they were often unable to contact the company or were put on hold for interminable periods.

The Attorney General’s settlement requires – for the first time – an ESCO to allow consumers the right to cancel their agreements without termination fees any time from the date that the consumer signs the agreement to up to 30 days after the date of the first natural gas bill where U.S. Energy Savings is listed as the gas supplier. Further, the settlement limits the amount that U.S. Energy may charge as a termination fee to no more than $5.50 per month remaining on the contract.

After Attorney General Cuomo’s Office brought these concerns to U.S. Energy Savings, the company agreed to waive termination fees for over 300 consumers and allowed them to cancel their agreements. In addition to forgiving these fees and paying $100,000 in costs and $100,000 in penalties, under the Attorney General’s agreement, U.S. Energy Savings must:

  • Provide every new customer a letter that clearly states the cancellation period and early termination fee and invites consumers to contact U.S. Energy with concerns about sales practices.
  • Verify all details and qualifiers of its Agreements with consumers either by recorded call or in writing
  • Obtain background and/or reference checks for all potential sales contractors
  • Review all consumer complaints and provide a response within 30 days of receipt
  • Terminate any independent contractor who misleads consumers
  • Waive termination fees for any consumer who cancels an agreement within 60 days of this settlement

The case was handled by Assistant Attorney General James Morrissey of the Buffalo Regional Office with assistance by Senior Fraud Representative Karen Davis, under the supervision of Assistant Attorney General In-Charge Russell Ippolito.