What you need to know about alternative gas companies

Consumers warned about spikes in energy bills

By Tony Statz - Producer

You may have heard the sales pitch: Alternative gas companies offer you lower rates than you get from the major companies, if you switch your service.

The state calls these businesses "gas choice" companies. They're also called "third party suppliers." Whatever you call them, more than 1/2 million people in Michigan have signed on the dotted line and made the switch.

However, during this bitter cold winter some customers came to regret that decision.

"Never ever, never ever, do I have this kind of situation in my life," said Lucyna Kopylowski, of Dearborn Heights.

What kind of protection do consumers have when they switch gas companies? Why did the rates spike so high from one month to the next? The Ruth to the Rescue consumer unit has been looking into those questions over the past few weeks.

Energy bills spike!

About a dozen Local 4 viewers have written or called Ruth to the Rescue in the last month complaining about energy bills that, in some cases, doubled in just one month.

"I was shocked when I got this bill recently," said Kopylowski. "I just called (my daughter) and I said, 'Anna, I can't believe it. My bill is almost $800.'"

The mother and daughter called Santana Energy Services to find out how the bill could change so drastically, so suddenly.

"Because businessmen buy commodities at high prices and my mom was on a variable rate," said Anna Stelmasiewicz.

Stelmasiewicz told Ruth to the Rescue that was the explanation she received.

In Lincoln Park, Christine Borlin Kanta was going through a similar experience. She chose Lakeshore Energy. Her rate per unit almost doubled on her March bill.

"I think something has to be done about these companies coming into our state," said Borlin Kanta. "I tried to call 'em and evidently a lot of other people were trying to call them, too, because you couldn't get through on the phones."

When she did get through, she canceled her service.

What caused the spike?

Local 4 Consumer Expert Ruth Spencer recently spoke with the Victor Howard, vice president of Retail Choice for Lakeshore Energy Services, about the price increase.

"As you know, we just came off a historic cold winter," he said. "Matter of fact, during this time period we saw supply cost increase by more than 200 percent, which we absorbed quite a bit of that ourselves."

However, there's more to this equation than the laws of supply and demand. When you switch to an alternative supplier, you should sign a contract that spells out the details of the agreement. It may be for a fixed rate or the rate may be variable.

Melanie Duquesnel, CEO of the Better Business Bureau Serving Eastern Michigan, said knowing the difference is critical.

"Personally, I'm not a gambler, so variable rates for me are not what I prefer. I like knowing what my bills are going to be month-to-month," she said.

Is there any state regulation?

Given the amount of complaints Ruth to the Rescue received, Ruth went to the Michigan Public Service Commission to see what's happening at the state level.

"Last year, we had a record number of gas choice customers in Michigan, many of whom were very, very happy," said spokeswoman Judy Palnau.

However, she admitted, this winter the commission also had been receiving numerous complaints.

Ruth brought her viewer stories of bills that had doubled in one month.

Ruth: "So, the question is, does that seem reasonable to you?"

Palnau: "The commission does not regulate the rates of alternative gas suppliers."

That is an important distinction for consumers to understand. While the Michigan Public Service Commission does work with investor-owned utilities (such as DTE and Consumers Energy) to set rates each year, it has no control over the rates charged by alternative companies.

That means only you can negotiate the best possible rate when you sign the contract, and you need to understand if the rate is fixed or variable. With variable rates your bills can spike without warning.

"You're only one market disruption away from seeing a dramatic effect on your winter heating bills," said Palnau.

Like the Better Business Bureau, she recommends you carefully consider if a variable rate plan will work for you.

"We do say there is some risk to being a choice customer on a variable rate contract because no one can predict what will happen with the market," she said.

What you need to do

As a consumer, before you make the switch to a third party supplier there is a checklist of things you should consider.

1) What is the rate you're currently paying? Will the new rate be lower?
2) Is that rate guaranteed or fixed? For how long?
3) What happens at the end of the contract? Some contracts start fixed, but revert to variable if you don't renew.
4) Check the companies record with the Better Business Bureau and online reviews.
5) Don't rush into anything, especially if a salesperson contact you on the phone, or in person.

"Sometimes it's going to sound too good to be true," said Duquesnel. "You might want to try to commit to that salesperson -- don't! Take their paperwork, look through it, and do some due-diligence."

That's an assessment that Borlin Kanta agrees with, though she goes even further.

"If anyone comes soliciting and gives you a dream or tells you something that's too good to be true, throw 'em out," she said.

Companies respond

Even Howard advises consumers to take charge of their energy bills.

"I always recommend that people look for fixed-price, fixed-term products because that will guarantee you the price that you pay every month through the contract term," he said.

He also said Lakeshore picked up customers during the winter.

"We actually saw a number of folks that were with other providers in the area to sign up with Lakeshore on some of our fixed term rates," he said.

Santana Energy Services did not agree to an on camera interview, but released a statement to Ruth to the Rescue that reads in part:

"Santana would be happy to speak with any customer about their bill, or answer any Santana related questions the customer might have. We ask that customers contact our Customer Service Center (800-764-4427) or viewer our offers on our website to enroll in our of our price protection fixed price plans."

Lakeshore Energy also provided its customer service number: 888-200-3788

If you feel any energy provider is in breach of your contract, you can contact the Michigan Public Service Commission. It will investigate your claims, and in rare cases might facilitate a refund. However, Palnau cautions the commission would need to find an actual problem with the contract.

"A customer may not like that high price, but that may not be enough, that might not be a breach of that contract," she said.

Helpful links:

Michigan Public Service Commission

Better Business Bureau

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