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Retail Supplier To Pay $12 Million Under Settlement With Attorney General
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Direct Energy Services, LLC ("Direct") is to pay $12 million under a settlement with Illinois Attorney General Kwame Raoul to resolve allegations from the AG that, among other allegations, Direct engaged in, "unfair and deceptive acts or practices[.]"
Direct Energy provided the following statement concerning the matter:
"Direct Energy has reached a settlement with the Illinois Attorney General’s Office regarding past marketing practices. As part of the settlement, Direct Energy will suspend marketing activities in Illinois through November 30, 2025. While we deny any wrongdoing, we are pleased to have reached an amicable resolution and remain committed to improving transparency, compliance, and customer trust. Direct Energy prides itself on ensuring our customers receive best-in-class service, and we will continue to work to deliver on that promise."
--- Statement from Direct Energy
In a consent decree, Direct denies each of the allegations from the AG.
The consent decree provides that, "Nothing
contained in this Consent Decree is intended by the parties to be deemed or construed as an
admission of wrongdoing or liability by Direct, all of which Direct expressly denies."
The AG alleged that Direct at times charged consumers electricity rates over 230% more than consumers would have paid under their default utility rate
The AG also alleged, "Since 2013, regardless of the rate plan, the rates Direct Energy has charged its
customers have virtually always been higher than the default rate customers would have paid to
their public utility. In fact, during the period from June 2018 through August 2020, which
included the peak of the COVID-19 pandemic, Direct Energy’s rates were higher than the default
utility rate over 99% of the time."
In addition to the $12 million settlement payment, the entity Direct Energy Services LLC voluntarily agrees to refrain from
all "Marketing Activities" in Illinois from December 1, 2024 through December 1, 2025
"Marketing Activities" include
any outbound telemarketing, direct mail, electronic, door-to-door, in-person, multi-level
marketing through independent business operators, advertisement on newspaper, magazine,
television, radio, internet, search engines, social media, email or other print or electronic media,
or other solicitation offering the sale of electricity to new Consumers in the State of Illinois.
"Marketing Activities" does not include Direct Energy's website or
inbound telephone calls or other forms of inbound communications initiated by consumers
With respect to residential customers only, for the entities Direct Energy Business, LLC, NRG Business Marketing, LLC, and Gateway Energy
Services Corporation (each stated to be a subsidiary of Direct Energy Services LLC), the marketing stand-down applies
only to marketing activities directed to residential electricity consumers in the State of Illinois.
Among other things, the AG alleged that Direct, or its third-party agents:
• misrepresented that there exists a state-
sponsored or state-sanctioned "program" that offers residential Consumers savings, refunds, or
similar benefits upon enrollment
• misrepresented during solicitations that the residential
Consumer's public utility account information had to be "verified" or "confirmed," and thereby
deceptively obtained access to confidential utility account information
• misrepresented that
Direct's rates are "low" and that residential Consumers will save money by enrolling with
Direct, when the opposite is true
• misrepresented that Direct's fixed rates provided "price
protection" that would protect residential Consumers from allegedly high default utility rates
when in fact it locked residential Consumers into fixed rates considerably higher than the default
utilities had ever charged
• routinely failed to disclose the new rate that residential
customers would be paying for their new fixed rate term
• misrepresented to residential Consumers that Direct
was affiliated with the Consumer's public utility
• omitted key disclosures during its telephone solicitations, including failing to
immediately state the purpose of the telemarketing call and obtain the Consumers' consent to the
solicitation at the beginning of the call
With respect to the allegation that Direct misrepresented that
Direct's rates were "low", such terminology was not included in the AG's initially filed complaint, but was listed as an allegation in the consent decree
The initial complaint had alleged the following terms were deceptive given Direct's rate, but notably this list does not include the term "low" itself and/or the use of the term "low" in conjunction with other terms (as opposed to "lower", etc)
The AG alleged that, "Direct Energy routinely has portrayed its rates as a discount on the rates that
consumers are paying on their electricity bills," with the AG alleging that Direct promised
consumers:
• "lower rates";
• "peak savings";
• a rate that is "a lot lower";
• a "dual discount";
• to bring your rate "down"; and
• to "save money."
Additionally, the AG alleged, "Direct Energy sales representatives begin solicitations by asking to speak with the
person who handles the 'electric bill.' Sometimes they even explicitly reference the utility by
name, saying, for example, they are calling 'about your electric bill, ComEd.' This initial
reference to a consumer’s electric bill -- not to mention explicit references to the public utility by
name -- is likely to mislead consumers to believe the public utility, rather than a private supplier,
is contacting them about their utility bill."
The AG alleged, "Similarly, Direct Energy sales representatives tell consumers, at the beginning of
the sales pitch, they are entitled to receive 'price protection on your bill.' This language is likely
to mislead consumers to believe they have earned this price protection benefit on their utility bill,
perhaps because of their record as valuable ComEd or Ameren customers. The qualifying
questions Direct Energy sales representatives ask consumers further perpetuate this confusion.
