Are Shady Marketing Practices Hurting the Deregulated Energy Industry?

The deregulated energy industry that now exists in 30 states and the District of Columbia has provided a somewhat mixed blessing for consumers. On the one hand, more energy rate-payers now have a choice over how much they pay and to whom, for their electricity and natural gas needs. Competition that was created by allowing the open market to determine rates for energy use has led to transparency and ultimately, to lower energy pricing.

On the other hand, any change as profound as energy deregulation is bound to open the door for unscrupulous companies and individuals to take advantage of unknowing or misinformed consumers.

Recently the Washington D.C. Public Service Commission, the agency responsible for overseeing energy delivery in the district, held a hearing on energy supplier marketing. Commissioners heard testimony from customers regarding their experiences with door-to-door sales agents and telemarketers who claimed to represent energy suppliers.

These so-called “customer agents” attempt to convince consumers to allow them to act on their behalf in choosing an energy provider, although they are typically unaffiliated with any legitimate reseller. They then attempt to benefit by providing the information to various retail electricity providers in an effort to book a profit from the referral. The agencies, whether they are a shadow business or individual, often concentrate on a specific area and attempt to convince as many consumers as possible to go with them. They may then try to sell the bundle of potential customers to the highest bidder.

The focus of the PSC Commissioners in the D.C. case was whether or not the customer agents are required by law to be licensed. At least one retail electricity supplier seemed to think so. Constellation NewEnergy Inc. has recommended to the commission that minimum standards be applied to these outside energy sales and marketing firms.

The standards recommended include:

  • Mandatory background checks for agents that are attempting to sell electricity for a competitive supplier.
  • Requiring drug screening and background checks for all energy sales agents.
  • Third-party verification of contracts obtained by this means.
  • Penalties for practices such as using duplicate phone numbers or any improper activity on the part of an agent.
  • Restricting commission pay for contracts that are signed until verification is done and the enrollment process is successfully completed.

Currently D.C. code defines specific regulations for “Brokers” and “Aggregators” of electricity usage, but it is unclear where these customer agents and marketing firms fit into the equation. As the hearing closed, chair-person Betty Ann Kane had these words.

“Retail choice and customer choice is the policy and the law of the District, and it is our obligation to see that it works, and to see that it works right. If there are instances of bad actors or misunderstandings that create barriers to customer choice, then we all have an obligation to see what we can do to overcome that. When people are showing up and representing themselves as being from the provider and they’re bad actors, it reflects badly on not only that company, but on the provider also.”

We at Choose Energy could not agree more.