CHICAGO — Utility customers who said they were duped into overpaying for electricity are moving toward a $7 million settlement to end their lawsuit.
Lawyers who brought the lawsuit could claim more than $2.3 million of that total.
Tracey Mercado sued Verde Energy USA in federal court in Chicago in March 2018, alleging the third-party electricity supplier lured customers by falsely promising variable electricity rates based on market conditions. According to Mercado’s complaint, Verde offers an introductory rate lower than what utilities charge for electricity supply, then switches to what it says is a market variable rate “but is instead an inflated rate based on” price gouging.
According to her complaint, Mercado was a customer of Connecticut-based Verde from November 2014 to August 2017. She said the company, like other alternative retail electric suppliers, “are essentially brokers and traders: they neither make nor deliver electricity, but merely buy electricity from a producer and resell it to consumers.”
Mercado said a typical consumer loses hundreds or thousands of dollars per year after Verde switches off the introductory rate. She cited “numerous months where Verde’s rate was over 45% higher than the ComEd rate” and said that although the “rates may not precisely match,” they at least should be similar.
“Contrary to reasonable consumer expectation,” Mercado alleged, “Verde used its variable rates as a pure profit center, increasing the rates charged to plaintiff and class members when wholesale prices rose, but staying at a level significantly higher than the wholesale market rates when the wholesale prices fell.”
On June 18, Mercado, joined now by several other named plaintiffs, submitted to U.S. District Judge Joan Gottschall a memorandum in support of their unopposed motion for preliminary approval of the settlement of their consolidated claims. In addition to Verde Energy USA, the defendant list now includes Verde corporate entities in Ohio, Massachusetts and New York. As part of the argument in favor of the settlement, the plaintiffs noted they already faced “motions to dismiss in five different federal district courts” and that they currently represent “thousands of consumers” affected by Verde’s pricing approach.
According to the memo, class members — from Illinois, Ohio, Massachusetts, New York, New Jersey and Pennsylvania — can submit claims to get an unspecified prorated share of the settlement fund based on their energy consumption. The awards to class members will be paid after attorneys fees and administrative costs are subtracted from the settlement fund.
The preliminary agreement calls for up to a third of the fund, about $2.33 million, to go toward attorneys representing plaintiffs. Lead class counsel is attorney Jonathan Shub, of the Shub Law Firm, of Haddonfield, N.J.; other firms representing the class include Milberg Coleman Bryson Phillips & Grossman, of Chicago and Raleigh, N.C.; Wexler Wallace, of Chicago; Goldenberg Schneider, of Cincinnati; Block & Leviton, of Boston; Finkelstein, Blankinship, Frei-Pearson & Garber, of White Plains, N.Y.; Jason Brown, of Jersey City, N.J.; and Kohn, Swift & Graf, of Philadelphia.
In addition to a claim submittals and motions for final approval, the next steps include a fairness hearing scheduled between 90 and 120 days following Gotschall’s entry of a preliminary settlement approval. The judge has not yet approved the settlement.
Verde has been represented by attorney Gregory T. Fouts, and others with the firm of Morgan Lewis & Bockius, of Chicago, and Kevin P. Allen, of the firm of Eckert Seamans Cherin & Mellott, of Pittsburgh.