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Gas Rates Spike For Residents With ‘Alternative Gas Providers’

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WEST MICHIGAN (April 2, 2014) — Gas rates have recently spiked in parts of West Michigan, more than doubling many gas bills.

In Michigan, gas companies like DTE, Consumers Energy and Michigan Gas Utilities are regulated by the Michigan Public Service Commission. That means they have to get approval to raise or lower rates.

However, 12 years ago state lawmakers paved the way for other companies called “alternative natural gas suppliers” to create a free market. Those suppliers can charge what they want.

Now customers who thought they signed up for a good deal on the free market are finding out that’s not the case.

“The day I got my bill, the day that I got it, I noticed that something couldn’t have been right,” Carrie Hill of Spring Lake said.

Hill said her gas bill more than doubled between December and March.

Her utility company is Michigan Gas Utility, but she’s blaming her gas supplier for the spike.

She actually gets her natural gas from Volunteer Energy which she said she signed up for through a friend. During her three years with Volunteer, she said she didn’t have a problem until now.

“I did use a little bit more energy [in March], but unfortunately the major cost of my increase was the rate of the CCFs,” Hill said.

CCF is the rate you pay per unit of natural gas.  Compare it to the price you pay for a gallon at the gas station.  That rate jumped from 59 cents in January to $1.59 in March.

On their website, Volunteer Energy said the polar vortex and our hard winter caused a spike in demand and the price.  However, Hill doesn’t believe that.

She said she called Volunteer Energy immediately after receiving the latest bill on Monday.

“I’ve left messages and no one will call me back,” she said.

So FOX 17 called the company.

“Your estimated wait-time is 14 minutes,” an automated recording said.

We finally got through to John Einstein, an attorney for Volunteer. Einstein said at the beginning of each month, utility companies tell the gas supplier how much natural to stock up on. This winter, he said, utility companies underestimated.

That means suppliers had to scramble and buy natural gas for higher amounts, and the cost was passed on to the customer. Einstein said Volunteer ate some of the cost.

FOX 17 also stopped by the Better Business Bureau. They’ve gotten 15 complaints about unregulated natural gas suppliers this week alone.

Phil Catlett is the president of BBB’s western Michigan branch. Although he sympathizes with people who are paying high rates, he said most customers signed up for it and failed to read the fine print.

“The most common circumstance for us… [customers] bring in their bill or they show us their bill, and we say we can see where your rate doubled. Now show us the contract that you signed. Let’s see how this violates the terms of the agreement,” Catlett explained.

“We have yet to find a case where the increased rate violated the agreement. It’s just the consumer didn’t know what they were signing,” he added.

“I think the bottom line here is that the consumer is really taking a risk when they sign a deal with an alternative energy provider, unless the terms of that contract are really clear and controllable with a regular constant rate and a cancellation clause that allow you to get out if you find its not working in your best interest.”

“Moving forward, I would never recommend it because this situation could happen to you, and it’s not regulated, and there’s nothing we can do about it,” Hill said.

Catlett said gas supplier’s still have to be licensed with the state to be an alternative seller, he said ultimately they’ll pay a price if they’re misleading people or engaging in dishonest practices. Bottom line, if you sign a contract and buy your natural gas on the open market, read the contract before you sign it.

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10 comments

    • Zana Curtis

      I signed up with Volunteer Energy before I read the reviews. I got Very Scared as I am disabled with a fixed income. I tried to cancelle with a phone number supplied to me on my contract with no luck. I called the rep. That I signed up with and Finally received an 800 number that led me to a voice mail that asked for information that it left with them and in about 3 days I received a letter of cancellation with a confirmation number.
      The number I called is, 1-800-977-8374
      This is a scam and if they have to go door to door it is a scam! Do your homework first and don’t be taken by these scammers!
      Zana Curtis, Grand Rapids, Michigan

  • Jo Mitchell

    The lady said she didn't have a problem with this company for 3 years. From what I read elsewhere, the cold weather affected energy suppliers across the country. Look what happened to propane prices – through the roof! I heard today MGU was raising rates because of the cold winter and high costs for natural gas. Hmmmm.

