watchdog column

The Watchdog: In the world of Texas electricity, free is not always free

December 9, 2013 by Dave Lieber

TXU Free Weekends promises free electricity for 48 hours beginning at midnight Friday. But during the week, expect to pay 19 cents per kwh. Holy moly! It’s free, The Watchdog says, but it’s expensive when it’s not.

Can a company say something is free when it’s not? Can a company put the word free in the title of a product even when customers have to pay?

Or worse, can a company selling this product with the word free in the title actually charge the highest rates around?

As readers of The Dallas Morning News Dave Lieber Watchdog column first learned, that’s what’s happening now, according to some critics, with revolutionary new plans for free electricity on nights or weekends offered by TXU Energy and competitor Reliant Energy.

Some people tell The Watchdog they’re confused.

Check this out: TXU Free Nights promises free electricity every day from 10 p.m. to 6 a.m. But what about the rest of the time? A residential customer gets slammed with an outrageous 18 cents per kilowatt-hour rate, about double what anybody else would pay on a normal price plan offered by most companies.

TXU Free Weekends promises free electricity for 48 hours beginning at midnight Friday. But during the week, expect to pay 19 cents per kwh. Holy moly! It’s free, but it’s expensive when it’s not.

Both plans are 18-month contracts with whopping early cancellation fees of $295 that aren’t even prorated. The only good thing — and this is important — is that TXU gives you 60 days to bail out of these programs without a cancellation charge if you’re not happy.

Reliant’s Free Weekends plan tacks on an extra four hours on Friday night, starting at 8 p.m., but the cost is almost 15 cents per kwh the rest of the time plus an extra $6.48 a month, which is part of Oncor’s delivery charge.

A difference is that TXU says it waives the Oncor charge during free hours, but Reliant doesn’t, meaning electricity used during free time is not entirely free. Reliant also gives its customers a free Nest Learning Thermostat, a $249 value.

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With 1.5 million customers and more than 40 percent of the market share, TXU deserves credit for not running in place and shaking up its offerings. Let’s detour for a moment and give TXU even bigger credit for its remarkable turnaround in customer service in the last year or so.

Four years ago, state regulators received more than 4,000 complaints from Texans about their electricity company. Asia-based customer service centers frustrated customers, as did an antiquated billing system left over from when TXU’s legacy company was the region’s utility monopoly. Many customers jumped to one of TXU’s 50 or so competitors.

Every year since, TXU has cut its complaint numbers in half. This year, TXU has fewer than 400 complaints before the state Public Utility Commission. That’s a truly remarkable turnaround.

Sadly, or maybe not, this comes at the same time TXU’s parent company, Dallas-based Energy Future Holdings, could be weeks away from filing what would be — with more than $40 billion in debt — one of the largest bankruptcies for a company not in the financial industry.

In the midst of this, TXU brags that almost 100,000 customers — 1 in 15 — have signed up for a “free” electricity program.

Dick Bunting of Bonham tells me he studied the plans and says “this makes my blood boil.” The title sounds good, he says, “but looking into it, you will find it is one of the worst deals out there in electric provider land.” He fears trusting seniors will sign up for the plan not knowing what they’re getting into.

TXU spokesman Michael Patterson says company reps are trained to ask a lot of questions before allowing customers to sign up for a program. “We want people to really understand and be happy with their selection,” he says.

One TXU competitor, Entrust Energy of Houston, created a truth-in-advertising campaign to show that the Entrust rates would save customers a thousand dollars or more in comparison to the free plans.

Entrust spokesman Kevin West said, “It’s interesting that TXU is pitching that this is so ‘free’ when in reality customers on these plans will pay a lot more in the non-free period.”

(Note that the PUC announced last week that Entrust agreed to pay $60,000 to settle an investigation into alleged violations of consumer protection rules.)

An analysis by the Texas Coalition for Affordable Power, which pushes for transparency in electricity pricing on behalf of member cities, also questions the plans, calling them “gimmick electric deals.”

“Let’s take free nights,” coalition analyst R.A. Dyer says. “If you work at night and sleep during the day, you’re still going to have to run your air conditioner during the day.”

He continues, “The main webpage of TXU’s pricing page doesn’t mention the 18-cent price for daytime hours. You have to go to the Energy Facts Label to find that.

“Also, these are 18-month, fixed-rate deals with a $295 early cancellation fee. Once you’ve figured out you can’t live the vampire lifestyle forever, or you figure out that the [kwh] rate is too high, you can’t walk away from this deal without paying a pretty hefty cancellation fee.”

TXU’s Patterson doesn’t agree that information is withheld from consumers. That’s not the way the new, improved TXU operates, he says.

“We always want to be the ones that are trustworthy and transparent in our pricing. We don’t hike fees. We’re straightforward, and we’re competitively priced.”

Bottom line: Texas retail electricity pricing is needlessly confusing. Every company has its own way of presenting its prices so numbers can’t easily be compared. Early cancellation fees are outrageous. Marketing is sometimes confusing, if not downright misleading. The fine print is everything.

