March 21, 2009
Local landlords take issue with gas costs
CORTLAND — Two local landlords were guaranteed that they would save money over a calendar year by switching natural gas suppliers for their apartment buildings last year.
But after paying thousands of dollars more to a private energy service company than they would have with their local utility company, they decided to cut their losses and end their service with the company.
Cortland landlords Marc Pace and Steve Muka both started purchasing natural gas from Syosset-based U.S. Gas and Electric instead of their local utility company, New York State Electric and Gas.
Pace said over the course of 11 months he paid about $4,300 more to U.S. Electric and Gas than he would have if he purchased it from NYSEG.
Steve Muka said over 7 months he paid about $3,000 more to U.S. Gas and Electric than he would have paid NYSEG.
U.S. Gas and Electric is a licensed Energy Service Company that has provided natural gas to commercial and residential users in the New York state deregulated gas markets since 2001, according to a letter dated Jan. 22 that the company sent Pace after he signed up for the service.
Energy Service Companies began competing with regulated utilities in 1996 to sell natural gas directly to consumers in New York state. Energy Service Companies, however, are not regulated like utilities and have become the subject of many consumer complaints, according to a news release issued July 14 from the state Attorney General’s Office.
The letter Pace received contains a company guarantee page, which reads that customers will receive a discount on the total annual cost of natural gas purchased from U.S. Gas and Electric, compared to the price of natural gas that would have been supplied by the customer’s local utility during that same time period. It does not specify how much the discount will be.
Pace had been a customer of NYSEG for over 30 years when he switched to U.S. Gas and Electric last March. NYSEG still delivered the natural gas and billed him for that service, but U.S. Gas and Electric began supplying the gas.
Pace began using U.S. Gas and Electric for his five residential properties and his four commercial properties in March.
Pace said he switched when an employee of U.S. Gas and Electric called him and guaranteed him he would save money.
Pace said that in June he was being charged $1.53 per therm for his natural gas. A therm is a unit of heat equal to 100,000 British thermal units and a common unit for quantifying the energy content of natural gas delivery. He said $1.53 per therm was 60 cents more per therm than he had been charged by NYSEG, but because it was summer, his tenants were not using a lot of gas, and he did not notice the price change.
By October, the cost of his natural gas had increased to $1.89 per therm, which he said was about $1 more per unit than he had been charged by NYSEG.
“Once it got cold, I got these huge bills and I was shocked,” Pace said.
Pace called the company to ask why his bills were so high, and he was told that he was being charged the commercial rate, which was higher than the residential rate.
Pace said that was the first time he heard about the difference in rates.
“At no time did they tell me that the commercial rate was going to be virtually double what my other ones were,” Pace said.
Pace said he was told he could ask for a rebate if the price was higher after a full calendar year. But because Pace became a customer in March 2008, he had to wait until the end of 2009 to ask for a rebate.
“By then I’d be $8,000 behind, and I can’t imagine that they were going to send me a check for $8,000,” he said.
Pace’s Jan. 19 bill for his commercial three-unit apartment building at 47 N. Main Street in Cortland shows that he was charged $1.96 per therm for 432.5 therms from Dec. 12 to Jan. 13. His bill for the month amounted to $1,074.32. He had to pay $919.35 to U.S. Gas and Electric for the supply and $154.97 to NYSEG, most of which was a delivery charge.
After receiving this bill, Pace wrote a letter to U.S. Gas and Electric to cancel his service and went back to NYSEG.
“I wasn’t going to take the chance of being with them for two years,” Pace said.
“At the least ,they’re disingenuous. They don’t give you all of the information upfront,” Pace said.
From Jan. 14 to Feb. 10, as a customer of New York State Electric and Gas, Pace’s bill for the 47 N. Main Street home was $598.33— $475.99 less than he had paid the previous month with U.S. Gas and Electric.
NYSEG charged him 88 cents per therm for the January portion of the bill, and $1 per therm for the February portion. He used 431.9 therms of natural gas from Jan. 14 to Feb. 10, compared to 432.5 therms the previous four weeks.
Muka’s first month with U.S. Gas and Electric was July.
In July, August and September, his bills were about the same for his commercial properties and residential properties as those for three properties where he still used NYSEG.
Muka said that like Pace’s, his bills from U.S. Gas and Electric for his commercial properties suddenly increased in October, when he was charged $1.58 per therm and $1.56 per therm for some of his properties.
His prices increased again in November and reached a peak in December, when he was charged $1.90 per therm for four of his properties.
“When you end up getting charged twice what NYSEG’s rate was, you just want to get out of it,” Muka said. “And it happened during heating season, so there was just a lot of money involved.”
Muka said he sent a letter to the company to cancel his service in December. He still had to pay his bill to the company in January.
After the cancellation, the company decreased his price to 88 cents per therm and 89 cents per therm for each of his properties, he said.
“I was happy that they lowered the price to where it should have been,” Muka said.
Douglas Marcille, chief executive officer for U.S. Gas and Electric said Pace and Muka are examples of people who ended their service at the wrong time.
“The product they signed up for is guaranteed annual savings. We don’t guarantee what the rate is going to be in any particular month,” Marcille said.
“The reason that they lost money is that they chose to leave our guaranteed product,” he said. “What they should have done is stayed and they would have made money.”
Marcille said that his company can guarantee savings over a calendar year because energy service companies do not have the same type of overhead and costs that they need to be reimbursed by the government that utility companies have.
Muka said he wants other people to use more caution than he did when switching energy providers.
“The concept is just be careful and don’t do anything over the phone ... It was a lady that called me and it just sounded good and reasonable, and I thought everything would work out OK,” Muka said.
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