For Immediate Release
MADIGAN REACHES AGREEMENT WITH SANTANNA ENERGY SERVICES
Chicago – Attorney General Lisa Madigan announced today that Illinois has reached an agreement with Santanna Energy Services as a result of a consumer fraud action filed against the company in 2005. This agreement, valued at just over $8 million, includes $3.3 million in restitution payments to Illinois consumers.
Santanna Natural Gas Corporation, doing business as Santanna Energy Services, is a Texas corporation with local offices in Hinsdale. The company sells natural gas to northern Illinois consumers participating in Nicor’s Customer Select program and People’s Energy’s Choices for You program. The programs allow commercial and residential customers in eligible service areas to select alternative, non-regulated utility gas suppliers. Santanna offered fixed-price contracts for fixed terms. For example, some customers locked in a rate of approximately $0.80 per therm for a term of five years. As part of the fixed-price contracts, Santanna promised customers that the price would not go up or down, regardless of fluctuations in the price of natural gas on the market.
Specifically, the fixed-price contracts included a promise that Santanna would not raise the price of the customer’s natural gas during the term of the contract, no matter what happened to increase the price of natural gas in the market. However, following Hurricanes Katrina and Rita, when the price of natural gas rose significantly, Santanna changed its fixed-price contracts and raised the price of natural gas for those existing customers. Based on this conduct, Madigan filed a lawsuit in October 2005, charging Santanna with violations of the Illinois Consumer Fraud and Deceptive Business Practices Act for allegedly misrepresenting its fixed rate offer when making telemarketing solicitations to consumers to enter into contracts with the gas supply company.
The agreement includes the following provisions:
In addition to the monetary requirements, the agreement prohibits Santanna from raising the price of natural gas in fixed-price contracts, subject to specific terms of those contracts. In the future, Santanna must follow the terms of its contracts, even in the wake of a natural disaster.
Santanna filed for bankruptcy in October 2005. The settlement with the Attorney General’s office is part of the Chapter 11 Plan for Reorganization that Santanna filed with the Federal bankruptcy court in the Western District of Texas. The bankruptcy court has accepted Santanna’s Plan and, as a result, the company will continue to do business in the state of Illinois.
In the agreement, Santanna does not admit any wrongdoing.Bureau Chief Charles G. Fergus and Assistant Attorney General Christine Nielsen handled this case on behalf of Madigan’s Consumer Fraud Bureau.