How to beat a Texas electric company when your variable rate goes up too much

Attention Texas electricity customers with variable rates: If you expect to get walloped when the next bill arrives, Watchdog Nation has a strategy that may get that bill lowered.

As first reported in the Fort Worth Star-Telegram Dave Lieber Watchdog column, at the August 2011 meeting of the Texas Public Utility Commission, new Chairwoman Donna L. Nelson held a copy of this previous Watchdog Nation report on Dynowatt and spoke about the Arlington man whose power bill jumped to $1,111 in one month because of electricity rate spikes.

“I’m sure you saw the article in the Fort Worth Star-Telegram this morning about the gentleman who was with Dynowatt, and it was a variable rate plan,” she said. His rate jumped from 10.6 to 18.3 cents per kilowatt-hour, she explained.

(In the above photo, Texas PUC Chairwoman Donna L. Nelson holds up a Watchdog Nation report from the Fort Worth Star-Telegram and asks the enforcement division to look into it.)

“Under the new rules we adopted there were certain disclosures that had to take place on the bill, if you remember. And so this article calls into question whether those actually happened.

“I guess I would like enforcement staff to look into this and make sure that the disclosures that are supposed to be happening are happening.”

There it is! The key to getting a power bill lowered. It’s like that moment in school when the teacher tells students what will be on the test.

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This is a test that some Texas electricity companies will flunk. They may be confused about state requirements detailing how variable rate increases must be disclosed to customers on their bills. That confusion and a failure to comply works to customers’ advantage.

The Texas Retail Electric Scorecard, a widely circulated industry newsletter, reported Nelson’s remarks and outlined for electric companies a summary of the rules. But probably not in time for August bills to be corrected.

For example, certain sentences must appear in 12-point type on a bill. (That didn’t happen on the Dynowatt bill.) Here’s a sample: “Please review the historical price of this product available at (insert specific website address and toll-free telephone number).”

If a customer gets a bill with a price spike but without that sentence about the company website and telephone number, he or she should submit a copy of that bill to the PUC as part of a formal complaint. Regulators will check whether the company followed the rules. If not, the bill will be lowered.

See other requirements in the state rules at

 The Amigo Energy example

 Here’s what can happen to a company that doesn’t follow the rules.

In 2008, I interviewed then-Amigo Energy founder and CEO Javier Vega about why his company didn’t include rate information on the company’s “facts label” as required. I showed him that state rules weren’t followed when Amigo raised its rate from 16 to 24 cents for a Fort Worth customer.

He answered, “I’m going to scream for a second.” He put me on hold, consulted his staff, returned and said: “I apologize. We’ve been better at this.”

After that, Fulcrum Energy, the company that bought Vega out, reneged on its agreement to keep Vega as an officer in the company. Vega sued for wrongful termination. The trial was held in Houston in July.

Vega says that his 2008 comments to me were one of two reasons cited for his firing.

On Aug. 1, a Houston jury awarded Vega a judgment that, with lawyer fees, could reach $3 million.

Last week, Amigo/Fulcrum was sold to Just Energy, a Texas electricity provider based in Toronto.

Vega’s lawsuit illustrates what can happen behind the scenes at a Texas electric company when operators don’t buy enough electricity before a power spike. That can cause bills for variable-rate customers to jump.

According to Vega’s lawsuit, Fulcrum insisted on a get-tough strategy aimed at customers who owed the company money, even if the charges were incorrect. Vega alleged that Fulcrum co-founder Gerardo Manalac ordered collection letters sent to customers only days after the first bills arrived. He also refused a PUC directive that Amigo rerate the bills.

Manalac previously denied those allegations in an interview.

Eventually, the PUC cited Amigo for numerous violations: not sending bills, refusing to offer payment arrangements to shell-shocked customers, not giving proper notice before an increase and not responding to complaints.

Amigo/Fulcrum paid a $15,000 state fine. Now comes this jury verdict.

The message is clear. An electricity company that raises a variable rate has to follow the rules. It’s up to customers to make sure this happens.

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Are you tired of fighting the bank, the credit card company, the electric company and the phone company? They can be worse than scammers the way they treat customers. A popular book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, shows you how to fight back — and win! The book is available at as a hardcover, CD audio book, e-book and hey, what else do you need? The author is The Watchdog columnist for the Fort Worth Star-Telegram. Visit our store. Now revised and expanded, the book won two national book awards for social change. Twitter @DaveLieber.


