Attorney General Files Suit Against Retail Supplier, Seeks License Revocation, Consumer Contract Rescission

Alleged Violations Include Referring To Energy Choice As "State" "Program", Even In Situations Where Supplier Does Not Say Program Designed To Save Money

October 4, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Attorney General (AG) of the State of Illinois filed in circuit court for Cook County, IL, a lawsuit against Residents Energy LLC for alleged, "violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. ('Consumer Fraud Act' or 'CFA'), and the Illinois Telephone Solicitations Act, 815 ILCS 413/1 et seq. ('Telephone Solicitations Act' or 'TSA')."

The AG alleged, "Among other practices, Residents has marketed its services by claiming consumers would save money on their electric bills when, in reality, consumers who switched to Residents virtually always paid considerably more for their electricity than they would have had they not switched."

The AG alleged, "Through misrepresentations, omissions of material fact, and other deceptive and unfair practices, Residents has tricked thousands of Illinois consumers into paying millions more for their electricity than they would have if they had remained enrolled with their default public utility."

The AG alleged, "Residents’ basic business model in Illinois has been to offer potential customers a first month, introductory rate that is approximately equal to the default utility’s rate, and then quickly escalate that rate until it is double or more than the public utility’s rate. Residents’ telemarketing agents conceal the fact that the quoted rate is merely a first month, introductory rate, and instead suggest that the quoted rate is typical of Residents’ rates, and that consumers will save money by switching to Residents. Moreover, Residents’ sales agents falsely tell consumers that Residents’ rate is historically low and less than the utility’s rate; that they have never seen Residents’ rate higher than the utility rate; and that Residents 'shops the market aggressively' to provide lower rates. None of this is true."

The AG alleged, "For example, during the period from October 2018 to September 2020, Residents’ existing variable account customers on average paid more than the default utility rate each and every month, and sometimes double or more than the utility rate. During that two-year period, Residents customers on average paid a staggering 54% more than the default rate the public utility charged, and collectively paid approximately $15 million more than they would have if they had enrolled with the default public utility. Residents’ customers have continued to the present day to consistently pay higher rates than the rates charged by the default public utility, and have continued to collectively pay millions of dollars more than they would have if they had enrolled with the default public utility."

The AG alleged, "For example, one Illinois customer who filed a complaint with the ICC in 2022 was charged a first month rate of 6.38 cents per kWh, after which the rate nearly tripled until it was 18.49 cents only ten (10) months later, in August 2022."

The AG alleged, "In some of its written materials -- but importantly, not during Residents’ telephone solicitations -- Residents refers to the first month rate as an 'introductory' rate."

The AG alleged, "For example, the average rate Residents charged its customers in ComEd territory from October 2018 through September 2020 was 10.6 cents per kWh, whereas the average ComEd rate during this period was 6.8 cents per kWh. In other words, Residents’ customers paid, on average, a 55% premium for their electricity during this two-year period."

The AG alleged, "Moreover, some consumers have found themselves paying Residents’ exorbitant rates without ever enrolling with Residents. That is because they were 'slammed' -- i.e., enrolled without their knowledge or consent. An alarming number of consumers have filed complaints with the Illinois Commerce Commission ('ICC') alleging that were [sic] switched to Residents without their authorization, and often without having had any contact with Residents’ representatives."

The AG alleged, "During recorded telemarketing solicitations, Residents’ sales agents routinely conceal the fact that the quoted rate is merely a first month introductory rate, and that the rate will never be that low again. Residents’ sales agents do not describe the quoted rate as an 'introductory rate,' a 'first month’s rate,' a 'special offer,' or any other similar term that would disclose the true nature of the quoted price. The fact that the quoted price is a temporary, one-month price is a 'material fact' for purposes of the Consumer Fraud Act, 815 ILCS 505/2, and Residents’ telemarketers’ failure to mention that fact during solicitations is a 'concealment' and 'omission' which Residents intends consumers to rely upon."

The AG alleged, "Instead, Residents’ sales representatives routinely describe the first month, introductory rate as the 'current rate' or 'current variable rate,' thereby deceptively implying that the rate is typical of Residents’ variable rates rather than a one-time, one-month offer."

