Direct Energy Part Two: "Get the hell off my porch"
Door-to-door agents were told they would make a lot of money -- quick. Telemarketers were instructed to "disarm" homeowners with small talk, such as chatting about the weather. Consumers were not impressed.
Calgary Herald - Sunday, May 16, 2004
Hugh Williams was a salesman for a building-supply business in Kingston, Ont., when he took a second job to earn some extra money.
He had no problems landing a position at Direct Energy.
"They would take anybody," Williams said.
"It was a one-day training course and at the end of the day, you got a card with your picture on it. Then you were ready to go."
The instructions were simple: Sell household utility contracts, lots of them -- and fast.
New recruits on the sales force were told to move as many electricity and gas deals as they could on doorsteps across Ontario.
Agents knew the more they sold, the more they would get paid, but somewhere in that chain, rules were broken and regulations sidestepped.
Information obtained by the Herald -- from interviews with former employees and internal documents used to train agents -- show the company's methods have walked a fine line between aggressive marketing and deceptive tactics.
Former employees say it was all too easy for agents to cross that line.
"There was a real loss of control," said Williams, who left the company before it was fined by Ontario in 2003 for forging the signatures of homeowners on energy contracts.
"A lot of the agents that went out were unscrupulous."
Direct Energy has since pledged to clamp down on its recruits. Agents caught breaking the law in Ontario would be fired, the company said last year.
The same promise has been made in Alberta.
"I can assure you that this is not going to reoccur in Alberta," said Paul Massara, vice-president of North American operations for Direct Energy's parent company, Centrica.
"We've acknowledged these events and we've taken detailed steps to make sure they don't reoccur."
Former employees, however, say Direct Energy pushes its agents hard to sell contracts. Unless consumers complain, problems are kept quiet.
In 2001, the company was on a drive to sign up new customers in Ontario with the goal of becoming the biggest energy retailer in the province.
By signing with the company, consumers would be switched over to Direct Energy from their existing utility. Direct Energy's contracts allow homeowners to buy electricity or natural gas at fixed rates over a period of several years, rather than be exposed to fluctuating market prices.
The contracts can create winners or losers, depending on the circumstances. If energy prices skyrocket, consumers who sign up can find themselves buying gas and power at below market rates. On the other hand, if energy prices drop below the contract's fixed rate, those same consumers can end up overpaying.
Direct Energy has staked its growth in Alberta on selling large numbers of the gas and electricity deals, just as it did in Ontario.
"The bottom line is making money," said Janaprakash Devan, a former regional manager for the company in Hamilton, Ontario.
But the way those contracts have been marketed has been questioned. Throughout its door-to-door sales scripts in Ontario, there was a focus on getting homeowners to produce copies of their old utility bills.
If a consumer said they wanted to wait and check out other offers before signing up, an agent was to respond by asking for the bill.
"You can continue to pay more for your electricity with no price guarantee or you can register now, pay less and have price protection that will last for five years," the scripts say. "All you need to start is one of your recent electricity bills, could you get one now please?"
Should a consumer mention they're satisfied with their current electricity or gas provider, agents would use a similar response. "Your local electric company will continue to serve and bill you as always. Direct Energy just makes sure you pay the best price. All you need to start is one of your recent electricity bills," agents were told to say. "Could you get one now please?"
In all, the Direct Energy's sales scripts provided agents with 17 different doorstep scenarios. Of those, 15 responses instructed agents to ask the customer to produce their utility bill. Showing the paperwork, consumers were told, helps the agent point out certain lines on the page where the customer could save money. However, many consumers who produced their bills were surprised and angered when they later became customers of Direct Energy, although they hadn't signed a contract.
Listed on the bills was confidential information, such as account numbers and data on energy consumption, as well as addresses and names.
"Think of the information on your utility bill like your credit card statement," said Tom Adams, head of Ontario consumer watchdog Energy Probe. "You wouldn't go around showing your credit card number to people."
The company's policies didn't promote unauthorized enrolments, but agents knew exactly what the information could be used for. "You need that part of the bill in order to get the utilities to release that customer to Direct Energy," said Williams.
During agent training, the company implied techniques that could be used to "wheedle the bill out of the customer," he said. "And, of course, once the people were on the road they could come up with their own techniques on how to get that bill."
Williams quit his job after a dispute over contracts he sold to friends and colleagues, including his boss at the building-supply store.
The contracts promised one price for natural gas, but when the bills began arriving, Direct Energy was charging a much higher rate.
"It was upsetting when your friends are getting shafted," he said.
When Ontario consumers began to complain about Direct Energy forging contracts, the company said the problems were the work of a few rogue agents.
But complaints were coming in by the hundreds.
Direct Energy said the agents responsible were contractors working for an independent third-party company, over which it had limited control.
But Williams observed no difference between the contractor who managed Direct Energy agents and the company itself in terms of how employees were treated or trained. "To me, it was just Direct Energy," he said.
When authorities in Ontario, Georgia and Michigan penalized Direct Energy and Energy America in 2002-03 for enrolling consumers illegally, they refused to let the companies blame individual agents for the problems.
Officials in Manitoba reached a similar decision in 2002.
Direct Energy's Manitoba subsidiary, Municipal Gas, was sanctioned after agents were caught using graphs that suggested heating prices would skyrocket in an effort to help sell contracts.