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Thanks to Texas electricity spikes, variable rate customers about to get burned

Nearly every day in the Texas summer of 2011, warnings come about overuse of electricity. As readers of the Fort Worth Star-Telegram Dave Lieber Watchdog column first learned, those customers on variable rate plans could get power bills that leave them boiling.

 Ryan Walton may be the canary in the coal mine when it comes to residential electric bills skyrocketing because of the heat wave.

The Arlington man is on a variable-rate plan with Dynowatt, an Ohio company. In June, he paid 9.8 cents per kilowatt-hour. In July, his variable rate jumped to 10.6 cents. But this month, the rate vaulted to 18.3 cents.

His most recent electric bill was for $1,111.

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This has happened before with Texans who chose variable-rate plans. Honestly, I don’t understand why anyone would want to take that risk.

He explains, “Two years ago, we signed a 24-month contract for about 8.9 cents. It was good. When it ran out, we went variable, and the rate actually went down. It went into the 7’s, so I thought ‘Why should I lock in?’ It’s kind of like mortgage rates. If you’re in an adjustable, if it goes up a little, you’ve got time to adjust.

“You figure it will go up 10 or 15 percent a month, and there’s time to look for other companies.” His rate shot up 72 percent on his Aug. 11 bill. “There was literally no warning. That was the big surprise.”

I called electricity market watchers to see whether other customers were having the same problem. Not yet. But sometimes smaller power companies have to jack up variable rates when they get over-leveraged in the electricity market, they said.

A Dynowatt spokesman says that is not what happened here. The heat wave led to “extraordinary volatility” for variable-rate customers.

“I am fully confident that consumers who have selected variable-priced products [with other electricity companies] will see the volatility reflected in their monthly bills,” he said.

Others are not so sure. Texas Public Utility Commission spokesman Terry Hadley recalls how some worried that spikes in power usage during February’s icy days would lead to similar jumps in residential customer rates.

“We haven’t seen that,” he said. “The rates remained low.”

Not for Walton. I checked the PUC’s rules to see whether Dynowatt played fair. State rules say that before a variable rate can go up, a monthly bill must “include a statement informing the customer how to obtain information about the price that will apply on the next bill.”

On Walton’s bill, in small print, this rule is followed: “Your variable rate may have changed pursuant to your Terms of Service. To obtain information about the price of your variable product that will appear on the next bill, please contact us.” The bill gives a phone number and elsewhere, a website.

Dynowatt may not have complied with a second rule that requires companies to include “clearly and conspicuously” these words: “Important notice regarding changes to your contract.”

I didn’t see those specific words on Walton’s bills. He can file a complaint with the PUC, which would investigate whether the company violated this rule. Walton could get a lower bill.

Dynowatt no longer offers a variable-rate plan to North Texans. The company offers several fixed-rate plans and, in its promotions, urges its remaining variable-rate customers to lock in a fixed rate.

Electricity shoppers are often attracted to variable-rate plans because the initial prices are so low. This week, on the state website, I found variable rates starting at 4.5 cents. The lowest fixed rate was nearly double, at 8.1 cents.

 Walton’s case “is a really good reason why people shouldn’t take variable-rate plans,” said Carol Biedrzycki of the Texas Ratepayers Organization to Save Energy. “They’re not predictable. … To me it’s like investing in individual stocks instead of an insured bank account. You have to have the time to watch the stocks. If you don’t have time, chances are good you’re going to lose.”

Walton is chirping like that canary in the coal mine as “a warning to other people out there,” he said. “You need to read the fine print on the bill, which I didn’t do. And if you haven’t locked something in by now, you should.”

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Dave Lieber shows Americans how to fight back against corporate deceptions in his wonderful book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong. Are you tired of losing time, money and aggravation to all the assaults on our wallets? Learn how to fight back with ease — and win. Get the book here.

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Texas changes rules for electricity disconnections for ill customers

Every so often I hear a heartbreaking complaint about how someone’s electricity is disconnected even though they depend on it to operate lifesaving medical equipment.

Sometimes people didn’t know that they have to register their medical condition to get special protection to prevent a quick power cutoff.

Other times, the company that sells the electricity, or Oncor, which distributes the power, made a mistake.

Fewer than 3,000 of Oncor’s more than 3 million area customers are registered for medical protection from cutoffs. I’m sure more would register if they were aware of the rules. That’s especially important since Jan. 1, 2011 when new rules took effect.

As readers of the Fort Worth Star-Telegram Dave Lieber Watchdog column first learned, as part of those rules issued by the Public Utility Commission, a new class of customers has been created called “chronic care” customers. They are defined as having a “serious medical condition that requires electric heating or cooling to prevent the impairment of a major life function through a significant deterioration or exacerbation of the person’s medical condition.”

