Direct Energy backs off and apologizes

I was tied up yesterday and missed the announcement. But I knew DE would have to stop forcing customers to accept contract changes they didn’t want.

The protest was too loud. I’ve seen nothing like it since the revulsion against Rogers’ negative option marketing of cable TV channels in the 1990s.

Canadians aren’t as vocal about consumer abuses as Americans are. But they can be pushed only so far. When they’ve had enough, they scream.

Direct Energy said it made the decision to drop the new contract. I don’t believe it. I’m sure the Ontario and federal governments had a role in forcing DE to back off.

Ontario outlawed negative option sales in 2005. What good is a law if it’s not enforced?

Meanwhile, Ottawa just announced that financial institutions would have to stop providing new features (like credit card balance insurance) and making customers call to opt out.

Rob Comstock, senior vice-president, was on TV last night, talking about the service enhancements the company hoped would offset the cancellation charges.

This strategy of sugar coating a bitter pill almost worked — until the media got involved. We warned people to read those letters carefully to the end, since DE was hiding the truth.

The company obviously didn’t do any research on consumers’ reaction to negative option marketing. If it had, it wouldn’t have made such dumb mistakes in this misguided campaign.

DE is now run by British and U.S. executives who don’t understand the Canadian mentality. Even the PR spokeswoman is in Houston, Texas.

It’s a victory for consumers in Canada, who finally found their voices and rose up. This DE story will be used in business courses as a case study in what not to do.

I normally get lots of email, but I’ve never seen anything like this. I had about 1,000 Direct Energy emails and phone calls in the past week. I couldn’t keep up.

I still find it hard to believe that DE could write to 500,000 customers, giving them a tight deadline and only one phone number to call.

When people couldn’t get through to the company, they asked the media to help — and we told them to fight back.

Luckily, they did fight back. And DE was forced into a humiliating apology.

Author: Ellen Roseman

Consumer advocate and personal finance author and instructor.

20 thoughts on “Direct Energy backs off and apologizes”

  1. My hat off to Ellen Roseman for leading the way to end this crazy fiasco. After causing mass chaos, confusion, and frustration to 600,000 customers, all he said is “oops, my bad. Sorry”.

    I hope the ministry of consumers will launch an investigation into this practice and penalize them for public nuisance, negative option, failing to provide adequate service.

    They forced me to call but I could never got any one to pick up the phone after two calls and more than half an hour wait each.

    In these days, people struggle to make a living, doing more for same pay (if you are lucky to keep your job) or do more for less (in your new job after the greedy company got rid of you), and DE wants you to pick more out of your pocket!

    Direct Energy itself got rid of 500 employees in Canada to move its HQ to Texas. Last year they make a record profit, up 31% from the year before.

    Do we need this greedy company in Canada? No.

    Where are my MPs and MPPs when they squeeze us like a piece of sponge and throw away when they want more profit?

  2. So are they delaying the change to May 1st or cancelling it? Their website says they extended the deadline to May 1.

  3. When I first became aware of this story, I told my wife DE would back off within a week. Obviously it was sooner and I was wrong. My bad!

    But I certainly agree with you, Ellen, that there was a lot going on behind the scenes. What surprises me is that a certain minority government didn’t come out publicly on the consumer’s side and score a few points.

    I would also like to extend my deepest sympathies to the bean-counters who hatched this plan and to the mid-level executive who signed off. No bonuses this year.

    But if a high level executive was involved, don’t worry, you are SAFE! Just take the Vic Toews approach and claim to never have read or actually understood what you were doing. Trust me, your bonus will still be good to go!

    Lastly, the lesson here is, if you can afford it, BUY your hot water tank! And shop around for prices – they’re all over the map!

    It’s an appliance, for gosh sake. No more, no less. Ask yourself – do I rent my furnace, fridge, stove, dishwasher, air conditioner, etc.??? So why do you rent your tank?

    Those of us who are (ahem) older might remember the day when virtually every home in Canada rented their phone from Ma Bell. (My parents rented the same green rotary phone for 40 years!)

    But over time, we all woke up and today, lots of residences don’t even have a “home” phone.

    Now DE has self-destructed their gravy train. Do your part to keep that train off the tracks!

  4. Dear Ms Roseman,
    I just want to thank you very much for bring the very questionable Direct Energy practice in regards to the April 2 change of terms and conditions to Toronto Star readers’ attention.

    No doubt, all credit goes to your initiative and the surge of reactions from its customers that Direct Energy has reviewed, apologized and made the necessary remedial action to this despicable negative option billing.

    Further to reading your article, my husband and I have decided to stop service with Direct Energy and buy our own new water heater. (We were given a $200 buy-out from Direct Energy for their 9-year old water heater.)

    True, we will have to add up the installation cost, but we would have a brand new one model. All in all, we would spend $600, which we would recoup in less than 2 years.

    So as you rightly said, we also say: “Bye bye, Direct Energy!”