The AG alleged, "Residents’ sales agents routinely misrepresent that Residents’ rates are 'low' and will save consumers money, as shown by the following examples of misrepresentations made during Residents’ recorded telemarketing calls..."

The AG alleged the following examples:

• 'We’re also gonna get you a new low variable rate every month.'

• 'We get you that new low rate, month in and month out.'

• '...you are paying more than you have to.'

• '...you will start paying the new low rate and see better results.'

• 'The whole point is to try to give you a little relief on the bill.'

• 'And we do adjust the rate and get you the lowest rate possible on the bill each and every month.'

• '...we’re able to shop around as a supplier and try to keep you cheaper than the default rate at all times.'

• 'if you’re not already enrolled in this free program, you end up getting charged the standard service rate for the electricity. So you end up paying more than you have to.'

The AG said that the Illinois Telephone Solicitations Act (TSA) requires telephone solicitors to immediately state, among other things, 'the purpose of the call.' 815 ILCS 413/15(b)(1).

The AG alleged, "Residents’ telemarketers violate the TSA at the very outset by failing to state the true purpose of the call."

The AG alleged, "Instead, Residents’ telemarketers conceal the true nature of the call by immediately promising consumers 'money back' on their utility bill in the form of a rebate. In recorded solicitation calls, Residents’ agents routinely begin the call with a variation of the phrase, 'We’re just calling to issue money back on the electric account.' Examples include, 'I’m calling about getting money back on the ComEd electric bill'; 'I’m calling to issue the rebates on your electric bill'; and 'I was just giving you a call back, getting some money back rebates for the electric account.'"

The AG alleged, "This deceptive sales pitch serves multiple purposes: first, it falsely suggests that the sales representative is affiliated with the utility company; second, it conceals the true purpose of the call, which is to switch the consumer from the utility to Residents; and third, it sets up the sales agent’s deceptive request to 'verify' or 'confirm' information on the consumer’s utility bill in order to effectuate the rebate—information that the Residents’ agent does not actually possess. See e.g., 'So in order to get the money back issued out correctly, I would just need to confirm some basic customer information with you. So in order to do that, we just ask if you can grab a copy of one of your electric bills.'"

The AG said that the Telephone Solicitations Act also requires telephone solicitors to 'inquire at the beginning of the call whether the person called consents to the solicitation.' 815 ILCS 413/15(b)(2).

The AG alleged, "Residents’ telemarketers routinely violate the TSA by failing to obtain the consumer’s consent to the solicitation."

The AG alleged, "To further conceal the true nature of the solicitation call, Residents’ sales agents have further misrepresented, expressly and impliedly, an association with ComEd or Ameren, as these are the public utilities that consumers know and depend upon to deliver their electricity and respond to emergencies. In recorded solicitation calls, Residents’ sales representatives routinely represent that they are 'working in cooperation with the utility' in order to provide rebates. Other examples include: 'We simply just work in cooperation with ComEd to get you the rebate on your bill'; 'We work with Ameren'; 'We work in cooperation with ComEd, Ameren, and Nicor.'"

"By falsely referencing 'cooperation' with the public utility, Residents misleads consumers to believe its agents are calling on behalf or in connection with the public utility to provide a 'rebate' on the ComEd or Ameren electric bill, rather than calling to switch consumers to a new electric supplier," the AG alleged

The AG alleged, "Residents’ agents’ misrepresentation that information on the consumer’s bill must be 'verified' or 'confirmed' is a deceptive practice in itself. Nearly every Residents solicitation call includes this 'verification' ruse, which is designed to conceal the fact that the agent does not have the consumer’s account information, but needs to obtain it in order to effect the switch from the default public utility. By asking consumers to 'verify' or 'confirm' their public utility account number, a Residents sales agent falsely suggests that the agent already has the utility account number and that the consumer is merely verifying or confirming that number. By pretending to know information that a public utility representative would know (but that Residents does not know), Residents intends for consumers to believe that its agents are endorsed by or acting on behalf of the utility."

