Energy deregulation was supposed to provide customers with lower prices for electricity and gas, according to a lawsuit, but has often resulted in price gouging and deceptive practices.
Angela Glikin of Maryland claims she was a victim of such abuses in a class action lawsuit filed in U.S. District Court, White Plains, against Major Energy Electric Services of Orangeburg.
“Some unscrupulous energy suppliers, like Major Energy, have exploited deregulation by deceiving customers hoping to save on their residential energy costs,” the lawsuit states. Major engaged in practices “designed to profiteer at the expense of the consuming public.”
Major Energy did not respond to an email asking for its side of the story.
States began deregulating energy markets in the 1990s, allowing independent companies that neither produced nor delivered electricity to broker energy prices for consumers.
They competed primarily against local utilities. And since a unit of energy is the same no matter who sells it, the independents competed on price.
Major Energy”™s strategy was to set an initial fixed rate, below or equal to the local utility, according to the complaint. Then at some point, the plan defaulted to variable rates purportedly based on competitive market rates.
But the promise of competitive rates was false, the complaint states. Major Energy”™s variable rates were allegedly untethered from market condition and at least twice as high as local utility rates.
The lawsuit accuses Major Energy of taking advantage of consumers”™ ignorance about energy markets.
“No consumer would ever agree to Major Energy”™s variable rate if they knew the truth,” the complaint states.
Several states have filed lawsuits and regulatory actions against energy brokers. New York, for example, found that residential customers had paid $1.2 billion more to brokers than they would have paid their local utilities from 2014 to 2016. Small commercial customers paid an extra $136 million.
New York banned brokers from serving low-income consumers in 2016 and banned variable rates in 2019.
In 2001, 42 states had begun or were considering energy deregulation. Today, the complaint states, only 17 states and the District of Columbia deregulate energy.
Glikin signed up for electricity service with North Eastern States Inc. in 2013 for 9.5-cents per kwh. In 2018, her contract was assigned to Major Energy, an affiliate of Sparks Energy of Houston.
Major Energy promised competitive prices, according to the complaint, but immediately “began price gouging her.”
She canceled the contract last year when she realized that Major”™s rates were much higher than the local utility rates.
For nearly two years, she paid Major Energy from 16.11-cents to 18.99-cents per kilowatt hour, according to the lawsuit. The local utility was charging from 6.55 cents to 8.14 cents per kilowatt hour and the wholesale market used by brokers was charging 5.4 cents to 8.9 cents per kilowatt hour.
The complaint was filed on behalf of all Major Energy customers in the United States who were charged variable rates for electricity or gas.
Major Energy is accused of fraud, unjust enrichment, deceptive practices and breach of contract. The action is seeking at least $100 million in compensation, plus punitive damages.
Glikin is represented by Armonk attorneys Steven L. Wittels, J. Burkett McInturff and Susan J. Russell; and by White Plains attorneys D. Greg Blankinship and Chantal Khalil.
