A pack of electricity salespeople are using prolific media coverage of a wintertime spike in electricity bills from Central Maine Power Co. to hawk contracts for a company that cost Maine customers about $280,000 more than the standard rate in 2015 and 2016.
One such salesman, for Dallas-based Ambit Energy, even managed to appear in a television news segment about CMP complaints, without disclosing his financial ties to the company. He and other Ambit sales consultants then used the segment to promote Ambit’s offerings on Facebook.
The catch is, contracts with Ambit won’t do a thing to shield customers from higher rates charged by a power utility such as CMP.
While state regulators have cracked down on misleading, misinformed or abusive door-to-door sales and traditional ad campaigns in the retail electricity market, their efforts have so far left advertising on Facebook and other social media out of the equation. Now, they are considering closer scrutiny for social media marketing campaigns.
“Social media is so hard to monitor, but that’s where the advertisement’s happening,” said Kiera Reardon, consumer adviser at the Office of the Public Advocate. “Maybe we need to be looking [at social media] just as hard as we did at radio and television ads.”
Ambit is unique for having a salesforce made up entirely of “independent consultants” who earn commissions and other rewards, rather than in-house sales and marketing staff. Cosmetics retailer Mary Kay also uses that model, called multi-level marketing.
Other electricity suppliers in the Maine market have typically used door-to-door sales, telemarketing, or radio and television ads.
A Bangor Daily News survey of Ambit consultant postings on Facebook found a realm where misleading or false advertising can go unchecked. Most recently, Ambit consultants have latched onto the regulatory investigation of unusually high CMP bills to try to sell their electricity plans.
For the customers they enroll, Ambit sales consultants receive commissions, discounts on their own power bills and a chance at a series of colored jackets set aside for top sellers. To be eligible for any of the perks or commissions, Ambit Energy consultants have to keep selling, either by maintaining a fleet of least 20 current customers or by signing up at least one new customer every four months.
While at least 100 CMP customers complained to the Public Utilities Commission about their January bills doubling, Ambit would only have saved the average customer 95 cents for the month.
Regulators are probing the reasons behind bill spikes, which could possibly be the result of a deep cold snap in January, problems with a new billing system, an 18 percent rise in the standard offer price that took effect Jan. 1 or a combination of those things.
Meanwhile, Ambit consultants have used the coverage to sell what they sometimes call a “solution” to utility woes. Many brand Ambit as an alternative to a utility such as CMP. It isn’t.
Utilities maintain the power grid that delivers electricity. Others deal in generating or selling it. Whether a customer takes the standard offer or switches to a contract with a company such as Ambit, it would not shield them from an increase in CMP’s charges for maintaining the power grid and distributing power.
Harry Lanphear, a spokesman for the Maine Public Utilities Commission, said such social media marketing is “definitely on our radar.”
A marketing coup
Last month, Ambit consultant Tyler Hall appeared in a WMTW news segment about the CMP complaints, using the exposure to tout Ambit’s rate. The story depicted Hall as a landlord but did not mention his role with Ambit.
Hall posted a link to the television appearance on his personal Facebook page, cheering the publicity and providing a link for customers to sign up with Ambit. He did not mention there, either, that he is an Ambit consultant, despite Ambit’s own social media policies, which specifically call for its consultants to “always identify yourself as an Ambit Energy Independent Consultant.”
Hall’s successful guerrilla marketing highlights the relative freedom Ambit consultants have in making their sales pitches and capitalizing both on consumers’ frustration with their power bills and lack of knowledge about them.
Other Ambit consultants have used similar lines of attack, conflating CMP with the actual electricity supply.
Maine separated companies that deliver electricity (including utilities CMP and Emera Maine) from those that generate and supply it 18 years ago, but the competitive retail supply market populated by companies such as Ambit, Electricity Maine and others is still relatively new in the state. The first major company to target home customers and give them another option besides the standard power offer negotiated by Maine regulators didn’t enter the market until 2012.
Since then, competitive suppliers haven’t saved customers money. Altogether, they cost Maine residential customers $77 million more from 2012 to 2016 than if they’d taken the standard offer, according to an analysis by the Maine Public Utilities Commission.
On Facebook, numerous posts promoting Ambit misstate the division between power suppliers and the utilities that maintain the grid.
In January, one Ambit consultant posted, “How would you like to save money on your electric bill? You can get a cheaper rate than CMP.”
In November, a consultant touting savings with Ambit asked readers, “who would you rather have that money? You or CMP?????”
Barry Hobbins, Maine’s public advocate, said his office will try to better educate customers about that split. That education is still needed to help customers navigate the competitive market, he said.
Advertisements implying that CMP supplies electricity are usually enough to get the utility’s attention, according to spokeswoman Gail Rice.
“The only time we get involved with CEP marketing issues is if a supplier mischaracterizes something regarding CMP (such as an affiliation between CMP and the supplier or a statement that implies CMP provides standard offer service),” Rice wrote in an email.
In those cases, CMP reaches out to the company in question before talking to regulators.
The company did so earlier this year, raising concerns that independent, door-to-door salespeople for the state’s largest competitive supplier, Electricity Maine, were misrepresenting themselves as utility employees or not properly identifying themselves as Electricity Maine representatives.
Rice declined to state if the utility has contacted Ambit over recent advertising.
Early this year, Hall took his marketing against CMP one step further — again without disclosing his financial stake in enrolling Ambit customers.
He started a Facebook page, called “Maine Electricity Epidemic,” which touted Ambit as “Maine’s CMP Crisis Solution.” It had about 170 followers until the page was deleted earlier this week. Hall used the page to amplify news coverage of the CMP bill spike in emails and posts, masking the effort as a consumer protection “movement” to fight utilities and inform customers.
