Energy Deregulation Backfires, Electricity Costs Increase Instead of Decrease

Many states with deregulated utilities have seen consumers’ electricity costs soar instead of drop, due to an alleged Ambit Energy scam.

Electricity deregulation began in the 1990s with the goal of creating a competitive market to drive down prices. Instead, critics say, deregulation gave birth to a new array of scam artists that saw a way to gouge consumers.

Energy service companies like Ambit Energy act as a middle man between energy producers and consumers. These ESCOs formed to compete with the large energy companies that traditionally provided electricity and gas.

ESCOs are accused of using aggressive sales tactics to convince consumers to switch energy suppliers.

Electricity Costs Have Doubled, Even Tripled for Some Consumers

Sixteen states have deregulated energy in efforts to provide consumers with lower prices made possible as a result of increased competition.

Unfortunately, some of the new energy retailers offered competitive fixed rates for an undisclosed amount of time. Once the fixed rates “expired,” the consumer was stuck with a variable rate that fluctuated higher and higher.

The end result is that trusting consumers pay higher gas and electricity costs than they would have had they stayed with their original supplier.

States Report Higher Costs After Deregulation

The U.S. Energy Information Administration says that in New York state, electric bills reportedly increased an average of 14.7 percent in 2014 for one million consumers who opted for what they believed was a lower cost option.

A $58.56 bill with Con Edison would have amounted to $67.14 with an ESCO.

One study showed New Yorkers paid an additional $413 in electricity costs over two years when they signed up with an ESCO.

The state of Texas reports similar issues. The Texas Coalition for Affordable Power released a report in June 2016 that said customers in deregulated areas paid an average of 15.5 percent more than those in regulated areas where consumers have no choice of energy providers.

Approximately 85 percent of Texas is deregulated. Their analysis looked at data from the U.S. Energy Information Administration that went back to 2002, which was when deregulation began in Texas.

“Rates have been higher and more volatile in the deregulated areas of Texas. But the state’s more serious challenges relate to reliability and the adequacy of power supplies,” said the Public Sector Consultants Texas Report in October 2013.

Higher prices and unreliable power supplies have left consumers feeling frustrated and ripped off.

Ambit Energy Scam Class Action Lawsuit

In a 2015 Ambit Energy scam class action lawsuit, New York resident Scott Lazarek says he was an Ambit customer for two years and ended up paying way too much for service.

After realizing that Ambit’s rates were a lot higher than his previous supplier, Lazarek claims he called Ambit to let them know he wanted to switch back to RG&E.

The Ambit Energy scam lawsuit states that his final bill was for an alarming total of $1,002.55.

“To make matters worse, while both the gas and electric portions of Mr. Lazarek’s final bill showed that he owed Ambit a balance, the ‘settlement’ charges Ambit imposed were larger than the balance owed,” the Ambit Energy scam lawsuit states.

The Ambit Energy scam lawsuit claims that by adding the surprise “settlement” amounts to Lazarek’s final bill, the company “hid the true cost of its energy charges, thus allowing Ambit to charge Plaintiff Lazarek more than his existing utility would have without Mr. Lazarek realizing it.”

The case is ongoing and seeks to represent all Ambit customers in California, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Texas, Virginia and Washington, D.C.

ESCOs Face Deregulation Lawsuits Because of Electricity Costs

Energy retailers who have overcharged consumers have been sued by consumers who were promised lower prices, but ended up paying substantially more money.

A customer filed suit against Stream Energy in 2015 because his electricity costs increased more than 50 percent after he switched to Stream.

Both Stream and Ambit are accused of using deceptive marketing practices and using a multi-level marketing program to sell their energy programs.

If you have seen your gas and electricity costs increase after switching to an energy retailer, you could qualify to participate in an energy deregulation overcharge class action lawsuit or an Ambit Energy scam class action lawsuit.