By: Joseph Goldy, CFP®
When New Jersey deregulated its electric and gas industries in the late 1990s, it was supposed to bring a new competitive environment that would benefit consumers. By being a “shopping state,” New Jersey joined many other states in the northeast where consumers could shop for the best electricity or gas rates among competing third-party suppliers.
Yet, by 2014, a lawsuit was filed by the New Jersey Division of Consumer Affairs against three third-party energy suppliers alleging deceptive bait-and-switch sales practices. It doesn’t seem much has changed in the years since that lawsuit, as my personal experience can attest.
Common Tactics Used by Third-Party Electric and Gas Suppliers
Phone - Fraudsters using the phone tend to be aggressive and threaten to shut off power if payment is not received. They can mask the number they’re calling from to look like it’s your utility and may demand immediate payment. Never provide your electric or gas account or PoD (point of delivery) number over the phone; it is all that’s needed to switch you to a third-party supplier.
Door-to-door – People may claim to be from your utility or shame you into signing up, saying, “Your neighbor just signed up. Why don’t you?”. They are simply trying to get hold of your bill, which has your PoD number, and the rest is history.
Bait-and-Switch – One of the most common deceptions is a third-party supplier offering a competitive rate for a fixed period, usually 6-12 months. After that, the rate becomes variable and typically adjusts higher than your utility company’s price. It’s the perfect scam; who remembers to check their bill a year after signing up?
Greenwashing – Some third-party suppliers play into people’s desire to help the environment by making it look like your energy source will be switched to wind and solar farms. A recent mailing insert from a company called CleanChoice Energy states that “CleanChoice Energy will source wind and solar power from farms in your region.”
However, the fine print of the disclosures explains that CleanChoice is simply buying RECs or Renewable Energy Credits from wind or solar farms in other states to offset the fossil fuel power generation of your regular utility. RECs are not the same as sourcing your energy directly from wind and solar farms.
There is considerable debate around companies purchasing RECs to look greener than they are since RECs do not add additional renewable power but simply reshuffle power already on the grid.
The REC discussion is beyond the scope of this article. However, misleading consumers to think they are switching to wind or solar power when their power is still coming from traditional fossil fuel energy sources is the definition of greenwashing.
How to Tell if You’re Getting Cheated on Your Monthly Utility Bill
In the sample electric bill below from JCP&L, one of the five principal utilities in New Jersey, you can see clearly on the left-hand side the “Basic Generation Service” price of 9 cents per KwH. If you’re paying more than this BGS price with any third-party electric supplier, you’re paying too much. Your own BGS price will vary depending on usage and other factors.
On this bill, the third-party supplier, North American Power, has happily charged 18 cents per KwH – double the price JCP&L currently charges. I have seen clients being charged three or four times the BGS price!
If you see a third-party supplier charging you more for electricity than the Basic Generation Service amount, call your main utility company and tell them you want to switch back. They’ll handle the switch for you. The same goes for your natural gas bill. Call your gas company if you see anything on your bill that appears like a charge from another company. If you’re not sure, call anyway.
A study by Karen Lusson, an attorney for the National Consumer Law Center, showed among the states that deregulated their electric or gas markets, residents were collectively being overcharged by millions of dollars.
In one example cited, a New York Public Service Commission analysis shows between 2014 and 2016, residential gas and electricity consumers paid $1.2 billion (the “b” is correct) more than they would have had they stayed with their default utility service. A similar study in Rhode Island showed overpayment by residents of $55 million during five years ending in 2018.
I did the math on how much more I’ve unknowingly been paying on my electric bill, which added up to thousands of dollars over several years. Embarrassing for a CERTIFIED FINANCIAL PLANNER™ to admit, but interestingly a review by the Better Business Bureau found that 70% of those scammed on their electric and gas bills were under the age of 45, with 80% holding college degrees.
The reality is a well-executed bait-and-switch can happen to anyone, so be sure to review your next utility bill so it doesn’t happen to you. If you feel you’ve been taken advantage of, report it to the NJ Board of Utilities.
Joseph Goldy, CFP®, is a wealth advisor and CERTIFIED FINANCIAL PLANNER™ at Highland Financial Advisors, LLC, a fee-only fiduciary wealth advisory firm based in Wayne, New Jersey.
Joe specializes in working with newly independent women because of divorce or losing a spouse. He understands firsthand the value of having a clear financial picture pre- and post-divorce and a plan to restate goals as a single person. When he is not helping clients, Joe enjoys spending time with his two sons outdoors and volunteering to help raise money for Type 1 diabetes organizations.