And free? In the world of Texas electricity? Come on.

Follow Dave Lieber on Twitter at @Dave Lieber.

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The Watchdog: Lon Smith Roofing loses suit over contract’s legality

December 8, 2013 by Dave Lieber

A company that calls itself “the largest residential roofing company in Texas” is in a legal fight that calls into question the legality of its basic roofing contract.

Lon Smith Roofing & Construction was ordered earlier this year by a federal magistrate judge to pay $275,000 in damages and attorney fees to a Fort Worth couple who claimed the company failed to keep its contractual promise to arrange with the couple’s insurance company to pay for a new roof.

As readers of the Dave Lieber Watchdog column in The Dallas Morning News first learned, a lawyer for Lon Smith, which has offices in Fort Worth, Garland and Austin, says he is appealing that ruling. The lawyer says there’s no contract problem.

The gist of the case is that Lon Smith’s signed contract with Gerald and Beatriz Reyelts promised to make all arrangements with the Reyelts’ insurance company to pay for a new roof. Lon Smith installed the new roof, but Lon Smith never made contact with the couple’s insurance company.

When the insurance company received a $15,000 bill for the new roof, it refused to pay, saying no one had showed its adjusters the old roof for inspection before it was torn down.

(Dallas Morning News photo)

Lon Smith was supposed to do that but didn’t. When Lon Smith billed the couple for the entire amount and sent three demand payment letters, the Reyelts hired a lawyer and sued. They claimed that Lon Smith didn’t keep its promise to make arrangements with the insurance company. The judge agreed and issued a default judgment in the couple’s favor after representatives of Lon Smith failed to show up for a scheduled hearing.

Lon Smith’s standard printed contract, which the Reyelts signed, is clear in its promise: Lon Smith agreed “to pursue homeowners’ best interest for all repairs, at a price agreeable to the insurance company” and to work out “the final price agreed between the insurance company” and Lon Smith. The homeowner is responsible for paying the deductible and for any upgrades. “The final price agreed to between the insurance company and LSRC shall be the final contract.”

Under Texas law, someone other than a homeowner who negotiates a price with an insurance company is considered a public insurance adjuster.

The problem here is that under state law, only a licensed public adjuster can do that. Lon Smith is not a licensed public adjuster. A public adjuster is someone who, for a fee, negotiates with insurance companies on behalf of homeowners or business owners who don’t like an insurance company’s initial settlement offer. There are about 600 active ones in Texas.

Lon Smith violated state law, says the Reyelts’ lawyer, Charles W. Fillmore. In court papers, Lon Smith admitted it lacked the required state license but stated that because it did not charge the family for its services, there was no violation. State law does not mention that providing insurance-adjusting services by an unlicensed adjuster is permitted if the service provided is free.

The case appears to have wide-ranging ramifications for other Lon Smith customers since the basic language of its contract has been called into question.

Rick Disney, lawyer for Lon Smith, responded to The Watchdog in a written statement: “Lon Smith Roofing provided the Reyelts a high quality roof, and they have never complained, even once, about the workmanship or quality. The trial court ruling is the first step in a long legal process, and Lon Smith is confident it will prevail.”

The lawyer adds, “One more fact: except for, I think, $1,176, neither the Reyelts nor the insurance company paid anything to Lon Smith Roofing for their roof.”

Lon Smith is lucky in one respect. Last month, a new state law went into effect that specifically states that roofing contractors cannot serve as both contractors and public adjusters on the same roof deal. The idea is to avoid a conflict of interest.

But that law wasn’t in effect when the Reyelts’ roof was replaced. The law that pertained to them at that time stated that public adjusters must obtain a state license, which Lon Smith didn’t have.

Lon Smith’s lawyer says that because the company failed to keep its promise to contact the insurance company on the couple’s behalf, it can’t be accused of acting as an unlicensed public adjuster.

However, in court papers, Lon Smith President David Cox stated that, “Lon Smith does, if appropriate, assist the homeowner with his negotiations with his insurance company.” He added, “Lon Smith has been using this form of an agreement for years.”

Under the original law passed a decade ago, unlicensed work is a misdemeanor crime.

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The Reyelts’ lawyer says that alone is enough to void a contract, which the federal magistrate did in this case.

Under the revised 2013 law, the language is even clearer, specifically citing that roofers cannot negotiate with insurance companies on behalf of a homeowner. That specific point was added to enforce that the roofing industry is included.

Cox also states in the court papers that he didn’t learn about the default judgment against his company until after the ruling. “I was and am very upset that our attorney did not keep us apprised.” He added that he hired a new lawyer “to try to repair the damage that has been done.” Cox did not return a call from The Watchdog.

Bottom line here for all future roofing customers: Roofing companies are not allowed to negotiate with insurance companies on behalf of their homeowner clients. Lon Smith, as have many roofing companies, participated in this process for years. Now, most definitively, it’s no longer allowed.

Follow Dave Lieber on Twitter at @DaveLieber.

[This originally appeared in the Dave Lieber Watchdog column in The Dallas Morning News.]

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