  5. Sorry for the confusion. In my previous comment, I actually meant:

    We were given a $657 buyout price while a brand-new one would cost us only $844. In essence, a brand new water heater would cost us less than $200.

    Adding an installation fee and taxes, we would spend about $600.

  6. Congratulations to you, Ellen, for not taking all of the credit. Our local newspaper’s consumer affairs writer seems to think that his article is what spurred DE to back down.

    I imagine it must have been the combined forces of a number of media outlets that turned the tide — along with a relatively new social media phenomenon that is fast becoming a force to be reckoned with.

  7. Thanks to your reporting I found out about the April 2nd deadline, and a day later, the May 2nd change. Yes, I admit, I don’t read the inserts that come with the bills. Later this afternoon, I called Direct Energy, and after being on hold for 45 minutes, the rep told me that the whole plan was scrapped. I thanked him for the update, but was still interested in knowing the cost to buy our tank, etc. I was rather put off when he informed me that it will take 10 days for another dept to contact me with this information! The reason for this delay….was because of the volume of inquiries. How’s that for customer service?

  8. Hello Ellen,

    All I can say is “Thank you very much”. I am one of those people who strongly believe that you helped make DE backed down. Best regards.

  9. I, too, believe that Ellen deserves much of the credit for DE’s decision reversal. Ths is column, I’ve stated before, does the job for consumers that our government won’t. Kudos, Ellen.

  10. The DE website seems to have contradicting information.

    On the main page, they say “There will be no changes to your Terms and Conditions as a result of the letter you received.”

    But if you click on “To Read More” there is a **New**
    C. New terms in regards to Customer Notification sent on March 2012 affecting rental water heaters installed prior to July 31, 2005.”

    What gives???

  11. I e-mailed them to ask for a value on my water heater buy-out. This is what i got a few minutes ago: so odd!

    If I still want the buy-out info I have to reply to their e-mail!!

    From: DEHS-Billing Enquiries []
    Sent: Monday, March 19, 2012 11:25 AM
    To: Charlene
    Subject: RE: water heater rental

    Dear valued customer,

    Thank you for contacting Direct Energy.

    Please note that as a result of customer feedback, we have decided to withdraw our letter and the proposed changes to terms and conditions. There will be no changes to terms and conditions of your water heater contract and there are no further actions required.

    We understand you were inquiring about buying out your rental water heater. Some of our customers have made this request as a result of the changing terms and conditions, which will not happen.

    We wholeheartedly apologize for any confusion or inconvenience this may have caused.

    The information you requested will be sent to you as quickly as possible. Before we proceed with your request, we wanted to ask if this is something you are still interested in learning more about. If yes, please respond to this email with your confirmation.

    We ask because many customers have cancelled their request and are continuing to enjoy the convenience of their Direct Energy hot water tank.

    We are proud to provide high quality service in Canada and look forward to keeping your family comfortable at home.


    Direct Energy Rental Specialist Team

  12. Hi Ellen, I read your article in March 17th Toronto Star. I have decided to terminate my contract with Direct Energy since my water heater has been on rental since March ’02.

    However, getting through to DE is frustrating to say the least. I have been on hold for over half-hour and I am thinking of driving over to their offices on Allstate Parkway.

  13. Financial math renting vs. buying hot water tanks:

    Average monthly renting cost = $16 a month + 13% GST = $18.08.

    In 12 years, total cost (assuming monthly cost is unchanged) = $2,603.52.

    Buying costs, using current prices at Home Depot (HD) as of March 2012:

    GE brand 50/60 US Gal. gas tank = $761 with 12 year warranty.

    1st year in-home labour and part warranty. Next 11 years come with warranty on parts only.

    HD Basic Installation = $215.

    If HD installs your tank, it will include the “service protection plus” for free.

    In their own words, “life time tank and functional parts, plus life time in home labour warranty” and “the last hot water heater you’ll ever buy”.

    One catch, this warranty is not transferable when you sell the home.

    I took the photo of their sign for proof.

    Measure cost = $40 (may be waived if you buy their tank and installation service, depend on who you talk to, I am told).

    Disposal cost = $40

    Total cost of buying = $761+215+40+40 = $1,056 + 13% HST (or $1,193.28 including tax).


    Renting 12 years = $2,603.52 vs. buying life time (or at least 12 years) = $1,193.28.

    Buying saves me money over the life of the tank. In fact, I will break even after 5 years and 6 months (1,193.28/18.08 = 66 months).

    Your situation may be different. Smaller tank sizes and shorter warranty time cost less, and may save you more money if you do not stay in your home up to 12 years.

    Disclaimer: To avoid running a risk of promoting Home Depot on Ellen’s website, I also went to Lowe’s and found their prices are in the same range.

    Lowe’s sells the Whirlpool brand name. The gentleman at Lowe’s also will price match HD prices!

    The closest Rona is too far for a quick price comparison.

    I am only a consumer. I am not working for Home Depot, nor a holder of its stock. I do not know anyone working there. I only want to get rid of my hot water tank and I’m crunching numbers in my research. Please do your own research.

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