Electric Company Scams: How to Avoid Fraud when Signing Up for New Electricity

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There are numerous attractive deals on electricity year-round, as many companies are eager to entice new customers. However, hidden within this sea of promotions is a more sinister reality—electricity scams. Scammers are skilled at taking advantage of moments of heightened consumer interest, particularly when electricity prices are a major concern. 

Consumers trying to save money on bills, who have bad credit or lack a social security number and are looking for prepaid electricity can unwittingly become victims of fraudulent practices. The Federal Trade Commission (FTC) notes that impostor scams, including those related to utilities, are among the most commonly reported types of fraud. Oncor points out that while phone scams constitute 75 percent of all impostor scams, email or text communications may also be attempted.

In today’s deregulated electricity marketplace, consumers are faced with over 140 Retail Electricity Providers in Texas alone, according to the Public Utility Commission of Texas (PUCT). While this variety offers choices, it also creates opportunities for scammers to exploit financially vulnerable customers seeking seemingly unbeatable electricity deals. Consumers must stay vigilant and cautious to avoid falling victim to these scams.

Let’s delve into the world of electric company scams and equip ourselves with what to look out for. By understanding how to identify and avoid fraud when signing up for new electricity services, we can take control of our financial security.

Texas Electricity Scams: Protect Yourself from Fraud

Scammers targeting Texas residents for electricity services can take various forms, often using door-to-door sales tactics or making unsolicited phone calls. Understanding their red flags and tactics is crucial to avoiding these scams.

Scammers typically follow a pattern to deceive consumers. They may initially build rapport by asking personal questions before pitching fraudulent offers. 

Here are key warning signs to recognize a potential scam:

Unscheduled Contact: Beware of unscheduled or unsolicited calls or visits from individuals claiming to represent your power or water company. Always verify their identity before sharing personal information or making payments.

Too Good to Be True: Be cautious of offers that seem too good to be true, such as extremely low rates or high-value sign-up incentives. Scammers employ these deceptive tactics to lure unsuspecting customers, so staying cautious is important.

Sense of Urgency: Scammers create urgency to pressure consumers into hasty decisions. They claim special limited-time offers to prompt immediate action.

Payment Methods: Legitimate companies accept payments through standard channels. Watch out for unusual payment methods preferred by scammers, like checks made out to an individual’s name, wire transfers, prepaid debit cards, or gift cards.

Unclear Plan Details: If electricity plan details are ambiguous or vague, it’s a potential red flag. Scammers may avoid specific information or fail to provide evidence supporting their claims.

Lack of Company Identification: Legitimate providers must provide company identification and permits upon request. Scammers may lack proper documentation or printed plan details. Be cautious if they cannot verify their identity.

How Electricity Scammers Operate: A Closer Look

In today’s digital age, scammers are constantly devising new ways to exploit unsuspecting individuals. One prevalent scam involves fraudulent offers for cheap prepaid electricity, which targets consumers through online platforms like Craigslist or Facebook Marketplace. Let’s examine how these scammers operate and how you can protect yourself.

Scam Initiation: The scam typically begins with a scammer posting enticing advertisements claiming they can swiftly set you up with low-cost prepaid electricity. When potential customers respond to these ads, they are lured into a false sense of security.

Payment Request: Upon contact, the scammer instructs the customer to send the activation fee via popular digital payment platforms like Venmo or Paypal. These platforms allow the fraudster to receive the fee immediately without verifying legitimacy.

Illicit Account Set Up: Armed with the customer’s payment, the scammer set up an electricity account using stolen credit card information. This illicit activity often goes undetected initially, as the customer’s electricity is promptly activated, leaving no immediate cause for suspicion.

Detection and Dispute: After a few days of seemingly normal service, the legitimate owner of the stolen credit card notices an unauthorized charge and promptly contacts their credit card company or the electricity provider, such as PaylessPower.

Service Deactivation: Due to the disputed charge, PaylessPower deactivates the account associated with the stolen credit card. Consequently, the customer’s electricity is abruptly cut off, leading to confusion and frustration.

Verification of Scam: When the customer contacts PaylessPower to inquire about the sudden service interruption, they face the grim reality of being scammed. PaylessPower clarifies that the money was given to a fraudulent representative who used stolen card details to pay for the service. The customer is left in a predicament, needing to make another payment to PaylessPower to restore their electricity.

“This is an unfortunate situation that we see often. It’s one of the biggest issues Retail Electric Providers in Texas face today,” says Payless Power. 

Let’s take a closer look at the deceptive world of electricity scams by examining actual advertisements used by scammers to entice unsuspecting consumers.

How to Avoid Fraud when Signing Up for New Electricity: Do’s and Don’ts Checklist

By following these do’s and don’ts, you can significantly reduce the risk of falling victim to electricity scams and make informed choices when selecting electricity services. Remember to stay vigilant, question suspicious offers, and report any fraudulent activity to relevant authorities to protect yourself and others from potential harm.

Do’s:

• Ensure Legitimacy: Verify that the website or platform you use to sign up for electricity services looks legitimate. Check for SSL certificates, official logos, and contact information.

• Request an EFL: When signing up for a new electricity plan, ensure that you are provided with an Electricity Facts Label (EFL). This document outlines key details of the plan, including rates, fees, and terms, helping you make informed decisions.

• Use Trusted Platforms: To shop for electricity rates, use reputable platforms like PowerToChoose. To avoid scams, deal directly with the electricity provider, not a third-party reseller.

Don’ts:

• Avoid Unusual Payment Methods: Be cautious of electricity providers or representatives who insist on payment via unconventional methods like Venmo or Paypal. Legitimate companies accept a variety of payment methods but typically do not require payments through personal digital wallets to strangers.

• Verify Company Information: Before making any commitments or payments, verify the company’s legitimacy. Check for licenses, permits, and business information to ensure you are dealing with a reputable and authorized electricity provider.

At Payless Power, we are doing our part to reduce fraudulent activities. In early 2024, we were seeing between 15%-20% of attempted enrollments have been fraudulent. In May we implement 2-factor authorization of user accounts to help catch fraudulent enrollments before they complete their account creation.

Navigating the realm of electricity providers in Texas demands a keen eye for legitimacy and a commitment to staying informed, ensuring a secure and reliable experience for all consumers. 

More Resources

If you’ve experienced fraud, you should file a complaint with the FTC either online or by calling 877-382-4357. Additionally, report the incident to your state’s consumer protection office or utility commission.

If someone has fraudulently opened a utility account using your name, contact the National Consumer Telecom & Utilities Exchange at 866-349-5185 to obtain a copy of your account history and contest any inaccurate information. You also have the option to place a security freeze on this report.

For detailed information on scams related to utilities, Utilities United Against Scams, which consists of over 100 North American natural gas, electric, and water companies and trade groups, provides resources on their website and in their Consumer’s Guide to Impostor Utility Scams.

RESOURCES:

https://www.energyogre.com/how-to-avoid-utility-scams-in-texas

https://www.texaselectricityratings.com/blog/how-do-i-identify-a-texas-electricity-scam

https://www.aarp.org/money/scams-fraud/info-2019/utility.html

https://justenergy.com/learning-center/scam-avoidance/

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