Lisa Madigan sues to shed light on alternative electricity supplier ‘fraud’

Attorney General Lisa Madigan filed suit Monday against an alternative electricity supplier for allegedly ripping off thousands of Illinois customers through high-pressure sales tactics that ultimately cost them $2.5 million more than if they’d stuck with ComEd.

The lawsuit against Major Energy Electric Services LLC of Orangeburg, New York, was the fourth action brought by Madigan’s office against such companies since 2016.

The attorney general conceded she has only been able to pursue the “worst of the worst” among 100 authorized alternative retail energy suppliers doing business in Illinois — an industry she said is “rife with fraud.”

More than 1.8 million residential customers in Illinois have switched to an alternative electricity supplier instead of continuing to buy their power from their local utility company, including nearly 1.2 million ComEd customers.

In the past three years, that switch has cost Illinois residential and small commercial customers $400 million more in electricity costs than their electrical utility company would have charged, Madigan said.

Obviously, that’s not how things were supposed to work after Illinois deregulated the utility industry in 1997, allowing companies to compete to supply the electricity and natural gas delivered by the big utility companies.

The idea was for a more competitive marketplace to reduce prices for consumers. But it’s not working out that way, said Madigan, who has had to create a special task force in her office to deal with all the consumer complaints filed against alternative energy suppliers.

“What we know is that it is very difficult to make money by speculating on energy prices and passing on those savings to residential customers,” Madigan said.

Instead, many of those companies make money by luring customers to switch with promises of lower rates and then charging them more. They target the most vulnerable people — seniors, low-income residents and individuals for whom English is a second language.

That’s what Major Energy did, using aggressive and deceptive sales techniques through telemarketing calls and door-to-door sales people, Madigan said.

“Many customers were given the impression they were signing up for a discounted rate from ComEd, when in reality they were entering into a new contract with Major Energy,” she said.

Madigan said the company’s “business model is really nothing more than fraud,” she said

A spokesman for Major Energy declined comment.

The Orangeburg, N.Y. company, which bills itself as the exclusive energy partner of the New York Knicks and New York Rangers, entered the Illinois market in 2012.

But Madigan stressed Major Energy is hardly unique in its underhanded approach.

“There are a wealth of bad companies,” Madigan said.

Her warning to consumers: “You are almost never going to save money by switching.”

Madigan said she plans to pursue legislation to restrict the marketing practices of the alternative retail energy suppliers to eliminate the fraud, but confessed she is “skeptical” that will help.

Still, she balked at going further to regulate the rates they charge.

Just last week, the Citizens Utility Board and AARP Illinois also asked for legislation to clean up marketing abuses by unregulated electric and natural gas suppliers. One proposal would require alternative retail electric suppliers to issue their own bills instead of piggybacking on the utility company’s bill — as they do at present.

The Illinois Commerce Commission announced new rules last August to protect consumers against deceptive marketing by the energy suppliers, but those have yet to take effect.

CUB spokesman Jim Chilsen said alternative retail electricity suppliers have generally been a bad deal for consumers since June 2013, when ComEd got out from under its own costly supplier contracts.

Some customers discover they are paying two or three times the rate for electricity that ComEd is charging, often without realizing they switched suppliers, Chilsen said.

“A lot of people are being taken for a ride by alternative suppliers,” Chilsen said.