Direct Energy curbs competition with new contracts

It’s disturbing to see companies make big changes to their contracts without getting customer consent. Direct Energy is the latest to try this tactic.

The British-owned firm is sending letters to customers who rent water heaters, thanking them for their loyalty and offering a few service enhancements. Many people don’t read beyond the first few paragraphs.

Then, comes the kicker. Direct Energy says customers have to accept new contracts unless they call to opt out by April 2.

The new contract stops clients from buying or renting water heaters from other suppliers unless they pay buyout fees of $200 to $1,000 or more. The current contract has no such fees.

Direct Energy wants to protect its declining market share from door-to-door competition. It also stands to profit from imposing inflated buyout fees on older tanks.

Customers who accept the new contract will get a 24-hour service guarantee and inflation protection on rates. But I don’t think that’s enough to offset the new exit charges.

I did a column last Saturday. Hugh Adami wrote a story in the Ottawa Citizen Pat Foran did a broadcast at CTV News.

Many people dislike having major contract changes forced on them without their express consent. Negative option billing is banned in Ontario. This seems to be skirting the line.

Also, the opt-out date is too close. Direct Energy’s letters were mailed out only last week. Shouldn’t it give customers at least 60 days’ notice to react?

I’ve decided to buy out my 12-year-old rented water heater. (The cost is only $131, less than a year’s worth of rental fees.) And when it stops working, I’ll purchase a new unit.

No more renting for me, I said in a follow-up column. If you’re looking for a reason to stop renting, which is convenient but costly, Direct Energy’s conduct has given you one.

Seize the opportunity to break free.

Author: Ellen Roseman

Consumer advocate and personal finance author and instructor.

29 thoughts on “Direct Energy curbs competition with new contracts”

  1. I’m a current DE customer, soon to be a hot water tank owner instead of renter (though these plans were set in motion well before their term changes).

    I’ve stumbled upon something that deserves some attention.

    First, I read the PDF terms and conditions posted by Direct Energy here:

    As I was reading, it says that the buyout pricing was posted online. I decided to try and find it, which I could not.

    At least, not 2012’s pricing.

    Instead, I found 2009’s pricing:

    I couldn’t believe it. All tanks at 15+ yrs old were $100 to buy out.

    This is NOT anywhere close to the 2012 buyout prices.

    In 2012, the pricing has changed, substantially, on almost all tanks. Primarily, the price after 10 years is much more expensive in 2012.

    Under the 2012 buyout, my 14 yr old CV40 tank is $300. In 2009 terms, $100.

    I couldn’t find the 2012 prices posted on Direct Energy’s website, but someone scanned it in and posted it on the forum here:

    It’s worth taking a moment and comparing the two. It’s easy to see what they did, once they were allowed to force the buyout on people after Sept. 16, 2010.

    I understand that there are two sides to the story, but I can’t help but wonder: Where is the line?

    At what point is it blatantly obvious that Direct Energy is trying to lock consumers in with extremely high and unreasonable cancellation charges?

    If they kept the buyout they had in 2009, even adjusted based on inflation, this could be considered as fair.

    At 15 years, it’s $100 and you can walk away. Even for the Polaris 34, it was $100. However, the Polaris 34 at 15 years is now $1,000. That’s a 10x increase since 2009.

  2. Direct Energy won’t get far. This is a sad way of saving their business after losing so many clients to the door-2-door campaigns. In order to compensate they even introduced a new scam; “total home comfort protect plan”, home owners pay $29.99+hst/month for some sort of insurance… open up an ING account and let your money grow people.

    What’s happening now in the industry is the true definition of Democracy. But Direct Energy is trying to impose communist ways on Ontario consumers; if you don’t call us it automatically goes into effect. Newsflash; if there is no signature on paper and voice records, a little paper that they send out through the mail that 80% of people will throw in the garbage upon receiving it will have no validity.

    This is just a desperate attempt to save their business.

    As for you Ellen, you’re awesome, but you should’ve bought a new tank. Or shopped around for a new rental provider.

  3. Ellen,
    Thanks very much for your enlightening post(s) – without reading these, we would have been completely in the dark about the changes to come. We have not received any communication from Direct Energy as yet. I have a couple of questions:

    (1) If the rental tank was installed after Sept. 2010, does one still have the option to opt out, or do the new contract terms automatically apply to the post-Sept 2010 tanks?

