IDT Energy “ESCO” Class Action: A groundbreaking lawsuit to recover on behalf of energy customers who were gouged after switching from their local utility to IDT Energy.
Until the late 90s, the rate a residential energy supplier could charge was strictly regulated. In 1996, however, New York’s energy market was opened to competition and gas and electricity consumers were permitted to choose from a variety of companies selling residential energy in addition to traditional utilities like Con Edison. Seizing on the deregulation in New York and other states, independent energy companies like Defendant IDT Energy, Inc. (called “ESCOs”) have grown rapidly.
Founded in 2004, IDT quickly became one of the nation’s largest ESCOs, now serving over 1 million electric and natural gas customers in New York and four other states and the District of Columbia. In achieving its rapid expansion, IDT has not simply bested its competitors. Rather it has developed and deployed the following underhanded and unlawful marketing and sales practices that result in its energy customers paying far more than they would have paid had they stayed with their traditional energy suppliers.
The Dangerous Variable Rate – While IDT boasts that its “bottom line” is to “offer choice, reliability and savings,” it fails to adequately inform consumers who switch that they can see their energy rates skyrocket. IDT’s rates can shoot up because unlike the vast majority of its competitors, IDT does not primarily offer fixed rate plans. Instead, like the risky adjustable-rate mortgages that contributed to the financial crisis, IDT’s variable energy rates can rapidly fluctuate and have no ceiling. For its part, IDT conceals this fact with an extensive marketing campaign that bombards consumers with promises of savings while failing to warn them of the factors affecting IDT’s variable rates and that those factors can fiercely turn.
IDT’s own investor presentations describe the energy company’s marketing strategy, stating that the “value proposition” offered to consumers includes an “expectation of savings.” The undisclosed truth to consumers, however, is that by switching to IDT they are gambling with their monthly utility bills and any expectation of savings was created by Defendant IDT’s misleading conduct. In particular, Defendant IDT’s marketing campaign fails to adequately inform consumers i) that with a variable rate plan the consumers’ energy costs can spike at any time, causing substantially increased monthly energy bills; and ii) fails to clearly and conspicuously describe what factors might cause consumers’ energy costs to rise.
IDT’s Deceptive Rebate Program – IDT markets itself as a less-expensive alternative to traditional utilities, boasting a rebate program where at the end of 12 months IDT customers are supposed to receive a refund based on the amount of energy purchased. As bait to show how generous its rebate program is, IDT provides potential customers with estimated rebates based on the potential customer’s prior electric and/or natural gas usage. The estimates, however, are grossly exaggerated and do not reflect the consumer’s prior usage or the size of the rebate they are likely to receive.
Only through a class action can the Company’s customers remedy IDT’s ongoing wrongdoing. Because the monetary damages owed each customer by IDT are small compared to the much higher cost a single customer would incur in trying to challenge IDT’s unlawful practices, it makes no financial sense for an individual customer to bring his or her own lawsuit. With this class action, Wittels Law seeks to level the playing field and make sure that companies like IDT engage in fair and upright business practices.
For more information, or to join this case, contact us.