You might be getting ripped off on home heating
Fixed rates, cancellation fees and criminal scams will cost you.
Mon, Jan 17, 2011 at 03:53 PM
If you've been using the same regulated gas company for years, with little cause for complaint (aside from gas price hikes), you've probably never suspected that something's amiss with your heating bill. And chances are, you're not getting ripped off. Regulated utilities are watched closely by your state government and, aside from the unlikely event of a meter malfunction, you're probably getting exactly what you pay for. However, there are a number of perfectly legal tactics that utility companies (mostly unregulated) use that ultimately lead to higher consumer costs.
Fixed-rate utility service
Often, consumers actually choose to pay higher prices for home heating. Here's one common scenario: In areas where utility service is offered by more than one provider, some of those companies may have fixed-rate programs, in which the consumer's price for gas stays the same over a given period. While these protect against rate hikes in the market price of gas, fixed rates tend to be higher than non-fixed rates.
Over the long run, if the market price of gas doesn't go up precipitously, fixed-rate customers may pay significantly more than customers with standard plans. Where things tend to get murky is in the marketing of fixed-rate plans. By focusing on, or even exaggerating, the potential for future gas price hikes, some companies try to scare consumers into believing a fixed rate is the only safe and sensible option. It can be argued that a fixed-rate plan is theoretically safer, but there's a good chance it will cost you more in the end.
Protect yourself by doing the math, looking at gas rates in recent years to make an educated guess about the future of gas prices. Also, if an unregulated gas provider claims to be endorsed by any official boards or business commissions, make sure the claims are accurate before considering the company.
Always read the fine print of any gas service contract. Regulated providers typically charge a fee for setting up an account, but there shouldn't be a penalty for stopping service at any time. Other companies may charge hefty fees for early withdrawal from a service plan. A high cancellation fee can discourage you from canceling a plan if you realize you're paying more on your monthly bill than you had expected.
Misleading marketing is legal persuasion, usually playing on people's fears. On the more nefarious side of matters are the outright crooks who take advantage of home heating worries. For example, if someone shows up at your door wearing an official utility company uniform (and even driving an official-looking vehicle) and asks for an overdue payment on your heating bill, kindly show him to the street (leading the way with your foot, if desired). A legitimate utility company will never ask for a payment on the spot, and if yours does, you should suspect their entire operation. If you suspect any activity, simply check it out by calling your utility company's customer service line.
Other scammers will claim to save you money by cleaning and servicing your heating equipment, then they "discover" something seriously wrong with your system that requires expensive repairs or replacement. While it's a good idea to have your furnace cleaned and inspected periodically, this is a maintenance issue, not a huge cost-saving measure. In general, don't hire anyone to work on your system unless you've checked out their company with the local Better Business Bureau, at the very least.
Where to learn more
Every state has a utilities commission, a governmental agency that monitors the rates and services of public and/or private utility companies. Call your local commission or visit its website to learn more about consumer rights and protections. Other places to seek help and information is your state Attorney General's office and any local consumer advocacy organizations.