Electricity switching risky for households

Natasha DeLima said she felt deceived after a saleswoman persuaded her to switch to Mega Energy, a competitive supplier.Jonathan Wiggs/Globe Staff/Globe Staff

The jump in electricity rates this winter has consumer advocates and state officials warning residents to think carefully before signing up with energy marketing companies offering better deals than the power supplied through the state’s regulated utilities.

Under the state law that deregulated electricity markets here, businesses and residents don’t have to get their power from utilities, which buy electricity in wholesale markets and pass the costs onto consumers. Residential customers can choose from 95 companies licensed to sell electricity in the state and try to find lower rates.

For businesses that use large amounts of power, the few cents per kilowatt hour that competitive suppliers knock off rates can save thousands, if not tens of thousands of dollars a year.

But for households, which consume relatively small amounts of electricity, the savings are often minuscule, and switching can sometimes expose customers to higher costs down the road.

“While we encourage consumers to look into ways to save on heating costs, we urge consumers to be careful and stay educated when considering alternatives offered by competitive suppliers,” said Jillian Fennimore, a spokeswoman for Attorney General Martha Coakley’s office.

Competitive suppliers, which have long been popular with industrial users, have made a renewed push for residential accounts in recent years. Since 2006, the number of households getting their electricity from a competitive supplier has more than doubled, hitting 420,000 last December.

But consumer advocates worry that the news of National Grid’s increasing rates by 37 percent this winter could invite unscrupulous companies to step up marketing and employ deceptive tactics to get residents to switch. Northeast Utilities, the state’s other major utility, is expected to file winter rates for customers of its NStar and Western Massachusetts Electric subsidiaries over the next few weeks.

Many authorities and experts have raised concerns about hard-sell tactics used by competitive suppliers. Some companies recruit armies of door-to-door salespeople who work on commission and promise things like “110 percent guaranteed savings,” in the words of a recent ad on the classified site Craigslist.

One day last summer, Natasha DeLima answered the phone at her Framingham duplex. On the other end was a polished saleswoman for Mega Energy, a power supplier based in Houston, who warned DeLima she faced a sharp increase in her electric bills in the winter unless she acted quickly and switched to Mega Energy.

“They don’t let you breathe,” said DeLima, who agreed to switch. “You don’t even think of going to say, ‘Let me go check this out.’ ”

“They almost make it sound like they have inside information,” Natasha DeLima said of Mega Energy. She acted quickly and was able to switch back to NStar.Jonathan Wiggs/Globe Staff

DeLima, however, later learned that Mega saleswoman could not have known how much her rates might increase. Her utility, NStar, had not published its winter rates yet. Feeling deceived, she switched back to NStar within a three-day grace period required by state law.

“They almost make it sound like they have inside information,” DeLima said. “I’m 55. I’m just picturing someone 70.”

Mega Energy did not respond to requests for comment.

One competitive supplier, Viridian Energy of Stamford, Conn., engages in a controversial practice in which recruiters must first pay the company $100 to $400 for training before they can start earning commissions by getting family and friends to switch to Viridian. Twenty-three Massachusetts consumers have filed complaints with the attorney general against Viridian since 2008.

Viridian said direct marketing firms and at least one other electricity supplier require recruiters to pay them before they can go to work. The company added that many complaints were due to spikes in bills as a result of unusually cold weather last winter.

John Howat, an energy analyst at the National Consumer Law Center, said Massachusetts regulators need to do more to protect customers from aggressive marketing and “slamming,” in which customer have electricity providers switched without their permission. In New York, by comparison, all switches must be verified by an independent firm before taking effect, Howat said.

In addition, he said, low-income customers in New York are refunded when the price from a competitive supplier is higher than a utility’s.

Many consumers, however, have positive experiences with competitive suppliers. If customers agree to switch, their new supplier will notify their utility. After receiving a letter confirming details of their power supply contract, consumers have three days to change their mind, with no strings attached, under state regulations.

Still, regulators say residents should look for details that telemarketers and sales staff may not disclose. Depending when it switches to a competitive supplier, a household may get hit with additional charges from their utility. Some contracts from competitive suppliers include additional monthly charges or hefty early-termination fees.

In 2008, one competitive supplier was fined $99,000 by the Massachusetts attorney general after failing to properly disclose monthly fees.

For some households, price is not the reason for switching. Larry Chretien, who runs a nonprofit energy broker called Mass Energy, said his organization offers environmentally conscious customers the opportunity to buy power from renewable sources, such as wind and solar, at a cost about $15 to $20 above the typical household’s energy bill.

“We have to transition away from fossil fuel consumption for the sake of our kids,” said Kelsey Wirth, a Cambridge resident who pays Mass Energy to offset her household’s electricity use with payments to wind power producers. She is still billed through NStar, and said her charges were “pretty straightforward and transparent.”