The AG alleged, "Residents’ agents lie if necessary to maintain the fiction that they already have the account information. On one recorded telephone solicitation call, a consumer balks at providing information from the bill and says, 'Well, you’ve already got this information.' The agent falsely responds, 'Correct. They still have us gather it as it’s on the bill.' On another call, after being asked twice for her account number, a consumer says, 'You said earlier that you had all the information you needed and now you’re asking me for it.' The agent responds, 'Well, we do verify the information. We don’t send out random money to people.'"

The AG alleged, "Residents’ sales representatives have also intentionally misled consumers by falsely claiming they are entitled to savings and refunds on their electric bills through an 'Energy Choice' program run by the State of Illinois or the public utility."

Notably, aside from more egregious and obviously problematic examples, the AG alleged the following examples:

"• 'It’s just a free state program in the State of Illinois called Energy Choice Program to help the customers with their supply cost on the bill.'"

"• 'The State of Illinois stepped in and came up with this program quite a few years ago. It’s called the Energy Choice Program to help customers with the supply cost on their bill.'"

The AG alleged, "There is no such program."

The AG said, "Nothing in Illinois law entitles consumers to reductions on their electricity bills." Notably, the quoted examples above do not explicitly state such, though they reference help with "supply cost"

The AG continued, "The Illinois Electric Service Customer Choice and Rate Relief Law of 1997, 220 ILCS 5/16-101 et seq., deregulated the market. But importantly, it does not create a 'program' for consumers to join or the state or the public utility to run. In fact, the deregulation law precludes the ICC from regulating the prices charged by ARES like Residents. It is simply a statute that allows consumers to voluntarily decide whether to stay with their default public utility or select a retail electric supplier to provide their electric supply."

The AG alleged, "By referring to a state or public utility 'program,' and telling consumers they are 'eligible' for these benefits, Residents intends to associate its product with various benefit programs commonly offered by the default public utilities. For example, ComEd’s website features a page titled 'Payment Assistance' that explains various 'financial assistance programs designed to lend a hand when you need it most,' including bill payment assistance, a neighbor fund, and payment arrangements. Ameren’s website, in turn, discusses 'Energy Assistance' for consumers 'facing soaring electricity and natural gas prices.' Residents incorporated references to such a 'program' in its marketing scripts, and its sales representatives have made repeated and relentless appeals to this 'program' in their customer solicitations, with the intent that consumers believed they are enrolling in something akin to one of the default public utilities’ benefit programs."

The AG alleged, "Residents’ agents also attempt to persuade customers to switch suppliers by misrepresenting how the electricity market works. A particularly egregious example is frightening customers into believing that the utility is charging them 'every time' they turn on an appliance, as shown by this recorded telemarketing exchange in October 2018..."

The AG alleged such example as follows:

Residents’ Agent: 'I just want you to be aware Ameren is currently charging you every time you open the refrigerator 3.710 cents every time you open the fridge.'

Consumer: 'Oh my God.'

The AG alleged, "On another recorded call in October 2018, a Residents telemarketer tells a consumer, 'Every time you turn on the light switch, ComEd is charging you almost seven cents just to turn on the light switch.' And on a recorded call in October 2019, a telemarketer states: 'That means that every time you press start on a microwave, you turn on a ceiling fan, you do a load of laundry, [consumer’s supplier] is charging you 19.3 cents.' Such statements exploit the public’s general lack of understanding about how electricity charges are calculated."

The AG alleged that consumers in recent years have filed complaints with the ICC alleging that their rate increased by more than 20% without receiving any notice from Residents. The AG said that, since 2017, Illinois regulations have required ARES to provide written notice to variable rate customers whenever their rate jumps by more than 20% from one month to the next. 83 Ill. Admin. Code § 412.165(e) (Rate Notice to Customers).

Among other things, the AG sought the following relief:

• such relief as the Court finds necessary to redress injury to consumers resulting from Defendant’s violations of the Consumer Fraud Act, including but not limited to, restitution, rescission of contracts entered into between the Defendant and Illinois consumers, the refund of monies paid, and the disgorgement of ill-gotten monies

• revocation of Defendant’s Certificate of Service Authority to operate as an alternative retail electric supplier in the State of Illinois

• Civil penalties of up to $50,000 per each alleged violation of certain statutes

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