Attorney General Maura Healey has sued a Connecticut company that allegedly used deceptive bait-and-switch tactics to get more than 100,000 Massachusetts residents to switch energy suppliers and then overcharged them for electricity.
In the legal action against Starion Energy in Suffolk Superior Court Monday, Healey said the company overcharged more 117,000 Massachusetts customers by at least $30.6 million above what they would have paid at their local utility’s standard rate. This translates to an average of about $260 per residential account.
The suit also names two Starion executives, and several affiliated telemarketing firms.
The legal action is a twist in Healey’s campaign to police the so-called competitive energy market in which alternative electricity suppliers offer to undercut local utilities’ basic service. Healey had previously settled with two other competitive suppliers, but this is the first time her office has taken one to court without a settlement in place.
The attorney general is seeking a court order to freeze $30.6 million in accounts that utilities National Grid and Eversource are holding for future disbursement to Starion. The goal of that order would be to ensure there’s enough money to distribute to affected customers if Healey wins her case, which essentially accuses Starion of ensnaring unsuspecting Massachusetts consumers in a bait-and-switch scheme.
A spokeswoman for Middlebury, Conn.-based Starion declined to comment Tuesday, citing a company policy against commenting on pending litigation.
Healey has taken a strong stance against competitive suppliers of electricity in the consumer market, calling on the Legislature in March to end the practice because many residents end up being overcharged for power. Industry specialists said at the time that Healey’s proposal seemed like an extreme step to address problems that could be better fixed with reforms to the consumer market. The Senate subsequently approved a measure with some reforms, as an amendment to a broader energy bill. But it was dropped in negotiations with the House.
Healey’s office sees the Starion case as a stark example of why reforms are needed. In the lawsuit, the attorney general says telemarketers working on behalf of Starion would call residents, including many whose numbers are on the federal “do not call” list, and entice them with electricity prices that were below their utility’s.
But, the lawsuit says, most of these Massachusetts customers would be hit with higher supply rates within a matter of months, sometimes nearly double what they had previously paid their utility.
Many customers would also be hit with an account management fee of up to as much as $10 a month.
One “robocall” message to consumers from Starion in 2016 included a reference to a nonexistent “U.S. Renewal Energy Program” and a bogus threat of a pending “14 percent increase” in rates, according to the lawsuit.
The state’s 1997 deregulation law was designed to separate the power-generation business from the delivery side; utilities sold off their electric plants, and instead bought electricity from third-party suppliers on behalf of their customers. In theory, this would encourage competition for electric suppliers. In practice, though, the financial benefits of that competition generally only materialized for large consumers, such as industrial and commercial companies.
In 2014, state officials adopted rules that reduced the risks for competitive suppliers, a move that seemed to encourage Starion and others to enter the market.
In March, Healey’s office released a report showing that electricity customers who switched to a competitive supplier collectively paid nearly $180 million more than if they had remained with their utility, during a two-year period between July 2015 and July 2017.
The report focused on the nearly 500,000 residents who buy directly from a competitive supplier. Healey wasn’t concerned about those who participate in group purchasing contracts organized by their community.Jon Chesto can be reached at email@example.com. Follow him on Twitter @jonchesto.