What does this mean? If you need heat in the winter or cool air in the summer because of your weakened medical condition, for whatever reason, you can sign up, with doctor approval, for special protection.

This replaces what was called “disabled” protection for those who could, according to the old definition, “become seriously ill or more seriously ill” with a loss of power.

Under the new rules, people with a chronic condition can — with doctor’s support — receive the designation for 90 days or a year before a renewal notice comes.

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As a safety measure, the customer and a secondary contact must be notified by letter and e-mail before the power is cut off. A disconnection notice is sent out 21 days in advance instead of the standard 10 days.

The second protected class consists of those in the critical-care program. That’s now defined as a customer who is “dependent on electricity to sustain life.” Example: Someone who needs a respirator to breathe. (A person who needs refrigeration for medical supplies would be a chronic-care customer.) The prohibition against disconnection for critical-care customers is 63 days.

Electricity companies are no longer responsible for collecting information about a customer’s medical condition. Customers who want to enroll in these programs must get the forms from their retail electricity providers. But the forms are now to be sent to Oncor, which will collect all information.

That takes electricity companies out of it. Previously, some electricity companies tried to decide which customers had valid medical reasons. That’s gone.

From now on, a simple doctor’s approval gets you through the door. If there is a question about an applicant, the customer gets immediate protection while the application is examined.

Texas is one of a few states that doesn’t offer a general medical exemption for those who can’t pay their bills because of a health issue, says Carol Biedrzycki, leader of Texas ROSE, a group that supports affordable electricity.

Electricity companies I checked with expressed no complaints about the new rules.

PUC spokesman Terry Hadley said the changes will provide consistency across the state.

These programs don’t exempt customers from paying their bills. They provide only a delay. And these new rules apply to disconnection only.

Current customers with medical protection don’t need to complete new forms until they receive renewal notices; they are grandfathered in.

Oncor suggests that critical-care customers have a backup generator in case something goes wrong. “While Oncor will do everything we can to prioritize [for these customers], no amount of preparation can safeguard against any type of power outage,” spokeswoman Catherine Cuellar says.

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Dave Lieber, The Watchdog columnist for The Fort Worth Star-Telegram, is the founder of Watchdog Nation. The new edition of his book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, is available in hardcover, as a CD audio book, ebook and hey, what else do you need. Visit our store. Now revised and expanded, the book won two national book awards in 2009 for social change. Twitter @DaveLieber

Dave Lieber book that won two national awards for social change.

Do electricity regulators really regulate?

Watchdog Nation had a theory: Some electricity companies, despite Photo courtesy of centralillinoisproud.comhorrendous customer service, are getting away with it. But is the theory true?

Based on the hundreds of letters we receive each year at the Fort Worth Star-Telegram from people complaining about their electricity bills, we wondered what happened to the thousands of complaints about electricity companies that go to the Public Utility Commission of Texas each year.

Do the companies get penalized?

As The Watchdog columnist for the Fort Worth Star-Telegram, I conducted a study. Using the open-records law, we requested the total complaints from customers of three companies that had severe difficulties in the past two years – Amigo Energy, TXU Energy and Direct Energy. We studied the number of complaints, the number that were investigated and what action was taken against any offenders.

The findings are described in detail in Sunday’s Fort Worth Star-Telegram (7/12/09) here. And you can have the reprint of our Guide to Shopping for Electric Rates – requested already by thousands of people.

In summary, the best way to counter an electric company (or any company for that matter) that harms you is to complain, complain and complain. By forcing up complaint numbers, the trend lines show a problem, thereby making the regulators more likely to take strong action.

By the way, colleague Jack Z. Smith tells a much-needed story about how the elderly, especially, can shop for lower rates here.

Behind the scenes at a troubled Texas electric company

How rare to see what goes on behind the scenes at a Texas electric company.

Watchdog Nation Staff is pleased to see that a smart blogger recognized this fact: On the behind-the-scenes nastiness, as alleged in a lawsuit, involving troubled Amigo Energy, the blogger notes that “the Star Telegram was the only media source” to report this.

Because the live link to Lieber’s column won’t last forever, here is what the founder of Watchdog Nation had to report:

There was the chief executive officer of Merrill Lynch who bought the $35,000 toilet for his office. Then we learned about the peanut butter company CEO who the Food and Drug Administration says knowingly shipped products tainted with salmonella.

