N.Y. AG settles with utilities over marketing

Bryan Cohen Apr. 20, 2011, 1:47am


NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman announced on Wednesday that his office had reached a multimillion dollar settlement with two utility companies over alleged deceptive marketing tactics.

Columbia Utilities LLC and Columbia Utilities Power LLC agreed to pay $2 million to refund New York consumers, $200,000 in penalties to the state and an added $750,000 suspended penalty if they fail to comply with the terms of the settlement. In addition, the companies will observe new restrictions on its future marketing practices.

"Consumers were lured by Columbia's false promises for huge savings and other deceptive practices, only to become burdened by more costly energy bills," Schneiderman said. "These are difficult economic times, and predatory companies that exploit New Yorkers looking to save their hard-earned money will be held accountable. This settlement puts energy providers on notice that such consumer abuses will not be tolerated."

The utilities sell natural gas and electricity through door-to-door sales and telemarketing to business and residential customers. Columbia allegedly claimed in sales presentations and advertising that consumers would realize significant savings by purchasing natural gas and electricity through Columbia instead of from their local utility company.

Many Columbia customers were allegedly given variable-priced contracts, allowing the company to change the price at any time. While the company promised savings of anywhere between 15 and 20 percent, customers ended up paying substantially more than they would have if they stayed with their local utility, Schneiderman says.

Upon receiving customer complaints, Columbia allegedly refused to allow customers to cancel the service, noting that it was a 12 month term, which it allegedly did not disclose at the time of enrollment. Some sales representatives allegedly misstated the terms of the contract by promising consumers they could switch back to their old company at any time.

After receiving hundreds of complaints, Columbia allegedly allowed consumers to terminate their contract upon request, but did not refund them for extra costs.

Under terms of the settlement agreement, strict regulations will ensure that the company may not make unsubstantiated claims about future savings, may not represent that it is affiliated with a local utility company and must clearly disclose that it is an independent entity. Additionally, current customers may cancel their contract without termination fee and the company must implement strict quality assurance controls to prevent future sales misconduct.

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