How to spot an energy scam
Hear the doorbell? You peek out and see a well-dressed young man with a badge who identifies himself as a representative of your energy company. Is he friend or foe? A mistake can cost you thousands of dollars before you know it, and then there’s the time and hassle of straightening everything out once you do.
How serious is the problem of door-to-door energy scamming? It’s hard to quantify. Some people never realize they’ve been scammed. Some are too embarrassed to report it. But evidence of a national problem does exist.
In 2015, a New York State Public Service Commission investigation resulted in 1,566 consumers receiving $950,700 in refunds from one of the largest energy suppliers in the state. Complaints ranged from predatory sales practices to higher-than-expected prices – though it’s not possible to pinpoint how many of the complaints stemmed from door-to-door sales.
AARP specifically warns its members against energy scams. And the fact that energy trade associations designate the third Wednesday of November as Utilities United Against Scams Day provides further documentation that there’s a real problem.
Most recently, AEP Texas took to the press to warn customers of scammers in the San Angelo area going door-to-door and threatening to shut off power without immediate payments.
Deregulation and the rise of door-to-door energy sales
The deregulation of energy in 16 states and the District of Columbia spawned the scenario by which energy suppliers send salespeople door-to-door. But that’s getting ahead of things.
What is deregulation? Congress opened the door for energy deregulation in 1992, but every state hasn’t adopted it. In regulated areas, consumers buy power from a single company service their area, in most cases a utility. In deregulated areas, consumers can buy electricity and natural gas from providers they choose. The energy is delivered by a transmission company, usually the area’s original utility, but energy suppliers compete for customers by offering competitive terms, green energy or efficiency incentives.
But many people in deregulated states – including New York, Texas, Pennsylvania, Ohio, Connecticut and more – still don’t realize they have choice, so some providers use door-to-door sales as a way to make consumers aware of deregulation (and pick up customers in the process).
Bryan Lee, a spokesman for the Retail Energy Supply Association, a nonprofit that works on behalf of suppliers, explains it further.
“Retail energy shopping is new for many customers,” he said. “Direct customer engagement through well-trained door-to-door sales personnel can be an effective way to educate customers about energy shopping.”
But that’s not the only reason. “Many retail energy suppliers utilize door-to-door marketing in large part because of arcane utility rules requiring a customer to provide a utility account number to change energy providers. This helps promote door-to-door marketing since that customer number is most easily accessed in the home.”
He proposes a change.
“Rules that would allow a switch with working knowledge of the account, like billing address, service address and a positive identification linking a person to the account, should be enough to provide adequate proof of responsibility for an account,” Lee said. “This would enable other marketing channels and allow retail suppliers to be less dependent upon door-to-door interactions.”
What can go wrong with door-to-door energy sales?
Consider what’s in it for the salespeople. Current ads for door-to-door energy sales agents on Indeed.com list commission-based salary ranges from $50,000 to $200,000. With money like that on the table, an unscrupulous door-to-door energy salesperson can employ a number of shady practices.
Again, the evidence is mostly anecdotal. But here are a few practices uncovered by ChooseEnergy.com:
Save now, not later:
“Sign on the spot RIGHT NOW to get a much lower electricity or natural gas supply rate,” the person at your door says. The insidious thing about this one: You really might get a much lower rate – at first. Part of the reason for the rush is to deter you from thoroughly studying the terms of the deal. You could end up with a low three-month introductory rate that would then transfer into the supplier’s much higher default rate. In this case, the salesperson isn’t lying, he or she is just manipulating you into not reading the contract fully or understanding its terms.
Slam, bam, thank you, ma’am:
That nice young man wearing a suit and holding a binder with the name of your electric company tells you there’s a problem with your account and asks to see your most recent bill to straighten it out. In reality, he’s from a competing electricity provider, and he wants to see your bill to get your account number. That’s all he needs in some cases to switch your supplier – it’s called “slamming.” And victims don’t realize anything is different unless they look closely at their next bill.
One Reddit user shared this type of experience with an unscrupulous energy salesperson: “He had a big binder with my company’s logo on it and he said there was a problem with my bill.” Despite asking the man to provide documentation or leave, he continued to push, and eventually got a look at the Reddit user’s bill before being forced from the home.
This isn’t just a concern for homeowners; businesses often fall prey to this tactic too when salespeople try to speak with employees. In this instance, it’s crucial for business owners to ensure all employees are taught to look out for these scams.
I’m from your electric company, and I’m here to help:
Sometimes the person dressed in your electric utility’s uniform will tell you he or she needs to come inside to discuss your service, say your service is in danger of being turned off unless you pay an immediate fee, or knock on your door during an outage and tell you to pay a fee for an express service restoration. In this situation, there are three possibilities:
- Scam. It is unlikely a utility representative will stop by unless the company contacted you beforehand to say it was sending someone over. This scenario may even be worse than a scam – it could be a criminal scoping out your place and your possessions for a break-in.
- Scam. This is not the way utilities operate, even if you fall behind on a payment. Plus, an energy company representative will never ask for cash on the spot, prepaid cards or same-day money wires.
- Scam. There’s no such thing as an express service restoration.
Who can I trust?
Use reputable resources such as Choose Energy to learn about and compare deregulated energy providers and plans. Choose Energy offers an easy and secure way to purchase deregulated energy from trusted providers in your local area. You choose the plan that’s right for you, and buy when you’re ready and informed after studying the terms of the deal carefully.
What do energy companies that employ door-to-door sales agents do to promote transparency for customers? Here’s a sampling of polices:
- SFE Energy, based in Buffalo, NY, sells natural gas and electricity, and it advises customers to ask for a business card.
- Spark Energy, based in Houston, says to identify its agents through photo name badges, vendor ID number and agent ID number. It also offers a phone number that people can call to verify an agent’s status.
Seven tips to avoid energy scams
Remember, not every door-to-door energy salesperson is a scammer. And, frankly, many people won’t engage with them – the only surefire way to avoid being taken in. But sometimes a salesperson really will have a good deal for you.
How can you avoid a door-to-door energy scam? Follow these tips when you open the door:
- Know who the salesperson represents. Don’t assume that wearing clothing or carrying a clipboard with a company logo you recognize means the salesperson actually works for that company. Ask to see identification, including proof of employment by an energy company.
- Protect your personal information. This means more than guarding your Social Security, bank account, and credit/debit card numbers. Don’t show any door-to-door salesperson your energy bill, which will include your utility account number.
- Know your current energy providers. This will head off that utility bill request above. You get bonus points for knowing the rate you’re paying for electricity or natural gas. (It’s also on the bill).
- Know your state’s policy on “cooling off” periods. States such as New York allow consumers up to three days to cancel purchases without penalty.
- Sweat the details of an energy contract. What’s the rate? How long will it last? What happens when it ends? Are there fees, including cancellation fees?
- Be aware. Stay current on local happenings and whether scammers are operating in your area. You can use the Better Business Bureau Scam Tracker to learn more about potential scams in your area.
- Don’t be embarrassed to report scams. If you believe you’re a victim of a door-to-door energy scam, call your energy provider, the local police and file a complaint with the Federal Trade Commission.
Lee, the spokesman for the energy supplier association, points out one more tried and true tactic.
“If any customers feel pressured, they always have the right to terminate the conversation and ask the sales representative to leave,” he says.
The key is being informed before the doorbell rings and being prepared to think things through carefully.