The latest? The CEO at a Texas electricity provider who is accused of ignoring state regulators and trying to overcharge customers to save the company.

And who makes these allegations? None other than the company’s previous CEO, who says he was fired when he tried to blow the whistle.

Javier Vega, the former CEO and founder of Amigo Energy of Houston, filed a wrongful-termination lawsuit against Amigo’s current owner, Fulcrum Power, in Harris County district court in November.

His lawsuit is more than an employment dispute.

It says, “The case also involves the greed and corruption of certain individuals and legal entities that led to blatant and knowingly illegal efforts to collect improper rates from Texas retail electricity consumers.”

In a brief interview, Amigo’s current CEO said the allegations are false.

“We vehemently deny all of Mr. Vega’s claims,” Gerardo “G.P.” Manalac told me. “We intend to let the litigation go its course.”

He added: “Amigo, like any other retail electric provider, had a very difficult year. But we turned the corner on that and are back on track.”

He said his company is cooperating with an investigation by the Texas Public Utility Commission into allegations of overcharging.

The lawsuit offers a peek at the turmoil behind the scenes at Amigo last year, when hundreds of customers complained that they were overcharged. Many said the company refused to answer their complaints and sent a collection agency after them, sometimes within days of the first bill’s arrival.

The PUC reprimanded the company for violating state rules, but it has yet to levy fines or other penalties.

According to Vega’s lawsuit, the problems stemmed from his decision in 2007 to sell his company to Fulcrum Power of Houston, which was a wholesale electricity provider for Amigo. Vega stayed on as CEO.

The first year went smoothly, the lawsuit says. But last June, Manalac, Fulcrum’s co-founder, took day-to-day operations away from Vega, who kept the CEO title in name only.

Manalac, though, did not buy electricity at lower prices for future use to hedge against price jumps, the lawsuit contends, something that Vega handled when he ran the company. Vega claims that he repeatedly warned Manalac to stop selling fixed-rate contracts to customers because the company hadn’t bought enough electricity at lower prices to make a profit. If prices jumped, he warned, the company could find itself in severe trouble.

Prices did jump, and the company lost $15 million by “gross mismanagement in a mere five months” last year, Vega contends in the suit.

To make up for the loss, the suit says, the company turned to “aggressive price increase methods” aimed at former customers of National Power, which closed in May. Amigo bought National Power’s variable-rate customers, who suddenly found themselves paying higher prices with a new provider.

According to state rules, an electricity provider may not raise rates by more than 10 percent in one month unless a customer is properly notified. Rates for former National Power customers in Dallas went up to 16 cents per kilowatt-hour, and Houston-area customers were stunned to see their rates jump to 20 cents. That increase was handled with proper notification, the suit alleges.

A few weeks later, Amigo again raised the rates for former National Power customers, this time as high as the 24- to 25-cent range. There was no proper notice, and the increase was more than the allowed 10 percent, according to the suit.

Customers were also wrongly billed at the higher rate for a period before the rate took effect, the suit charges. When some customers received several months’ worth of bills at once, they were stunned by the higher rates and called to complain. But they couldn’t reach anyone at Amigo. More than 700 customers complained to the PUC, which launched an investigation. In September, the PUC ordered the company to “rerate” hundreds of customers – lower their bills to the proper amount.

The PUC also cited Amigo for numerous violations – not sending bills to customers, refusing to offer payment arrangements to shellshocked customers, not giving proper notice before an increase and not responding to customer complaints.

The suit contends that Fulcrum cut Amigo’s customer service staff, leaving angry customers with phone waits “in excess of one hour for tens of thousands of Amigo Energy customers.” There was also a backlog of 10,000 unanswered customer e-mails.

PUC staffers were coming down hard on Amigo because of the many complaints. One PUC official, the lawsuit says, asked an Amigo executive whether the company wanted “to continue to be in this business.”

Manalac insisted on a get-tough strategy aimed at customers who owed money, even if the charges were incorrect, the suit says.

He ordered that collection letters be sent to customers only days after their first bills arrived. And he refused the PUC’s directive that Amigo go back and rerate the bills, court papers say.

Manalac sent an e-mail, papers say, urging bill collectors to “to pester these people” to pay. In another e-mail, he wrote, “Allow them no negotiation the first or second round (and then we can go from there).”

Vega talked about quitting, but before he could, the suit says, Fulcrum executives told him he was fired for spreading harmful information about the company.

Vega’s lawyer did not return phone calls. Fulcrum’s lawyer declined to comment.

It may not be a good time for some chief executives, but it can be an even worse time for customers.