Free $100 checks are no better than free cheese

What will you do if you receive a check from a company you've never dealt with? Are you going to cash it right away or will you try to contact the company to find out what is the check for? If you choose to cash the check immediately - you're trapped in a 5-year contract at highway robbery prices.

The Niagara Centre MPP alleges Direct Energy is violating the consumer protection act by sending residents $100 cheques that enter them into five-year contracts if cashed. Direct Energy denies that's how it works.

"It appears to have no terms attached because as you can see from the cheque, there's nothing on the face of it or on the back of it that indicates you're signing a contract," Kormos said.

A letter that comes with the cheque indicates "in fine print" that once it is deposited, the person will be enrolled in a five-year electricity flat-price protection plan, he said.

Kormos said the plan enters the resident into a contract at 8.59 cents per kilowatthour for five years, when the current residential electricity price is 5.3 cents per kWh. Most people don't calculate their energy based on kilowatts, he said, so the impression is 8.59 cents is a great price.

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A difference of 3.29 cents per kilowatt adds up to way over $100 a year for someone who lives in an apartment. For those who live in a house, the extra cost would be several times higher. Considering that it's a 5 year contract, the cost of a free $100 check adds up to at least $600-700; often - to a couple thousands of dollars. That explains why Direct Energy mails those out, doesn't it?