CUB, Attorney General Issue Consumer Alert Warning Nicor Customers About Highly Lucrative, Rarely-Used 'Comfort Guard' Service

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Nov 23, 2010, 12:56 ET

Evidence Shows Cost Of Average Repair Less Than Annual Cost Of Service

CHICAGO, Nov. 23, 2010 /PRNewswire-USNewswire/ -- The Illinois Attorney General's office and the Citizens Utility Board (CUB) on Tuesday issued a consumer alert about "Gas Line ComfortGuard," a lucrative pipe-repair service that has drawn hundreds of thousands of Nicor Gas customers despite the fact that it is overpriced, rarely used, and the plan's annual cost is more expensive than average repairs, according to testimony filed with state regulators.

In fact, the list on Nicor's website of what ComfortGuard does not cover is longer than the list of what it does. Illinois Attorney General Lisa Madigan's office and CUB have uncovered evidence showing that while the service rakes in revenue of more than $2 million a month, it is so rarely useful to customers that its monthly repair benefits have averaged less than 10 cents per home.

At $4.95 per month, ComfortGuard, marketed as Nicor's "most popular and affordable plan," is offered by Nicor Services, an unregulated affiliate of the natural gas utility. It covers the cost of inspection and repair of potential gas leaks with exposed pipes and appliance connectors inside a home, up to $600 per incident.

ComfortGuard is the focus of a case before the Illinois Commerce Commission (ICC) in which consumer advocates argue that the service is overpriced and its marketing misleading. Also, they allege that even though Nicor Gas, the regulated utility, largely promotes the program, Nicor sells the service through an unregulated arm and improperly diverts ComfortGuard's abundant revenue to its affiliate. This tactic prevents that revenue from reducing rate hikes proposed by the utility. Revenue is a key factor the ICC considers when it rules on rate-hike requests.

"Nicor's ComfortGuard service does not live up to marketing promises that it will save money for consumers," Attorney General Madigan said. "Consumers looking for comfort should carefully review their gas bills to determine whether they really need to pay an extra $4.95 a month."

"With another expensive winter bearing down on us, gas customers can ill afford to burn hard-earned money on unnecessary services," CUB Executive Director David Kolata said. "Take a look at your gas bill, and if you have ComfortGuard, ask yourself if you really need it. The numbers indicate that ComfortGuard is of much greater value to Nicor than its customers."

Testimony filed by CUB and the Illinois Attorney General's office shows that in 2009:

20 percent of Nicor customers, about 440,000 people, were enrolled in ComfortGuard, yet not even 2 percent of them had repairs performed under the program.
The annual cost to ComfortGuard customers is $59.40, but the average cost of a repair for non-ComfortGuard customers was only about $47. Less than 3 percent of gas-leak repairs made by Nicor for non-Comfort Guard customers were more than $100.
Nicor Services brought in more than $2 million a month in ComfortGuard revenue, but spent less than $50,000 per month—or under 10 cents per ComfortGuard customer—on actual repairs.

The testimony, written by David J. Effron, a New Hampshire consultant on utility regulation, also estimated that the actual price of ComfortGuard should be just 30 cents a month, not $4.95 a month, based on estimates of the costs of providing the service.

ComfortGuard is billed as a non-utility service, yet Nicor Gas, the regulated utility, performs the vast majority of repairs, solicits customers to sign up for the service, and charges for ComfortGuard on its own bills.

Because of that, CUB argues ComfortGuard revenue should be considered utility revenue and be used to offset utility expenses that get billed to consumers. Utility revenue is an important consideration in 11-month "delivery" rate-hike cases in which state regulators determine what Nicor Gas can charge customers to pipe gas to their homes.

Reviewing scripts that Nicor Gas call center employees used to promote ComfortGuard, consumer advocates argued in testimony that customers are misled into believing that gas leaks will not be inspected and repaired by the utility unless they're enrolled in ComfortGuard.

In fact, Nicor Gas is legally obligated to immediately investigate any reports of gas leaks for free, and shut off the gas, if necessary. Customers are responsible for the cost of any inside leak repairs—either done by a Nicor technician or another contractor—but the company must cover the cost of repairs to problems outside the home.

"Gas leaks are a serious problem, and Nicor shouldn't play off peoples' fears to sell ComfortGuard," Kolata said. "Before you sign up for ComfortGuard, read the fine print and make sure it's exactly what you want. You may be better off passing on the service. Your savings over time would make up for any repairs—if you ever needed them."

An ICC ruling on CUB's case is expected early in 2011.

CUB is Illinois' leading nonprofit utility watchdog organization. Created by the Illinois Legislature, CUB opened its doors in 1984 to represent the interests of residential and small-business utility customers. Since then, CUB has saved consumers more than $10 billion by helping to block rate hikes and secure refunds. For more information, call CUB's Consumer Hotline at 1-800-669-5556 or visit CUB's award-winning website, www.CitizensUtilityBoard.org.

SOURCE Citizens Utility Board