    (2) Is an email sufficient to opt-out? I was unable to find a fax number.

  4. Excellent research, Dave. Thanks! Evil Direct Energy needs to be reigned in at the Ontario Energy Board for their despicable business tactic of negative option billing on Rental Water Heaters.

  5. Quick question: If I choose to buy the water heater currently rented from DE, will there be any implications on my home insurance coverage?

  6. Good afternoon Ellen. I have been trying to get hold of Direct Energy from 10 am this morning through to 1.10 pm this afternoon (March 14) about the buyout on my water heater.

    I have been left on hold through their automated telephone system for 15 minutes, with the system advising me that my call will be taken in order.

    Patiently for 15 minutes I have waited, only to be then having been dropped off their line!

    What kind of customer service is that? How do I get hold of them?

  7. Thanks for the heads up! I spent 30 minutes on the phone with DE the other day and decided that buying out my 30 year old heater that is working fine was the way to go.

    The price? $25! Less than 2 months rental!

    Thanks for keeping us aware of these financial sink holes!

  8. Have a good March break? Fantastic. Don’t forget to check your mail right away. Ah, lots of bills and junk mail.

    Oh look – a letter from Direct Energy, thanking you for being such a loyal customer, accompanied by a lengthy small print form which looks like some kind of contract.

    Well, I’m not interested in whatever they’re up to. Into the recycling it goes. Oh, oh!

    Ah, good old Direct Energy! This is going to be fun!

    Will they back down because of massive media coverage? Or because of public outcry? Or because of Consumer Protection Act violations? Or will they actually pull this scheme off?

    Makes me happy to have owned my own tank for many, many years!!
    So my thoughts:

    The only reason to actually rent a tank is if you are simply unable to afford to buy a one (hey DE – how about a rent-to-own program?) and/or you are absolute in wanting to pay for some self-defined “peace of mind”.

    Let’s look at some math if you agree (sorry should I say default) to the new contract.

    Take a specific power vent tank, the PV50. Depending on the manufacturer/retailer, it’ll cost you a maximum of $1,500 installed (hint -shop around!).

    The tank will come with a 6 to 9 year warranty. Check if this is with or without labour, which could cost a few hundred extra.

    Unless you are just unlucky, most of these tanks will last well beyond their stated warranty period. And when they fail, it is usually a mechanical part and not that the tank will suddenly burst open, ruining the downstairs family room.

    DE will rent this unit to you for about $30/mo. Remember that as a major company, DE paid far less than retail for their unit than you did at Lowe’s, Home Depot, Sears or wherever.

    So, when they actually want $926 (as per their 2012 buyout chart) during year 7, they are actually getting back more than they paid and you now have the ultimate responsibility of removing and disposing the unit!

    And the $2,500 in rental fess that you paid over those 7 years? Well, that’s the gravy train, folks!

    Oh, how I would love to be an accountant calculating DE’s rate of return on this little scenario.

    So in short, if you’re one of the the lucky ones receiving a letter, opt out.

    I just find it outrageous that in this age of consumer protectionism, a major Company can write its “loyal” customers and legally as well as ethically/morally try this!!!

    In the meantime. I look forward to reading other posts and seeing how it all plays out.

  9. This is my experience of a couple days ago…

    I had a representative come to my door from the competitor and offered to upgrade our tank to tankless. He also explained how Direct Energy was changing their policies and how his company has better policies in place.

    We decided to go tankless because we have a Jacuzzi. Ontario Consumers Home Services came the next day and replaced our old tank.

    We called Direct Energy to get a removal number as instructed by our new supplier to safely return the tank and remove the rental charges.

    A Direct Energy Rep by the name of “Simon” came on the phone and was completely arrogant and immature. We explained to him numerous times that we wanted to get the removal number and he was fighting with us on the phone.

    He was trying to use scare tactics and even threatened that we’d have to pay an exit fee, which I know is not true.

    He then started shouting out facts that are irrelevant. “They are not affiliated with Enbridge Gas.” Neither is Direct Energy, so what is your point?

