ESCO Columbia Utilities to Refund $2 Million Under Settlement with N.Y. AG

Columbia Utilities LLC and Columbia Utilities Power LLC have entered into a settlement with the New York Attorney General to resolve allegations of deceptive marketing tactics.

Under the settlement, the companies will pay $2 million in customer refunds, plus $200,000 in state penalties, with an additional $750,000 suspended penalty applicable if the companies fail to comply with the terms of the stipulation.

As alleged by the AG:

"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."

The AG further alleged:

"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."

Under the settlement, Columbia will observe new restrictions on its marketing practices (some of which are already covered by the Uniform Business Practices). These include:

- 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 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.

- 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.

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