What does an ESCo scam look like?
Energy supply companies (ESCos) in New York City are responsible for a lot of good. For businesses and residences alike, ESCOs are capable of offering customers low rates on their electricity and other value-added services, many of which can be found on other pages of this website.
Unfortunately, there are some ESCos that do dishonest work. The Public Service Commission – think of them like the police for energy companies – gets complaints regularly from certain companies. What do these scams look like, and how can you make sure to avoid them?
There are a number of different tactics that energy companies employ to try to “win an account” on false pretenses. These can differ depending on whether we are talking about a residential account or a commercial (business) account. For the most part, scams tend to be more common in the residential market. That’s because business owners are usually extremely careful when it comes to making changes in their business, whereas homeowners can be more open to a quick, catchy sales pitch. Since residential scams are more common, let’s start with that.
A handful of ESCos do door-to-door sales, typically in the outer-boroughs of NYC. Some will knock on your front door and claim to be with Con Edison (some may even carry a fake “badge”). They may explain that at some point, you were overcharged and that they’re here now to correct the mistake. They may say that they have a new plan that will help the elderly save on their bills, or something to a similar effect. They’ll say taking advantage of the new plan is easy – just sign here, and you should see the savings on your next bill. You may be fooled into thinking that because they’re allegedly with Con Ed, they must know what they’re talking about – and who doesn’t love saving money?
Let’s continue playing this scenario out. Suppose you believe what you hear and you sign the dotted line. The person who knocked on your door says thanks very much and walks off. On your next bill, you may indeed see savings, or no difference at all. Your rates aren’t likely to change right from the get-go. What’s more likely is that the ESCo that signed you up without knowing it is keeping your rates low for a while– say, 3 or 4 months – until switching the plan and charging you double or triple what you’re used to. Their hope is that you’ll have forgotten all about that two-minute interaction with the stranger who knocked on your door by the time you notice, and you’ll think that Con Ed has just gotten more expensive.
But you’re smarter than that! You know something’s fishy. The stranger hardly gave you the chance to read what you were signing before you did so – they wanted you to think it wasn’t important. Bottom line: no reputable ESCo will knock on your door telling you to sign up right away to take advantage of savings. In reality, that’s true of any business, not just ESCos – a good company will be very transparent as to what exactly it is you’re signing, so you can feel confident about your new supplier, not nervous.
Now let’s talk about businesses. One scam that happens all too often is what can be called the lighting scam. A representative from an ESCo may come by – unlike the residential scam, they’re unlikely to pretend to be from Con Ed. Instead, they may say that they have a great new program that will give you free LED lights that can save you lots of money – again, “just sign here!” Part of this is true: LED lights are an excellent investment for any business that doesn’t already have them. They are many times more energy efficient than traditional fluorescent or incandescent lights, and they really can save you on your usage quite a bit. But nothing comes free. Think about it: how could a company just come in and give you free light bulbs without making any money off of it? That doesn’t make any sense.
In this case, when you sign up for the free LEDs, there’s likely fine print that says you’re signing up for that company’s energy supply as well. They’re not telling you, but they’re an ESCo. Similar to the residential scam, the company may charge you a low rate for a few months, and then increase your rate to a number way higher than you realistically need to be paying. In some cases, I’ve even seen these contracts have two-year binding agreements, meaning you will be unable to get out of it without paying a cancellation fee. Yikes.
Again, you can use the same strategy to make sure you avoid this kind of situation at your business. If something appears too good to be true, it’s probably because it is: all you have to do is think about it. No company can offer you free lights without taking any sort of benefit from it – that’s impossible. They must be winning somewhere, so it’s your job to read through the agreement and make sure you know exactly what you’re signing up for.
This doesn’t mean all ESCos are bad. Of course they aren’t! It just means you have to be smart. If someone says they’re with Con Ed, make them prove it – and not just by quickly flashing a badge. Ask them tricky questions and see if they get nervous. Lots of companies (Phoenix included) can offer you discounted LED upgrades, but no one can realistically do it for free. Trust your instinct and be careful. Don’t be skeptical by nature – like I said, many ESCos provide excellent service to customers of all kinds in homes and businesses around the city, and it’s great to take advantage of what they can offer – just make sure you’re picking the right one. Look them up on the Public Service Commission’s website! Do your research and remember: always read the enrollment agreement!