    I told him I am a big supporter of buying locally and pointed out the fact that Direct Energy cut 500 Jobs to the USA. After 15 minutes with this idiot on the phone, he finally gave up.

    It reminds me of how pushy their telemarketing calls were when trying to lock our electricity prices in.

    Our tank was 18 years old, never serviced. We had never been offered an upgrade. Renting was clearly a waste of money.

    We decided to pay by credit card since the manufacturer offered a warranty. I’m quite happy with my purchase and glad I don’t have to rent any more from these scum bags.

  10. something tells me that DE is doing this in an effort to actually get rid of tank rentals because they figured out that they can make much more money on service repairs than actual rentals…just a hunch, I work in the heating trade.

  11. My advise to anyone who is attempting to deal with Direct Energy by phone is, DON’T. Please email or put everything in writing. I have personal experience that they can and will ignore information shared on calls. I have never dealt with another company that disregards customer satisfaction quite so thoroughly.

  12. Incompetent people don’t know they are icompetent.
    The world is full of them in high places and overly paid.

  13. I agree with most of what is said regarding the way DE handled this.

    However, tankless units are overpriced and not worth it. And power vented tanks can be troublesome. You can see numerous YOU TUBE videos explaining why.

    Renting is a consumer’s choice. If you buy, read the warranty carefully. Ask who will service it, because it will not be the manufacturer.

    Do you live in a hard water area? That can kill a water heater.

    I know I had one in Kitchener, where the water is hard, and it sounded like popcorn in the tank as the pockets of calcium built up exploded.

    So I got a water softener. My water ended up smelling like sulphur and the anode had to be changed. Not a cheap fix because it was due to the water, not the water heater.

    If you don’t have a Ontario registered contractor install the water heater and it bursts, your insurance may not cover house damages.

    People, it’s buyer beware. Always read your rental agreements. Pretty much ALL the companies I called require a buyout if you don`t want the tank. Some even required a chargeable yearly check up.

    For most people, they are not STUPID simply because they enjoy peace of mind knowing that all service is covered while renting. So don`t whine and pout that you didn`t read the agreement or ask.

    I advised my 82 year old mother to rent so she would know someone would be there when she needed help. One less thing she needed to worry about.

    Direct Energy was amazing. A guy came out because she needed her pilot light relit, no charge. He even changed a light bulb for her. I live 100 km away from her.

    Hey, Ellen, and the others who bought their tanks, did you get Enbridge to inspect the installation to make sure it is up to gas code? Did you ask them who does the warranty work? Who will you call in the late hours when your tank doesn’t work?

    How about also informing your loyal readers about the other companies that try to fleece customers, like National or Reliance?

    They are delightfully feeding off the customers with Direct because YOU made Direct out to be the evil doer. Don’t put out half truths. Show the whole truth or nothing at all.

    And you unhappy renters, the person on the phone didn’t make the policies so don’t blow up at them.

  14. I called Enbridge today at 1 877 362 7343 and was told to call Direct Energy, 1 800 266 3939.

    When I did that, I listened to a recording at Direct Energy stating that there was so much negative feedback that DE has cancelled that new contract proposed.

  15. This whole issue with Direct Energy was caused by the competition bureau in the first place! They imposed a 10 year ban on them charging customers a buyout fee, while new companies can do as they please!

    Talk about fair and equal opportunity! EVERY new company has a long-term contract and buyout fees!

    These new companies are scamming customers with flat out lies and deception into signing up with them and removing tanks that aren’t even 1 yr old that must be scrapped for the safety of the public.

    Direct Energy has always been fair and strived to provide the best customer service. No one knows that side of the story though.

    You can’t even believe the media these days because only half truths are told to make good stories. I really am sick of today’s society in general. There is no handshake and a person’s word doesn’t mean jack any more!!!!

    Everyone, be cautious about what you read or see on TV. There is always more information you need before you jump on the bandwagon.

  16. Who is Ontario Consumers Home Services Inc.? Are they a subsidiary of some other company? If so, who?

    A sales person dropped by my place today.

  17. I had a new water heater installed in the summer of 2012. At the time Direct Energy was offering a $100 fuel card or prepaid master card as an incentive. Guess what I have never received the chosen incentive the prepaid master card. After complaining to the company I still have not had any satisfaction. Is there anyone else out there with the same problem??

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