By La Risa Lynch

Gov. Pritzker today signed a bill that prevents alternative energy suppliers from pocketing millions in energy assistance funds intended to help low-income residents pay their high utility bills. Senate Bill 651 takes effect on January 1, 2020.

Many of these suppliers disproportionately target Black and Latino neighborhoods with deceptive marketing practices to get customers to sign up with these companies.

More than $12 million in LIHEAP, or Low-Income Home Energy Assistance Program subsidies went to some of the 152 active alternative electric and gas suppliers operating in the state between November 2018 and May 2019, an analysis of payment data shows. It is unknown how much of this public subsidy has gone to the industry since alternative energy suppliers began servicing residential customers in 2010. The state only began collecting this data last year.

But a key provision of SB 651, the Home Energy Affordability and Transparency (HEAT) Act, prevents these companies from switching individuals who receive LIHEAP support or are on an income-based payment plan.

The bill would also place tighter regulations and more transparency on alternative energy suppliers, which are private companies that resell energy — often at higher prices — to residential and commercial consumers. It was among the flurry of bills that passed out of the General Assembly on the last days of the session.

Consumer advocates have long criticized energy suppliers for deceptive marketing practices that promise savings but charge higher rates months later. These companies, advocates say, use confusing and misleading information to go after low-income residents, communities of color, senior citizens or those with limited English skills who don’t understand the products sold to them.

Through low teaser rates and high dollar gift cards for brand name stores, some suppliers bait low-income residents into switching their energy services from traditional utilities like ComEd or Ameren. In some instances, these tactics leave people struggling to pay high gas or electric bills with some turning to LIHEAP for relief. And thousands of those federal dollars end up in the pockets of energy suppliers when low-income residents sign up with these companies.

Over a four year period, customers who switched to an energy supplier paid more than $600 million more in electricity costs than those who stayed with a traditional public utility, according to Attorney General Kwame Raoul, who championed the bill that passed both chambers with unanimous bipartisan support in May.

“We’re extremely happy that the HEAT Act provides protection for LIHEAP customers, who have been robbed of millions of dollars from bad alternative supplier deals,” said Jim Chilsen of the consumer watchdog group Citizens Utility Board. “It’s disgusting and shameful how some alternative suppliers have targeted and exploited low-income consumers.”

Even the industry wanted reforms to weed out bad actors and stop abuse, said Kevin Wright, president of the Illinois Competitive Energy Association. The seven member association, which represents suppliers with the largest market share including Constellation, an arm of Exelon, worked with Raoul’s office to negotiate a compromise that would allow firms to renew fixed rated contracts without customer consent if the new rate remains fixed.

The industry, Wright said, first broached the idea last year of banning LIHEAP recipients from enrolling with an alternative energy supplier “based on reports and concerns that there was targeting in low-income communities.”

In Chicago alone, energy suppliers pulled in more than $3 million in energy assistance, most of which came from ZIP codes that are predominantly Black and Latino. The most lucrative ZIP code for LIHEAP subsidies to energy suppliers was 60623, which includes North Lawndale and Little Village, and contributed $215,000.

These findings mirrored a similar analysis that found a high concentration of consumer complaints against alternative energy suppliers occur in the city’s low-income Black and Latino communities.

News of the bill’s passage couldn’t have come soon enough for Rev. Dr. Henry Raven Sr., whose organization The Action Coalition of Englewood helps residents sign up for energy assistance funds. The bill happened to pass on the last day to sign up for those funds.

At least half of the people who walk through his organization’s door are signed up with an alternative energy supplier and don’t even know it, said Raven. The group serves about 9,000 clients annually.

“That’s why their bill is so high,” said the president of the 30-year old organization. “Once they get hooked up on there a lot of them are not aware they are paying two bills until we notify them.”

Customers, he explained, get charged by ComEd for the delivery of the electricity and then by the energy supplier, they are signed up with for the actual supply.

“It really hurts them,” he said.

In Raven’s community, energy supply companies pocketed $144,000 in LIHEAP funds for a community with a median income of $19,000.

Advocates hailed the reform as one step toward protecting the most vulnerable utility customers who signed up to save on energy bills they’re already struggling to pay.

“The idea that those resources that should be helping people pay their bill are instead padding the profits of alternative energy supplier is outrageous and that is why … this reform is going into place,” said Abe Scarr, director of Illinois Public Interest Research Group, a non-partisan consumer and public interest group.

Those additional LIHEAP dollars, he said, could be used to help others with their electricity or gas bill. The demand for financial assistance always outweighs available funds, he added.

Wright called provisions in the bill some the toughest he’s seen in the country and could serve as a model for other competitive energy supplier markets. The bill gives the attorney general’s office leverage to go after suppliers who violate certain Illinois Commerce Commission marketing rules under the state’s Consumer Fraud and Deceptive Business Practices Act. The commission oversees the state’s utility market.

“Not only do you risk a violation at the Illinois Commerce Commission, you also risk a consumer fraud act [violation], which is far more severe and can lead to class action lawsuits,” said Wright, who once served as an ICC commissioner. “It’s tough medicine but I think it is needed to correct problems that we admit exist in the industry.”

Under the new legislation, traditional public utilities will serve as a backstop to prevent LIHEAP recipients from enrolling with an alternative energy supplier since they maintain those payment records.

Other provisions in the bill include ending automatic contract renewals from fixed to variable rates, a tactic that stuck many consumers with gradually increasing utility bills. Now suppliers are required to get customers’ consent before switching them to a higher rate. In other words, customers must opt-in.

The bill also ends termination fees and penalties for both residential and small business customers. It requires alternative energy suppliers to list their price in comparison to that charged by a traditional public utilities. That information must be on all marketing materials as well.

Both Scarr and Wright agreed that the bill gives consumers the tools and resources to make informed decisions about whether to stay with a traditional utility or switch to an alternative supplier.

But Scarr noted only time will tell if these reforms work.

“If over a couple of years … we are still seeing significant problems, I think we would have an even stronger case to take back to the Illinois General Assembly and demand even stronger reforms or reconsideration of the whole market,” Scarr said. “But in terms of policy, it is a big victory for consumers.”