A.G. Schneiderman Secures $2.95 Million From Deceptive Gas & Electric Companies That Misled Thousands Of New Yorkers

Columbia Utilities Customers Were Promised Savings, But Bills Were Often Higher Than Former Providers’ Rates, Some Unable to Cancel Enrollment or Receive Reimbursement

SSettlement Includes Restitution for Consumer Victims, As Well As Company Restrictions to End Fraudulent Sales Practices

Schneiderman: “Settlement Puts Energy Providers on Notice – Consumer Abuses Will Not Be Tolerated”

 

NEW YORK – Attorney General Eric T. Schneiderman today announced a multimillion dollar settlement with two energy companies that used deceptive marketing tactics to mislead thousands of New Yorkers. Under the agreement, Columbia Utilities LLC and Columbia Utilities Power LLC (Columbia) will pay $2 million to refund New York consumers, $200,000 in state penalties, and an additional $750,000 suspended penalty if it fails to comply with the terms. In addition, Columbia will observe new restrictions on its marketing practices to prevent future fraudulent sales conduct.

“Consumers were lured by Columbia’s false promises for huge savings and other deceptive practices, only to become burdened by more costly energy bills,” Attorney General Schneiderman said. “These are difficult economic times, and predatory companies that exploit New Yorkers looking to save their hard-earned money will be held accountable. This settlement puts energy providers on notice that such consumer abuses will not be tolerated.”

Columbia is an energy service company (ESCO) that sells electricity and natural gas through telemarketing and door-to-door sales to residential and business customers. Columbia claimed in sales presentations and advertising that consumers would realize significant savings by purchasing electricity and natural gas from Columbia instead of from their local utility company. Most Columbia customers were given variable-priced contracts, which did not limit the ESCO's ability to change the price at any time. Though Columbia’s sales representatives promised savings of anywhere between 15 and 20 percent, customers generally ended up paying substantially more than they would have if they had stayed with their local utility.

When consumers noticed the higher prices and sought to cancel their service, Columbia refused and noted the contract was for a 12-month term – a detail it failed to clearly disclose at the time of enrollment. Sales representatives did not advise customers that they were obligated to remain with Columbia for one year regardless of the price. Some consumers reported that sales associates even misstated the terms of the contract by promising consumers they could switch back to their old utility company at any time. In response to hundreds of consumer complaints, Columbia eventually allowed consumers to terminate their contract early upon request, but did not refund them for their extra costs. Other consumers reported that Columbia’s sales representative led them to believe they were dealing with a local utility, instead of an ESCO.

The settlement provides for strict regulations to prevent future misconduct and protect consumers from deceptive business practices. These include:

  • Columbia may not make unsubstantiated claims about future savings.
     
  • Columbia may not represent that it is affiliated with a local utility company and must clearly disclose that it is an independent entity.
     
  • Current customers who signed a one-year contract may cancel their contract without any termination fee. All future contracts will be month-to-month.
     
  • Columbia shall implement strict quality assurance controls to prevent future sales misconduct, including recording and reviewing sales calls, thoroughly investigating any consumer complaint, and employing a full-time compliance officer.

Current or former Columbia customers who believe that they were harmed by Columbia’s deceptive sales practices and wish to seek refunds can call the Attorney General’s Consumer Complaint line (1-800-771-7755) to obtain information about submitting claims.

Columbia fully cooperated with the Attorney General’s investigation and changed some of its problematic practices during the course of the investigation.

The investigation was handled by Assistant Attorney General Keith H. Gordon, under the supervision of Jeffrey K. Powell, Deputy Bureau Chief of the Bureau of Consumer Frauds and Protection.

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