The Problem
“Junk fees” are mandatory fees that cause consumers to believe they will be charged a lower advertised price for an item or service, only to find out at the time payment is due that the actual price is higher — sometimes significantly higher — as the result of undisclosed fees.
Thirty-seven percent of Americans report facing unexpected or undisclosed fees on their gas and electric utility bills. For example, a recent investigation found that renters in Washington, D.C., were being forced to pay undisclosed utility fees that increased their monthly payments by up to $165.
Other fees imposed on customers include credit card and debit card fees or even a ban on using those payment methods. A 2022 report from the Edison Electric Institute, the trade association for monopoly electric utilities, found that at least 31 utilities offer fee-free credit and debit card payments and some have been successful in reducing the per-transaction fee with payment networks such as Visa or MasterCard.
It is important to eliminate these fees because many customers may lack access to certain types of accounts or are unable to set up direct payment transfers with the utility. Furthermore, these fees hit low-income customers the hardest. Often, the payment option available to them is a prepaid debit card.
Consumers are also subjected to abusive late fees. For example, in Illinois, the monopoly gas utility Peoples Gas recovered $29 million in late-payment fees in 2021, up from $16 million in 2020, which helped contribute to its $200 million in net income that year. That income helped the parent company, WEC Energy, raise its shareholder dividend.
The Solution
States should pass legislation to explicitly ban undisclosed, mandatory junk fees in the utility sector, similar to laws that California and Minnesota have adopted for broader consumer prices, as well as bans on abusive late fees. A 2024 Data for Progress poll shows voters strongly support banning utility fees such as late and reconnection fees.
To increase transparency, lawmakers should also require utility providers to offer clear and detailed billing statements so that customers can not only see but also understand every charge reported on their bill. Similar to a recent FCC rule requiring broadband providers to use “nutrition style” labels, utility providers should be required to standardize their billing practices so consumers will no longer struggle to understand what they are being charged.