A Brooklyn based energy service company has agreed to pay refunds to 2,700 consumers who may have signed up for electricity and natural gas service expecting savings. YNN's Bill Carey says the Attorney General says aggressive sales tactics left many consumers confused and facing bills that did not go down, but went up.

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NEW YORK STATE -- “This case is a very good example of the kind of scam that proliferates when you have hard economic times and something like high energy prices that make people desperate for a better deal,” said New York State Attorney General Eric Schneiderman.

But in this case, the attorney general claimed he had good news for those consumers. Checks are in the mail from an energy service corporation he says ripped off ratepayers to the tune of $2 million.

Back in the 1990s, New York deregulated the power system. There were companies that generated power and utilities that delivered it to individual homes and businesses. But a new group was born, Energy Service Companies. Middlemen who bought the power from the generation firms and distributed it to the utility serving their customers.

With all of those costs fairly standardized, when one distributor claimed it could produce savings for customers of 15 to 20 percent, the attorney general says red flags went up.

Schneiderman said, “They all have to buy electricity and gas from the same generation sources. It's not like they have some secret generator that nobody else has.”

Instead of savings, Schneiderman says customers signed up with Columbia Utilities saw major increases. That led to complaints and an investigation. And once they looked at the books, the attorney general says the problems were clear.

“This was a company that essentially had a business model based on fraud. They went to people frequently. We heard that Columbia representatives pretended to be from the existing utility. We heard from people that they refused to let people see the contracts. They then reported in that these people were signed up. A lot of the people did not realize that the contract they supposedly signed locked them in for a year,” Schneiderman said.

For consumers who were ripped off, average refunds of $700 are on the way. Schneiderman calls it all a cautionary tale. A reminder for consumers to beware.

Columbia Utilities serviced homes and businesses across New York State, but the largest concentration of customers was in Central New York.