The state is looking to strengthen regulations regarding electric and gas suppliers who convince customers to switch from their incumbent utilities, sometimes with misleading claims.
The initiative launched by the state Board of Public Utilities comes in the wake of charges filed last month by the attorney general’s office against three alternative energy suppliers who allegedly defrauded customers by telling them they would save money if they changed from their electric and gas utilities only to see their bills soar.
In a hearing scheduled for July 17, the state agency is seeking input into a possible proposal to prohibit the so-called third-party suppliers from making false or misleading statements to residential customers, as well as barring the companies from contacting customers if they do not have an existing business relationship with them.
In the past winter, complaints from customers who switched energy suppliers rose tenfold, according to the BPU. Part of the problem was that natural gas prices, which have been historically low, spiked because of the extreme cold. Customers were saddled with the increased costs and had to pay several hundred dollars a month more than if they had stayed with their incumbent utility.
Other customers complained about being “slammed,’’ a process in which they were switched from their incumbent utility accounts without their permission or knowledge.
Among the topics to be pursued by the state agency in its upcoming stakeholders’ meeting is defining the meaning of the “guaranteed savings’’ offered by third-party suppliers, which occasionally failed to materialize.
More often than not, the trouble was the result of so-called variable-price contracts, which allowed electric and gas prices to rise depending upon market conditions. When natural gas prices soared because of the cold weather, customers were stuck with the higher bills.
In the upcoming hearings, the state also is seeking to define what is a variable rate and how it might afffect a customer’s bill.
The largest group representing third-party suppliers said it supported strong enforcement of consumer protection rules.
“Effective customer protections preserve market viability and provide more transparency, certainty, and value for out customers,’’ according to Stephen Bennett, New Jersey State chair of the Retail Energy Supply Association.
In the civil complaints filed by the attorney general’s office in early June, the state said it would seek civil penalties, other fees, and potential restitution for customers who were switched without their consent and ending up paying more on their utility bills. The state also may consider revoking companies’ licenses to sell gas or electricity in New Jersey.
In the 15 years since the state deregulated the energy sector, few residential customers switched from their incumbent utilities. But with the steep drop in natural gas prices more than 100 energy suppliers came into New Jersey actively seeking customers..
According to the BPU data as of April 2014, 9.5 percent of residential gas customers have switched suppliers and 15 percent of residential electrical customers have done the same.
The proposal being put forth by the agency suggests whether the timeframe for changing energy providers should be changed. A frequent criticism of the current rules is that customers may have to wait at least two months to go back to their incumbent utility — a requirement that saddles them with increased costs for those months.
In a filing with the BPU, the state Division of Rate Counsel also is seeking more protections for utility customers who switch suppliers. Director of the Division of Rate Counsel Stefanie Brand said unless changes are made it could derail efforts to encourage customers to shop for cheaper energy bills.
Brand suggested changing current regulations to give customers more information in an easier-to-understand format when they are thinking about switching suppliers. In the upcoming hearings, the BPU plans to consider requiring a one-page summary of the proposed contract between suppliers and customers.