A Feb. 12 post opened with a call to action, “STAND WITH US!”
“Join and share our Facebook page and logo to help support our cause!” Hall wrote. “The website in our logo is the place we are all going to do what we can do to make a difference.”
The web address in that logo points to a page at joinambit.com, where for $25 a month the company provides consultants custom referral portals.
As of March 1, Hall’s page made no mention of his position as a consultant with Ambit. The page’s description read, “Maine people taking a stand to get answers about the wrongful charges on their electricity bills. Thousands are affected and are standing together!”
In response to questions about the page and its tag line, “Maine’s CMP Crisis Solution,” a spokesperson for Ambit said the company had referred it to its compliance department.
Following that referral and an interview with the BDN, Hall added the words “independent consultant” at the end of the “about” page. It still made no mention of Ambit.
Some saw through Hall’s attempt to sign up more Ambit customers. One commenter wrote on his Facebook page, “I was hoping for a protest — not a marketing ploy.”
Hall confirmed his role as an Ambit consultant in a phone interview with the Bangor Daily News. He had emailed the newspaper on Feb. 9 “in hopes that you will help me educate the public so we do not keep overpaying for electricity as a whole in Maine,” citing the paper’s earlier investigation into competitive suppliers.
“If [the BDN] can’t run a story for me I would love to purchase an ad to do it myself,” Hall wrote in the email, in which he did not disclose his role as an Ambit sales consultant. Hall did not purchase an ad with the newspaper, according to Todd Johnston, director of sales.
Ambit charges $75 to start as a marketing consultant (it advertises the fee as discounted from $429), with a monthly fee of $24.95 for an individual webpage on joinambit.com.
Ambit encourages customers to become consultants and begin referring family and friends to sign up, giving those referring customers discounts based on how much electricity their recruits use. From there, consultants can earn money through commissions on the electricity payments of enrolled customers and ascend to higher tiers of consultancy, which come with larger payouts.
Ambit marketing happens exclusively through media that are more difficult for regulators to monitor than television or radio ads. With social media specifically, much of the marketing can happen in private networks closed to the general public. Ambit has told Maine regulators that it relies on word of mouth, informational meetings and what it characterizes as “peer-to-peer” communications.
The company asks consultants to adhere to a code of ethics that prohibits false and misleading advertising and sets out other guidelines established by the Direct Selling Association, a trade group representing companies that use independent consultants to sell their products.
By using independent consultants, the company also creates some distance between it and the online marketing on its behalf.
“Here’s your first guideline: statements made through social media channels are perceived as your opinion,” the company’s social media handbook for sales consultants states. “Therefore, be clear these opinions are coming from you.”
The company responds to complaints on a case-by-case basis.
“If we ever see something on social media that violates these guidelines, the issue at hand is sent to our compliance team to address immediately,” an Ambit spokesperson wrote in an email.
Last week, the Maine Public Utilities Commission took initial steps toward implementing new consumer protections in the retail electricity market. But its efforts to rein in competitive energy marketing over social media could face challenges, potentially revolving around Ambit’s stance that social media posts from its consultants constitute their individual “opinions.”
Last year, the Retail Energy Supply Association, a trade group, balked when regulators floated the idea of banning door-to-door sales, arguing that such a ban would violate free speech protections under the First Amendment.
Regulators have not banned any categories of marketing. They handle complaints on a case-by-case basis.
Earlier this year, they responded to “extremely serious” complaints about door-to-door marketing from Maine’s largest supplier, Electricity Maine. It resulted in the company temporarily shutting down its door-to-door effort, run by independent contractors. Regulators said they may consider suspending the company’s license or imposing monetary penalties if that continues.
In 2015, regulators probed Ambit’s sales practices following complaints about one consultant signing up customers without their consent. In response, the company promised to institute a certification program for consultants.
Last year, the Maine Public Utilities Commission probed Ambit’s practices after receiving complaints about salespeople failing to identify themselves as salespeople, making calls at unreasonable hours and providing “false or misleading information” about rates and benefits of using Ambit.
In response, Ambit told the PUC that it does not allow telephone or door-to-door sales, and limits marketing to “word of mouth, peer-to-peer and general informative meetings conducted by Independent Consultants.”
The company did not mention marketing using social media specifically, but on its website it encourages its consultants to use their social media accounts to market Ambit’s offerings.
The commission did not take any action in response to the complaints about Ambit last year. PUC spokesman Lanphear said the commission since has addressed other concerns about Ambit’s communications with customers at the time of enrollment.
A winning strategy
Ambit’s marketing approach appears to be paying off. Its loose network of independent consultants managed to grow the company’s customer base in Maine by 48 percent in 2016, at a time when competitive providers as a whole lost customers.
Ambit grew despite generally higher electric rates. In 2016, Ambit customers paid $49 more, on average, than if they had paid the standard rate, according to analyses of federal data by the Bangor Daily News and the Maine Public Utilities Commission.
Ambit customers collectively paid roughly $281,648 more than if they’d accepted the default rate in 2015 and 2016. Ambit had 5,345 customers by 2016, after closing its first year, 2015, with 3,607.
At Ambit’s current rates, the average customer signed up from January 2018 to December 2018 would save about $11.
The standard rate will change again in January 2019. Prices with Ambit or any other competitive supplier can change at any time.
Maine Focus is a journalism and community engagement initiative at the Bangor Daily News. Questions? Write to firstname.lastname@example.org.