Company brochures given to homeowners at the start of 2001 said natural gas prices -- which had risen to a record $12 per gigajoule (a standard measure of gas) at the time -- would soar beyond $14 within two years. In fact, the opposite happened. Prices fell steadily to less than $6 a gigajoule. Homeowners who signed contracts with the company soon found they were paying far more for natural gas than their neighbours who hadn't enrolled.
The data on the brochures was inflammatory and misleading, the Manitoba Public Utilities Board ruled. The regulator put the blame on the company, not the agents who delivered the sales pitch.
It was not "an agent problem," said Gerry Barron, executive director of the board. "It was the company's distribution."
Sales agents in Georgia were also shown how to coerce consumers through telemarketing scripts approved by Direct Energy's U.S. affiliate, Energy America.
Prospective customers were told the fixed-rate contracts being offered were part of a special deal only they -- and maybe a few of their neighbours -- were getting.
"Energy America wanted me to call you personally to talk to you about our Price Protection Program, which is only being offered to a select few customers in the Georgia area," agents were told to say. At the top of the script, spelled out in capital letters, agents were instructed to "DISARM THE CUSTOMER" by using small talk, such as chatting about the weather. Once the customer's guard was down, the next step was to "be enthusiastic" and "sell the benefits," the scripts instructed. If the customer hesitates -- or wants to talk to their spouse first -- tell them there is no risk by signing up now and discussing the terms later. "So let's go ahead and get you locked into that low fixed rate today, OK?"
From there, agents were told to get the customer's account numbers and other important information such as full names and birthdates.
In numerous recordings of the telemarketing calls in Georgia, consumers were told to find a copy of their bill and read the information over the phone for confirmation.
All it took, say investigators who worked their way through hundreds of recorded phone calls, was for a simple 'Yes' to be given by an unsuspecting consumer and the company would enrol them in a contract.
"We found agents would read the terms of the offer and say 'do you understand?' " said Mike Nantz, one of the investigators for the state of Georgia in its case against the company. "And if the person said 'Yes' to that question, they would take that as the affirmative they needed."
A few seconds later, the telemarketer for Energy America would quickly read a legal disclaimer outlining the terms of the deal, including a $136 fee if the customer wanted to cancel after three days. "Once again, we thank you for choosing Energy America," the telemarketer would say, sticking to the script as the call ended.
Direct Energy pledged last month to use follow-up phone calls in Alberta to confirm that all new sales are legitimate.
However, Nantz said many of the violations discovered by Georgia investigators were, in fact, found on recordings of the company's confirmation calls -- which were supposed to protect consumers.
Inside cramped meeting rooms at Direct Energy's affiliate in Detroit, new recruits for the company were told to say as little as possible to would-be customers. "You guys are going to make a lot of money -- quick," the new agents were told by managers during a training session in 2002. "Keep it simple. You start talking too much, though, and you're going to open yourself up to a lot of questions."
What the company didn't know was that one of the trainees was carrying a hidden camera for a local television station deluged with complaints about how Energy America was conducting itself. The footage was obtained by the Herald.
Once out on the street, new agents were counselled to go after lower-income homes where consumers would be anxious to hear about saving money. "The brick houses, they're a little more upper class. The shacks -- that's where you're going to make a lot of money," the new agents were told by a trainer.
Repeatedly, the Michigan homeowners heard about price protection, rebates and savings. But agents were saying little else.
Angry consumers complained to state authorities that agents didn't mention they were selling long-term utility contracts, nor did they say which company they represented.
Demonstrating how to pitch contracts in Michigan, trainers used an approach similar to the one later employed by Ontario agents. "Just making sure that you received your price reduction on your gas bill," the trainer told a consumer on the hidden camera footage.
Sure enough, when the customer produced his utility bill, he hadn't received the savings. That's when the agent pulled out the paperwork for a contract.
"Don't tell them anything they don't ask," the agent instructed trainees. "Talk about the weather. Something like that keeps their mind off of it. Then they don't start asking questions."
Joan Goodrich, a resident of Hartford, Mich., was burned by the pitch in 2002. An agent told her she could save money by locking into a fixed-rate plan.
Goodrich was soon forced to find other ways to keep warm after her bills skyrocketed. She was being charged a higher gas rate -- one her agent failed to mention.
"My two girls and me had to bundle up and wear blankets around the house," she said in documents filed with the Michigan attorney general's office. "I was afraid to turn the heat up."
Her complaint is one of several thousand the state has on file about the company.
After the tape of Energy America's training sessions was broadcast on Detroit television, a company vice-president criticized local managers in Michigan.
"I'm actually very angered that many of our policies that we've clearly set out in our training manual aren't being adhered to," Energy America vice-president Nick Fulford told Fox 2 News.
By that time, consumer advocates were skeptical.
Agents who showed up at Rick Gamber's door in Lansing, Mich., weren't welcomed.
As director of the non-profit Michigan Consumers Coalition, Gamber had been fielding dozens of calls about the company from angry homeowners.
The agents didn't know they were speaking to a consumer watchdog when they knocked on his door.
"I said, 'Energy America?' They said, 'yeah.'
"I said, 'Get the hell off my porch.'
Gamber had never thrown anyone off his doorstep before.
"But I made an exception in their case," he said.
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See the other 4 parts in this series about Direct Energy: