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Watch Out For Alternative Supplier Rip-offs With These Tips

During high-priced times, consumers wonder if they should switch to a gas or electric alternative supplier. Be careful. 

“Alternative electricity suppliers are impacted by the same market conditions that are causing utility prices to increase, so be careful about getting lured into bad deals,” said CUB General Counsel Julie Soderna at the Illinois Commerce Commission’s Summer Policy Planning meeting this month.  

Illinois consumers have lost more than $1 billion from alternative electric suppliers since 2015, and the gas market has been rife with bad deals. Here’s how to protect yourself from alternative supplier ripoffs this summer: 

Find out what the alternative supplier is charging and how that compares with the utility’s price-to-compare. Is the rate fixed or variable? Also, make sure to check if the price is only introductory. A company may offer a low introductory rate that will skyrocket after a short period. (Ask how long the intro rate lasts, and what the new rate will be after that promotional period.) 

Be wary of add-on fees that can raise the cost of the plan. If a company offers a lower fixed supply price, find out if it can try to declare force majeure (a provision in a contract that frees the company from its obligation if an extraordinary event occurs–like, for example, unusual market conditions) and back out of the deal. 

Also, be careful of multi-year deals. The utility’s price will eventually come down so you don’t want to get locked into a long-term deal that goes sour a year or two into it. 

With electricity supply, check if your community has negotiated a “municipal aggregation” deal. Municipal aggregation is when community leaders negotiate with an alternative supplier for the purpose of securing a reasonable electricity price. Savings aren’t guaranteed, but your community may have secured a lower supply rate than your utility. Just make sure to find out when the offer expires.

To summarize:

  • Know the utility supply rate and how it compares to the offer. (Also, see if your community has negotiated a “municipal aggregation” power deal that’s lower than the utility’s supply rate.)
  • Make sure any offer you consider is not an introductory rate that ends in a month or two. (And if it is, find out when it ends, and what the new rate will be.)
  • Scan the fine print for hidden monthly fees. A $10 monthly fee means you pay $120 a year—before using any power or gas.
  • If it’s a low fixed rate, scan the fine print to see if the company allows itself to change the rate during certain market conditions.
  • If you want to sign up, watch your bill like a hawk and be prepared to get out of the deal. (You should be able to get out with no penalty, thanks to consumer protections CUB supported.)

During this high-priced time, remember: 

Stay in contact with your utility. Consumers who are struggling should contact their utilities to see about energy assistance programs, inquire about payment plans to pay off debt and learn about energy efficiency programs.

Practice energy efficiency. Weatherize your windows and doors to keep cool air in and warm air out. Set your thermostat at a safe level: 76-78 degrees when you’re awake and home, and bump it up a few degrees when you’re away or asleep. CUBHelpCenter.com has more tips.