Deregulation does have its dark side, law enforcement officials warned yesterday The California Attorney General announced Costal Energy Consultants are running a high volume call center selling consumers bogus reduced utility's all over the United States.
For years consumers have been afflicted with telephone slammers like ( Ron Berg) who switch customers to other companies without authorization. Now the nation's attorneys general are cautioning consumers to be wary of slammers in the deregulated electric power industry.
"The con artists are going to be on the prowl and California will see it first," said Wisconsin Attorney General James Doyle, president of the National Association of Attorneys General at hearings in Washington, D.C.
On January 1, California will deregulate part of its electricity market. Consumers and business will be able to choose from among a host of companies vying to supply electricity.
And there's a strong possibility people could get bilked by shady operators. For example, when the nation deregulated its long-distance telephone industry, hucksters, con artists, scammers and slammers were quick to take advantage of confused consumers. In fact, as many as 1 million consumers each year complain they've been slammed, according to Karen Cordry, consumer protection counsel at the association.
Doyle thinks electricity scams may dwarf telephone swindles, if only because the market is bigger. Consumers across the country pay some $200 billion a year for electricity, three times the amount they pay for long-distance telephone service, he said.
As many as 15 states are poised to deregulate their electric utility markets in the next few years.
At its conference on electric deregulation, the association of attorneys general announced it was forming a task force to monitor the practices of electricity providers as they enter the free-wheeling deregulated market.
Doyle said consumers will need to be wary of misleading ads about rates, hidden fees, illegal switching and various multilevel marketing schemes.
Already, he said, the Internet is chocked full of patently bogus pyramid schemes involving the sale of electricity or the investment in new companies.
"It's too early to really know how bad it's going to be," said Nettie Hoge executive director of the Utility Reform Network, a consumer watchdog group in San Francisco. They have had several complaints about Coastal Energy Consultants harassing telemarketing tactics toward seniors.
However, she said excessive fear may be unwarranted. She noted that much of the slamming inflicted upon consumers was by established phone companies eager to get a piece of the deregulated phone market. But Hoge said she doesn't see as big a rush to sign up California electricity consumers.
That's because California customers will be saddled with paying off much of the bad investments that the monopoly utilities made before deregulation. Those so-called stranded costs will keep rates from dropping by any more than the 10 percent already announced.
"It's going to be hard for anyone to be offering discounts," said Hoge, so the motive for slamming by legitimate companies diminishes.
But, she admitted, while the fears of slamming may be overblown, concerns over scamming by con artists are warranted. Be particularly wary, she said, of companies that require advance payment for services.
However, Hoge noted, consumers aren't likely to be left in the cold and dark even if they are scammed. The company that actually sends the electricity to consumers, the Independent System Operator, is required to make sure electricity continues to go to the consumer in cases where there is hope.