Advocates, Legislators Are Confident Maryland Law to Rectify Retail Energy Market Will Survive Industry’s Legal Challenge 

Laurel Peltier felt her blood boil as she scanned the news on her cell phone. She slid back in the chair, uncrossed her legs and put down her reading glasses. A stack of energy bills lay scattered next to a file she was supposed to review. 

After seven years of volunteering on Wednesdays at Gedco Cares, a nonprofit in Baltimore’s Govans neighborhood, Peltier has helped thousands of low-income people avoid getting their power cut off. Often at the root of the problem, she’s found: At some point their account got switched to a retail energy company, also called a “third-party supplier,” who offered them low introductory rates before massively hiking them, sometimes after a single missed payment.

And now, on her phone, was the news that a recent Maryland law adding robust consumer protections to this market had just been challenged in court.

Some of the people she’s worked with “unwittingly paid $1,000 more a year to some out-of-state energy supplier,” Peltier said. “It had to stop. People need their power on.”

The state fully deregulated its energy market in 1999, allowing energy retailers to purchase electricity from the wholesale market and sell it to businesses and residents at a different rate. The premise was that such competition would drive rates down. 

But a number of studies and state lawmakers have questioned if competition among energy suppliers has lowered energy bills for average households—the rationale behind deregulation. Instead, by one estimate, third-party suppliers have cost mostly low-income Maryland consumers an upward of $1 billion in utility overpayments since 2014. 

Energy justice advocates like Peltier and some concerned state legislators have long maintained that an unsupervised energy market opened the door to bait-and-switch practices by retail suppliers targeting low-income communities by dangling attractive introductory rates before raising them. In most cases, this happened without the customers’ knowledge, Peltier said.

After years of debate, the Maryland General Assembly finally passed Senate Bill 1 in its 2023 session. The law, which takes effect in January 2025, introduces new licensing requirements, strengthens regulatory oversight by the Maryland Public Service Commission and requires retail energy companies to prove that their “green” energy products are sourced from real renewable sources.  

More than 120 retail energy companies operate across Maryland, selling gas, electricity or both to commercial and residential customers. Some of the big operators, among them NRG Energy, Constellation Energy and American Power & Gas, worked hard behind the scenes to keep the bill from passing, contending that the law would drive energy companies away from Maryland, stifle competition and harm the state’s clean energy mandate by limiting people’s access to green electricity products. 

But Gov. Wes Moore’s administration withstood the pressure. Moore signed the bill after the General Assembly sent it to his desk. 

On Oct. 1, the Retail Energy Advancement League, an industry group representing energy retailers, and Green Mountain Energy Co., a subsidiary of the Texas-based energy giant NRG, filed a lawsuit in the U.S. District Court in Baltimore. 

In the 37-page complaint, the petitioners allege that the provisions in the bill requiring retail energy companies to prove their products are “green” violate the First Amendment rights of retail suppliers. They also argue that the law violated the Constitution by imposing unlawful burdens on interstate commerce.

“For decades, retail energy providers have been able to lawfully market clean energy solutions to residential consumers in Maryland, explaining how their products are better for the environment than the service offered by the local incumbent utility, with benefits like combating climate change,” the plaintiffs said in the suit. 

“But starting on January 1, 2025, a new Maryland law will prohibit these providers from truthfully and accurately describing these products, on pain of civil penalties, unless these providers agree with the government’s views on green energy.” 

“As a result,” the filing asserted, “many retail providers will choose to stop marketing and selling products in Maryland altogether, at dramatic cost to consumer choice, the environment, and the marketplace of ideas.” The petitioners asked the court to invalidate the entirety of the law to prevent harm to suppliers of renewable residential electricity in Maryland. 

As Peltier scanned these lines, she thought about the people, some of them elderly and ill, who had their power cut off after failing to keep up with their inflated bills. 

“When I got the news about the industry suing Maryland, my first thought was an elderly lady named Frannie,” Peltier said. “She’s thousands behind on her energy bill. Last week, I spotted a random third-party supplier on her account. And she had no idea her account was on a supplier, and that she’s been paying an out-of-state supplier a 50 percent higher rate for years.” 

A Berkeley Energy Institute report from 2022 found that third-party suppliers targeted Baltimore’s lowest-income neighborhoods using direct door-to-door marketing, and the highest rates were paid by Hispanic, Black and immigrant families. 

Jenya Kahn-Lang, the author of the study, found evidence that suppliers charged customers different prices based on their attention and search behavior. “Firms can raise prices on existing customers that aren’t paying attention, they can offer low prices to consumers who search more, and charge higher prices through in-person marketing,” Kahn-Lang told Inside Climate News in 2023. 

Peltier said Maryland did not open its residential energy markets in 1999 for these companies to hook low-income families or seniors into pricey bait-and-switch contracts. “Then to sue Maryland when it gets fixed and claim this is all OK under free speech, I just don’t understand how this is ethical,” she fumed.

Chris Ercoli, president and CEO of one of the plaintiffs, the Retail Energy Advancement League, did not respond to multiple requests for comment.   

In an earlier interview, Ercoli called the legislation “ill-advised” and said that the group asked Moore to veto it. He denied that energy retailers were overcharging customers and said the legislation would establish a price cap lower than that charged by the state’s primary regulated utility, BGE, “while also introducing provisions that make it more expensive to conduct business and further stacking the deck in favor of the utility.” Nearly half a million Maryland consumers who have chosen a retail energy provider will be affected by this legislation, he said.

Neither the other plaintiff, Green Mountain Energy, nor its parent NRG could immediately be reached for comment.   

David Lapp, Maryland’s People’s Counsel, an advocate for ratepayers, said SB1 appropriately and lawfully seeks to address the problem of green energy claims that leave customers confused and companies’ failure to inform them of what they are actually buying. 

“Customers should know what they are actually paying for when they buy a ‘green’ product at a premium price,” Lapp said. He added that some suppliers are selling renewable energy credits that are located thousands of miles from Maryland with no chance that those electrons will make their way to the state. “A ‘renewable energy credit’ means one thing under Maryland law, but something else under other states’ laws. SB1 makes sure customers understand what they are buying,” Lapp said.

He noted that much of the statute simply requires suppliers to make disclosures to keep customers informed. “Such disclosures are patently lawful, especially in energy markets, where customers can be easily confused,” he said. The statute provides considerable discretion to the Public Service Commission to implement the law in ways that avoid any constitutional concerns, including those involving free speech, Lapp added. 

“The First Amendment does not restrict disclosures and protections to prevent customers from being misled into bad decisions,” he said. “SB1 protects suppliers’ ability to accurately market their products and earn a profit. We are confident that the court will uphold this important consumer protection law.”

State Sen. Malcolm Augustine, a Democrat from Prince George’s County who sponsored the bill in the Senate, said previous attempts to correct the behavior of energy retailers forced the legislature to restructure the marketplace. 

“The legislative intent is clear that we wanted to create a fair and open market for the larger retail energy supply, and then to create a secondary market that has more flexibility for the renewable energy markets. I feel really good about the guardrails that we have created,” Augustine told Inside Climate News.

“I’m very proud of the legislation, and I’m really looking forward to its implementation,” he said, adding that the state’s attorney general will be able to defend it.

Peltier said she’s already seeing positive signs as a result of SB1. Energy retailers are beginning to tailor their products to comply with the new requirements. She thinks that could finally fulfill the promise of a retail energy market. 

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