  • Jamie P

    I recently experienced the same issue here. 12 months at a fixed rate that at that time is lower that your current regulated provider(like Consumers Energy). Current providers when you call to see if it is a legit offer can't tell you to BE AWARE OF THE FINE PRINT, WHAT IS OFFERED VERBALLY VS, IN THE CONTRACT, THAT SWITCHING BACK TAKES 1-3 MONTHS FOR THE PRICE TO GO BACK TO THAT OF THE REGULATED PROVIDER. So most people think if Consumers doesn't say it is a bad idea and the numbers show I will save money then why not. Santanna Energy in MI offered me the 12 month fixed and said that after 12 months the month to month was based on Market average and that rate wouldn't be more than 10% above Consumers rate. I would have an option to join for another fixed rate also. They said I would get a notice near the 12 month ending so I would know my options then. It sounded reasonable to me. The phone confirmation & follow up change notice seemed appropriate. I had no idea of the issues that I mentioned before. My Februrary bill was higher than usual,($300 approximate winter average) but i chalked it up to the severe cold. When my March bill came and it was over $700 for 1 month I was SHOCKED. The gas amount was over $600. Noticing the amount I got previous bills and looked. Santanna had nearly quadrupled my Mcf rate. Fixed rate in Dec at $4.95 per Mcf to March's month to month rate (that would never be more than 10% higher than Consumers) at $16.32 per Mcf. I started making calls. Santanna customer service was rude and only justified their actions by saying "we are not regulated. Therefore we can charge any amount. You signed a contract & have to pay this amount which is based on Market value and supply and demand. It has been a very hard winter." I asked how they got away with doing this sneaky process & she said "We sent you a letter in Dec letting you know that you would soon be on the month to month rate. I can enroll you on our latest fixed plan if you like for $5.90 per Mcf." I said that I never got any rate change notice and if they wanted to keep me as a customer would they give me the $5.90 rate back through at least March since they gouged that month and would like it if they would go back Februrary also. she replied " Why would we want to do that? We can charge our rate and you have to pay it. We aren't regulated. The new fixed rate would start with your next billing cycle." Meaning after my next meter read. I was so disturbed by her customer unfriendly attitude and after trying to ask for many options & arguing the issue that I said fine I want to go back to Consumers Energy then. She informed me that she would do that, but I needed to know that it would take 1 to 2 more billing cycles for Consumers to take back supply for us. Flabergasted I realized that I could wind up owing up to $2400 for 3 months utilities on my house if it took the maximum amount of time and be shut off for non payment as I certainly couldn't afford that much. I hung up and made many other calls and internet searches for numerous hours over the next few days. I filed complaints with the BBB & MPSC along with posting the scam on Facebook & commenting on Santanna's Facebook page. The unfortunate part in all of this was what I didn't know and how Santanna Energy used this to take advantage of thousands of people. There was stuff all over the internet now about. The complaints go no where because they are too smart to say the promises on the recorded call and show a document that they supposedly sent by mail that never got to the customer (nearly every time people say they didn't get a notice). Thus they are within the legal terms of the contract and nothing can be done about it!!! The supervisor who called me about the MPSC complaint even refused to give me a credit on my account. He said "they were not allowed nor was it legal to go back and change a rate or give a customer credit on their account!" I finally between calling every other day was able to find out that Consumers has had so many of these same complaints that they were stepping up the processing time of switching to try and help out the MANY customers this had happened to and my account was back with Consumers much less time than it would have taken before this got so bad over the month of March. My bill will not be over $2000 & can make payments to prevent shut off. It is such a terrible thing to take advantage of people where and when they are most vulnerable. In their homes and with something they can't get by without in Michigan!! This is just plain bad business practice. Many different suppliers have done it not just Santanna Energy however Santanna's March rate was at least double of the next highest rate and research shows them accountable in a class action law suit in another state for which they filed bankruptcy on later!! SO IF SOMEONE OFFERS YOU A NATURAL GAS CHOICE PLAN BEWARE OF WHAT YOU DON"T KNOW!! I would suggest not switching at all. Regulation isn't a bad thing in this case!

      • Jamie P

        I did take many breaths while writing this long message. Thanks for your concern. I am trying to be as detailed as possible to hopefully help others from going through the same thing. It seems as though not knowing all of the details is what has casued this & other suppliers to legally profit from price gouging every day citizens.

  • Albeit

    Deregulation of this utility is thought to create lower prices via increased competition (new and more firms entering the market;creating a competitive market) with hopes for proper allocation and wishes of innovation, so then where is the competition for those who operate in this market freely and unregulated? Those who are regulated cannot raise prices without government approval and those who are not regulated can and will set their own prices beyond the fair market price, hence the purpose of regulation. Right now you got the choice to choose the regulated monopoly or the unregulated small firm. Keep the market regulated or make it totally free and let the invisible hand work. This works in some states and not in others.

  • For Real

    The same thing is happening with electric power.
    My electric bill was $500 this month.
    Now I pay for power and I pay to "rent" the lines in the form of "delivery fee" or " user fee"
    And its going to get much much worse-

    As the EPA keeps shutting down coal plants with no plans to replace them the cost of power will "necessarily skyrocket"