The ins and outs of contracts

The ins and outs of contracts

Toronto Star - February 17, 2007 - By Ellen Roseman Toronto Star

Last week, I talked about how a fixed-price gas contract may be renewed automatically if you don't take the right steps to cancel it.

Today, I'll look at what happens when you sign a gas or electricity contract and you want to get out.

Under the law, you have a 10-day cooling-off period to change your mind when you sign a contract with a door-to-door seller.

During the next 60 days, the energy retailer has to call you to see if you understand what you signed and you want to continue. This reaffirmation call is an important safeguard. It gives you a second chance to cancel the contract without penalty. Companies have to record each reaffirmation call and provide you with a copy if you ask for one. (NOTE - This consumer protection measure does not exist for British Columbia residence.) This can be helpful if other members of your household - such as your spouse or your kids, if they're 18 and over - sign the
contract or take the reaffirmation call.

Sophie Farag, a single mother, was away from home last February when her 19-year-old son agreed to a five-year gas contract with Superior Energy Management. She called the company, only to be told she was bound by her son's signature. Any adult can sign for the household. When she called again in September, Superior Energy agreed to lower the contract price to 39.9 cents a cubic metre (from 42.9 cents) because the market rate had dropped. Still, she found it a struggle to pay the bills and asked me for help. I passed along her request to Greg McCamus, president of Superior Energy.

"The reason we have been resisting letting her out of the contract is that we have committed on her behalf to take delivery of gas for five years at the prevailing long-term rates back when
the contract was signed," he explained.

"To cancel her agreement would leave us with 4.5 years of future gas supply without a customer to match it up to."

McCamus agreed to put through the cancellation as a goodwill gesture.

However, he pointed out that Farag had not tried to get out of the contract when she got the verification call.

"I have just listened to a recording where the agent explains the program she has been enrolled in very thoroughly and she agrees with the value proposition and the pricing," he said.

Farag has a different memory. She felt she had no choice but to accept the contract after her son signed on her behalf.

Edwin Paley asked me for help after his 78-year-old mother signed for both gas and electricity last April with Ontario Energy Savings Corp.

"Unfortunately, she has no recollection of signing," he said about the contracts, which he found only after the deadline for cancellation had passed.

The company said she couldn't get out. The Ontario Energy Board, which regulates energy retailers, agreed - but suggested he appeal, citing his mother's age and providing proof by
sending her birth certificate.

"I tried the appeal, minus the birth certificate. No success. With identity theft such a common occurrence, I wasn't going to send a birth certificate to an organization I did not trust."

Ontario Energy Savings cancelled the two contracts without penalty once I got involved.

"We certainly don't promise savings," says Gord Potter, vice-president of regulatory affairs for Ontario Energy Savings. "But you see the potential for savings in our brochures."

Signing a long-term contract means you pay a higher rate at the beginning, hoping to be protected from rising prices in the later years.

But there's no protection if the energy market tumbles. Some people signed natural gas contracts last year at 50 cents a cubic metre. The current utility rate is 30 cents. With electricity, many people agreed to pay almost 10 cents a kilowatt-hour last year for all the power they consume. Utilities charge a two-tier rate that rewards conservation - currently, 5.5
cents for the first 1,000 kilowatt-hours used and 6.4 cents for the rest.

Staying with your utility means uncertainty. Rates are adjusted every three months for gas and every six months for electricity. And if utilities run a deficit by charging too little, they're allowed to put through retroactive increases.

But at least you won't lock into an inflated price when the market hits a peak - and lose the ability to follow the price down again.

News tip: The Ontario Energy Board provides comparisons of energy retailers at its website (www.oeb.gov.on.ca, What's New). You'll find complaint statistics broken down by company and category for the last three months of 2006. If you have an interesting consumer problem you would like investigated, please send details by email to onyourside @
thestar.ca.