One of the questions is whether the consumer is current on her payments. Implying that being
current on payments to the public utility (since payments always go to the utility, no matter the
supplier) has qualified a consumer for 'price protection' misleads consumers into believing the
agents are calling on behalf of or in connection with the utility to apply a 'price protection'
benefit on the ComEd or Ameren electric bill, rather than calling to switch consumers to a new
electric supplier."
The AG alleged, "Direct Energy also tells consumers at the outset of the sales pitch that the purpose
of the solicitation is to 'apply the benefits into your account.' In order to 'apply' these
'benefits,' Direct Energy often asks consumers to 'verify' the utility account information. This
language is likely to mislead consumers to believe the agent is a representative of the public
utility and has access to information within the utility’s system, including consumers’ utility
account numbers. These misrepresentations are intended to mislead consumers into revealing
their unique utility account numbers, which the Direct Energy sales agent can then use to switch
a consumer’s electric supplier."
The AG's complaint also alleges that characterizing the default service rate as changing "every month" or "fluctuating" is misleading because, while the bypassable PEA (reconciliation) factor may vary each month, the amount of change in the PEA is capped at 5 mills per kWh, and the specific PEA charged to default service customers may not necessarily change each month (the PEA has historically remained flat for multiple months at a time)
The AG alleged, "Direct Energy has misled consumers regarding the variability of their
current rate. For example, Direct Energy has told consumers that the default utility rate changes
'every month,' 'is never the same,' and keeps 'increasing' and 'fluctuating.' But the default
utility rate is not subject to change every month, is often the same from month-to-month, and is
considerably more stable than Direct Energy represents. If a consumer is currently receiving
electric supply from the public utility, their rate is determined and publicly available months in
advance and will change, at most, once every three months, excluding a small monthly
purchased electricity adjustment (PEA) that is capped at one half of one cent. It can, and often
does, remain the same for five months at a time."
Under the consent decree, Direct agrees to not represent, expressly or by implication, that there exists a state-sponsored
or state-sanctioned program that offers Consumers savings, refunds, or
similar benefits upon enrollment, or that Direct is contacting the Consumer
to enroll them in such a program, including but not limited to using terms
such as "energy choice program," "utility choice program," "state choice
program," "government choice program," "government choice initiative or
plan," "utility choice plan or initiative," "state choice plan or initiative," or
"state or government choice opportunity," as it relates to Illinois'
deregulation law
Direct also agrees to not represent, expressly or by implication, that the Consumer's public utility
account information must be "verified" or "confirmed," or otherwise
implying that the sales representative already has access to confidential
utility account information, or asking a Consumer to provide their utility
account information before Direct discloses all material terms and the
Consumer affirmatively consents to enroll with Direct
Direct also agrees to not represent, expressly or by implication, that Direct's rates are "low" or
that Consumers will save money in comparison to the default public utility
unless Direct will guarantee that the Consumer will pay a lower rate than
they would with their default public utility and Direct clearly and conspicuously discloses the time period during which Consumers will
experience such savings. Nothing shall foreclose Direct
Energy from representing that its rates are lower than another competitive retail electric supplier
Direct also agrees to not represent, expressly or by implication, that Direct Energy's fixed rates
provide "price protection" that will protect Consumers from allegedly high
default utility rates
Direct agrees that, prior to asking the Consumer to
provide their utility account number for enrollment, Direct shall disclose all material terms, and shall also disclose the current default public utility rate for electricity supply in
the customer's zip code
The $12 million settlement payment reflects about $9.4 million in restitution to eligible customers, $750,000 to administer the restitution fund, and about $1.9 million in payment of legal fees to the AG for the AG's retention of outside counsel for assistance in pursuing the complaint
Customers eligible for restitution include those served between 2013 and April 2025
The settlement also includes the development of training and compliance programs at Direct, and compliance monitoring and reporting
"Companies like Direct Energy must be held accountable for taking advantage of consumers with misrepresentations and false promises of lower prices," AG Raoul said. "My office is committed to protecting Illinois residents from such deceptive practices and preventing people from being misled into overpaying for the energy they need."
The AG alleged that the alleged behavior described above violated the Illinois Consumer Fraud and Deceptive Business
Practices Act ('Consumer Fraud Act' or 'CFA', 815 ILCS 505/1 et seq.), including Section 2 which generally address "unfair or
deceptive acts or practices", as well as Section 2EE which is specific to retail suppliers, and/or the Illinois
Telephone Solicitations Act ('Telephone Solicitations Act' or 'TSA'), 815 ILCS 413/1 et seq.
Cook County IL, Circuit Court, No. 25 CH 4091
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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