Energy Justice Case Win for Those Cheated by Maryland’s Deregulated Energy Retailers (Now Being Challenged in Court)

     Deregulated energy retailers have been accused in several states of punishing consumers with high fees and rates after introductory rates no longer apply and if a payment is missed. Here in Ohio, a deregulated energy state, one is often annoyed with mail, phone calls, texts, and even proselytizers (as in my local Walmart – I always avoid walking past them) trying to sell electricity and other forms of energy like natural gas services. These third-party retail suppliers are supposed to increase competition and lower rates but that often does not happen. Indeed, as many have discovered over the years, the reverse can happen with people getting locked in at higher rates and subject to increases.

     In Maryland, they have been accused of bilking customers by increasing rates from low introductory rates and charging massively higher rates if a payment is missed or late.

     Inside Climate News reporter Aman Azhar wrote about this activity in Maryland, which deregulated energy in 1999. He writes that deregulation:

“…opened the door to deceitful bait-and-switch practices by the retail suppliers. One recent study found that retail energy has cost mostly low-income consumers more than $1 billion in utility overpayments since 2014. Through another common practice called “slamming,” sales representatives often use customers’ utility account numbers to take over their accounts without their consent.”

He gives one case where a consumer switched suppliers to get a $20 gift card and ended up being charged hundreds of dollars higher for electricity. These big increases then cause people to get further behind on their bills and face shutoff in some cases. Governor Wes Moore signed Senate Bill 1 in April 2024 that includes:

“…a raft of helpful provisions, including new licensing requirements and expanded oversight by the Maryland Public Service Commission coupled with additional fines and penalties to protect consumers.”

“The legislation seeks to return over $150 million a year to the pockets of hardworking Marylanders, over 300,000 of them,” said state Senator Malcolm Augustine.

     Energy retailers were adamantly against the bill, but others noted the bill was necessary and fair, especially to those victimized by these rip-off business practices:

“Over the past decade, our office has investigated and participated in significant litigated cases against more than a dozen retail suppliers who charged exorbitant rates to thousands of Marylanders,” David Lapp, Maryland’s People’s Counsel said, explaining that many of those targeted by retail suppliers were limited-income households, elderly and disadvantaged individuals and families.”

     One person thought their electric bill was so high because they had an older gas furnace but no, it was their choice of retail energy supplier that was the cause (basically stealing their money). The person did not even know that had switched suppliers.

“One big problem with the state’s deregulated utility market is a regulation known as “purchase of receivables,” volunteer Laurel Peltier said, which the Maryland Public Service Commission had approved in 2010. It guaranteed that the energy retailers would get paid by the regulated utility even when their customers defaulted, creating a big incentive for energy retailers to charge higher rates.”

“The new law that the Maryland General Assembly just passed eliminated the purchase of receivables, which is great news for people like Grayson and Burlock,” Peltier said.

“Another reform provision in the legislation is that anyone can call Baltimore Gas & Electric and say they no longer wanted to remain with the third-party retailer, which can be particularly helpful to older people who can be easily confused by energy sales pitches, Peltier said. “That way even if someone switched their account, the system will reject it,” she said

     These seem like necessary reforms. The reality in Maryland is that people right next door to those paying normal energy rates may be paying much higher rates. It doesn’t take a rocket scientist to see that that is unfair and basically a rip-off.

     A 2022 study by Berkeley Energy Institute found that low-income households and marginalized communities face particularly high prices for energy from retail suppliers. It also found that low-income Black, Hispanic, and immigrant families were targeted in Baltimore through direct marketing and ended up paying the highest rates. It’s particularly grotesque that people with very low household incomes below $10,000 per year were consistently paying the highest rates. They were essentially profiting most from these poor customers. Low-income households were already paying a higher percentage of their income from energy before they got ripped off further.

     A 2022 report by the Office of the People’s Council showed that some people were paying 15% of their total income for household energy expenses, as shown below.

     The Berkeley Energy Institute study also showed that more retail energy suppliers were targeting low-income neighborhoods with door-to-door marketing campaigns.

Peltier notes that:

“In 2021, the Maryland General Assembly passed legislation prohibiting retail suppliers from charging customers on energy assistance more than what a regulated utility would charge for gas or electricity. About $15 million from the state energy assistance grants was flowing annually to third-party suppliers at the time.”

     Aman Azhar reported in October in Inside Climate News that the new Maryland  law, set to go into effect in January 2025 as being challenged in court by the bigger energy retailers:

“NRG Energy, Constellation Energy and American Power & Gas, worked hard behind the scenes to keep the bill from passing, contending that the law would drive energy companies away from Maryland, stifle competition and harm the state’s clean energy mandate by limiting people’s access to green electricity products.”

He noted that there are about 120 different retailers working in Maryland. He describes the lawsuit:

“On Oct. 1, the Retail Energy Advancement League, an industry group representing energy retailers, and Green Mountain Energy Co., a subsidiary of the Texas-based energy giant NRG, filed a lawsuit in the U.S. District Court in Baltimore.”

“In the 37-page complaint, the petitioners allege that the provisions in the bill requiring retail energy companies to prove their products are “green” violate the First Amendment rights of retail suppliers. They also argue that the law violated the Constitution by imposing unlawful burdens on interstate commerce.”

     Some people have been paying much higher rates to retailers for years without even knowing it.  Chris Ercoli, president and CEO of one of the plaintiffs, the Retail Energy Advancement League:

“…denied that energy retailers were overcharging customers and said the legislation would establish a price cap lower than that charged by the state’s primary regulated utility, BGE, “while also introducing provisions that make it more expensive to conduct business and further stacking the deck in favor of the utility.” Nearly half a million Maryland consumers who have chosen a retail energy provider will be affected by this legislation, he said.

    Office of the People’s Council’s Lapp noted that the new law simply requires suppliers to include disclosures to keep customers informed. He suggests the retailers have been confusing people about green energy, most of which is bought by consumers via trading renewable energy credits, often from out of state. Senator Augustine noted that the legislation aims:

“…to create a fair and open market for the larger retail energy supply, and then to create a secondary market that has more flexibility for the renewable energy markets. I feel really good about the guardrails that we have created.”

     If there’s one thing that gets under my skin it is people and businesses ripping people off with deceptive business practices, especially in obvious cases like this one.

 

References:

 

Twenty-Five Years After Maryland Deregulated Its Retail Energy Market, a Huge in Looms for Energy Justice Advocates. Aman Azhar. Inside Climate News. May 8, 2024. Twenty-Five Years After Maryland Deregulated Its Retail Energy Market, a Huge Win Looms For Energy Justice Advocates - Inside Climate News

Competing for (In)attention:  Price Discrimination in Residential Electricity Markets. Jenya Kahn-Lang. Berkeley Energy Institute WP 333. November 2022. WP333.pdf

Maryland Low-Income Market Characterization Report: 2022 Report Update. Office of People’s Council. Affordability Baseline

Advocates, Legislators Are Confident Maryland Law to Rectify Retail Energy Market Will Survive Industry’s Legal Challenge. Aman Azhar. Inside Climate News. October 21, 2024. Advocates, Legislators Are Confident Maryland Law to Rectify Retail Energy Market Will Survive Industry’s Legal Challenge  - Inside Climate News