Company urges representatives to sign up friends, family for supplier, build sales team
Published on Monday, Sep 06, 2010
If you're interested in a home-based business but you don't want to sell cosmetics for Mary Kay or household products for Amway, you can pay $499 and become a sales representative for a company now marketing natural gas in the Akron-Canton area.
Utility Choice International, also known as UCI, is recruiting local representatives to pay a fee to sell gas for another company, Volunteer Energy Services of Pickerington, near Columbus.
Area residents are invited to sales meetings, often held at a hotel ballroom, where UCI officials explain how they can make money persuading friends, relatives and neighbors to buy Volunteer gas and receive a percentage of the sales.
Celeste King of Cuyahoga Falls was concerned after her 75-year-old mother called a month ago saying she had attended one of the meetings and wanted to either become a gas customer or sign up as an agent for UCI. Her mother suggested that King and her brother become agents, too.
But King said her mother was not told the price she would pay for natural gas as a customer and King wasn't convinced her mother fully understood the program and worried it could be a pyramid scheme. Those businesses generate more money from recruiting agents than from the sale of products.
''You would really have to work at it and get a lot of people signed up underneath you to make money. I'm not that good of a salesman to try to make that. Plus there's a $500 commitment. I had several concerns,'' said King, who thinks she has talked her mother out of the idea.
UCI explains
The president and chief executive of Chagrin Falls-based UCI, Damon Mintz, said his company is just a ''pio
neer'' in Ohio in the new method of using network marketing to sell natural gas and other utilities.
''You get shot with a lot of arrows'' when you're one of the first companies, he said.
UCI has been in operation since January and in that short time has recruited 3,000 agents and 20,000 customers in four states, Mintz said. The company plans to launch electricity sales in another nine states soon. Mintz said it's possible his company could have ''hundreds of thousands of reps'' if it reaches its potential.
UCI is not the only company in Ohio that could be called a ''multilevel marketer.''
Zurvita, whose agents sell contracts for MXenergy, has been operating in the state for longer, but MX officials said the company has not received many sign-ups through that channel. And last week, a third company, Momentis, said it would be entering the Ohio market for natural gas supplier Just Energy.
Multilevel marketing
The idea behind multilevel marketing companies is often to use family, friends and acquaintances to network and build a team to sell a product. The more people a person has on the ''team'' selling a product, the larger the possible profit as the team sells the product and the people in various levels make money.
When they learned of the multilevel marketing method for gas, state officials examined the practice to determine whether it was crossing the line into being considered a pyramid.
There are many successful examples of multilevel marketing companies, such as Mary Kay Cosmetics, Amway and Tupperware. Multilevel marketing is legal in Ohio but a pyramid scheme is not and there's a fine line between the two, said Thomas McGuire, an assistant Ohio attorney general who specializes in pyramid schemes.
The difference can be how much money a person can make and whether the transactions are focused on the recruitment of other team members rather than the product, McGuire said.
''They're supposed to be making profit from the people in their down-line selling product. Sometimes it's a thin line. Sometimes it's a blurred line,'' McGuire said.
Agency oversight
There have been no formal complaints about UCI or other multilevel marketing companies in Ohio to the attorney general's office, the Public Utilities Commission of Ohio (PUCO) or the Ohio Consumers' Counsel. But officials at the PUCO and the consumers' counsel said they have received a number of inquiries.
Deputy Ohio Consumers' Counsel Bruce Hayes said that because the gas supplier is certified but the multilevel marketing companies are not, it's possible complaints or concerns could be overlooked at the various agencies.
PUCO spokesman Matt Butler said the staff met with the attorney general's office to discuss the legality of multilevel firms' compensation models and was told pyramids are difficult to prove.
In Texas, multilevel marketing firms have been operating for several years to sell electricity in the deregulated market (natural gas is still regulated), said Terry Hadley, spokesman for the state's Public Utility Commission.
Hadley said that in the beginning, there were many complaints about the companies, but ''they have leveled off pretty dramatically.''
Hadley said complaints centered on people unclear about what the companies were offering.
''In general, I would characterize them as part of the evolution of moving to a competitive market,'' Hadley said.
What UCI sells
For companies like UCI, independent agents sell a discounted monthly variable price supplied by Volunteer Energy. Agents sign up their friends and family offering the Volunteer Energy product, Mintz said. The agents are clear that Volunteer offers only a monthly variable rate instead of a fixed rate, but agents do not get into details about rates or what other offers are available.
Volunteer Energy's variable public prices can be higher or lower than what is called the Standard Choice Offer price paid by customers who do not choose their own supplier and pay a state-approved supplier monthly rate. In seven of the last 11 months, Volunteer's price was 23 cents per thousand cubic feet (mcf) to 93 cents/mcf higher than Dominion East Ohio's price. In the other four months, it beat the price by 8 cents/mcf to 23 cents/mcf.
For September, Volunteer's public rate will be $5.79/mcf and the price for UCI customers will be $5.49/mcf, company officials said.
Falls resident King said she was concerned that UCI sold only variable rates and she could find very little information on the company's Web site about rates.
Mintz said agents can make $200 to $800 a month and some aggressive representatives are making $10,000 to $12,000 a month with large teams and customer bases.
Mintz said the company has a ''very, very minute'' number of older representatives. The majority are 20 to 40 years old, he said.
Mintz said the company allows a refund of the $499 start-up cost within seven days. He said if the company became aware of an elderly representative who didn't understand what he or she was signing up for and hadn't signed up any customers, UCI would refund the fee.
There's also the option of a $99 fee to become a customer associate and build personal residual income with customers, but that does not include the option of team building and higher profits.
Rick Carnutte Sr., president of Volunteer Energy, said he is pleased with the relationship with UCI.
''Based on the amount of sign-ups with virtually zero complaints and we know the cancellations with these sign-ups are very minimal, it's been very good for Volunteer,'' Carnutte said.
Mintz said the company's agents are prohibited from ''cold marketing,'' that is, soliciting anyone they do not know personally or through another person.
