Anti-competitive Enercare Rental Water Heater Business Scheme in Ontario

Trueler has received several complaints on companies providing rental water heaters from consumers who want to terminate rent and face over thousand dollars in cancellation fees. We’ve tried to figure out what’s happening, why this kind of unfair business is still working well in Canada, and what can be done in order to terminate it. I’m providing information here for you to decide if you wish to continue subsidizing huge corporations with unreasonably high rates or if you wish to do something about it and stop being a “silent consumer”.
There are two major companies in Canada providing rental water heaters for homeowners: Enercare which is formerly Direct Energy and Reliance Home Comfort which is formerly National Energy Corporation. There are also other companies exist on the market.

They are trying to put you on hook by any means, like advertising the following things:

  • Peace of mind
  • Avoiding breakdown costs
  • Affordability
  • Worry free
  • Great customer service
  • No additional costs
  • No hidden fees
  • “Free” stuff when signing contract like “$200 prepaid Mastercard” from Enercare

Let’s see how much all these nice things really cost.

Rental rate for 50 gallons gas water heater is about $30/month. It comes up to $360/year. Taking approximate life of a water heater as 15 years we are basically paying $5400 for water heater with installation assuming that the rental rate won’t increase over this time. But I bet it will. It may easily become $60/month in 15 years, or even more. Assuming the rental rate will go up by $2/month every year during the next 15 years, we are getting $8100 for water heater from Enercare. Is this a reasonable amount? Let’s see.

You can buy a new 50 gallon water heater for approximately $1000 with taxes included and have it installed for $300. Let’s say $1500 all in – it’s a very reasonable price now for great 50 gallon water heater with quality installation and exhaust pipes upgraded.

Just read it: “I will pay $8.1K – over eight thousand dollars – for water hater which costs $1.5K, and will have “piece of mind” – this is what I’ll pay extra $6.6K for”.

$6.6K for “piece of mind” about water heater for 15 years. Service call usually costs $100 – this is official price of big box stores. Usually it comes down to ~$40-60 if detecting a problem takes about 15 minutes which is usually true for such a simple thing like water heater. If your heater is on warranty it may be even covered. If something serious breaks down – it is either covered by warranty or you buy a new water heater with installation for $1.5K if it is already old enough.

Let’s calculate a bit further. Assuming water heater purchase with installation will be increased twice over the next 15 years to approximately $3K with $2.25K average price, we get $8.1K/($2.25K) = 3.6, which allows us to buy a new water heater with installation approximately every 4 years.

For the price being paid for rent to Enercare consumers may buy new water heater with installation every 4 years. Given that average life of water heater without major repairs is approximately 15 years, we see that renting water heater is 3-4 times more expensive option than purchasing and installing your own hot water heater tank.

Still want to enter into rental contract? Have you ever thought of renting the following stuff:
  • Washer/dryer
  • Dishwasher
  • Stove
  • Maybe TV or some furniture?
  • Toilet or vanity?

How about paying $30/month for your fridge forever which costs about the same as water heater?

Well. If you have not entered into water heater rental agreement yet you are lucky. If you have entered into rental contract less than 20 days ago you may be eligible to cancel it under cooling-off period if you wish to. If you are going to sell your house soon and that’s why you replaced your old water heater tank with a new rental one which will be automatically transferred to the new owner, you are very smart, but may be damned by a new homeowner, so do it at your own risk!

This is what happens after you enter into rental water heater agreement with Enercare:

The only way to terminate rent is to buy out the water heater tank for the price Enercare sets on their website in buyout schedule:

https://www.enercare.ca/sites/default/files/assets/library/pdfs/water-heater-buyout-schedule.pdf

Depending on the water heater type the penalty to terminate rent varies from $1000 to $6000.

For example, the penalty to terminate rent during the first year of 50 gallon water hater with power vent (PV50 in the Enercare’s table) is $1590 + Tax, which is $1796.7.

Penalty to terminate rent for PV50 during 5-th year comes down to $1462.22 which is still a lot. Even during the 10-th year the penalty to terminate rent will be $914.17.

Have you ever seen such outrageous penalties to terminate rent of anything or to terminate any customer’s contract of approximately the same $30/month value?

Water heater rental companies such as Enercare do not give customers any other choice other than to continue rent forever or pay ridiculous termination penalty of thousands dollars. This is valid for water heaters installed after Sep 15, 2010. It looks like it was intentionally introduced by huge corporations such as Direct Energy, Enercare, Reliance home comfort, in order to eliminate the practice of customers jumping to competitors with lower prices.

Such insane terms of terminating rent are captured in Enercare’s rental agreement:

https://www.enercare.ca/sites/default/files/assets/library/pdfs/residential-water-heater-rental-agreement.pdf

“Termination by You: Your sole method of terminating this Agreement prior to the end of the useful life of the Water Heater is to purchase the Water Heater”.

Anyone can write in the contracts whatever they want, but there is a law which always has more power than any contract!

What the law says with respect to this practice which looks very unfair to consumers leaving us no choice in switching to more competitive options?

There is a Canadian Competition Act C-34:

http://laws-lois.justice.gc.ca/eng/acts/c-34/FullText.html

It clearly says:

The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices”.

How does it apply for water heater rentals?

Let’s read it again:

“… in order to provide consumers with competitive prices and product choices“.

As we have calculated, the option of renting 50 gallon water heater with power vent from Enercare is approximately 3-4 times more expensive than the option of purchasing and installing a new water heater. Even taking into account that along with rent Enercare provides service in case of problems (which may be covered by warranty), buying your own water heater is much more competitive option given that for the same money you pay to Enercare for rent you can afford purchase and installation of a new water heater every 4 years. However it doesn’t need to be replaced so often, since its lifetime without major repairs is about 15 years.

Let’s see example if I’m a customer of Enercare renting 6 years old 50 gallon water heater for $30/month which was installed in Nov 2010. I realize that buying my own water heater with installation will cost $1300. If I keep Enercare’s contract and continue to pay rent, I will spend $1300 in 3 and a half years. I’m pretty sure that the new water heater will last longer. Moreover it will have warranty coverage during this time. That’s why this option is much more competitive. I need to terminate rent with Enercare first and they ask to pay approximately $1100 – $1200 cancellation fee (depending on the exact buyout schedule), since buyout is the only option to terminate rent. I don’t need this 6 years old water heater which may be out of warranty for $1.2K, I want a new one with warranty for $1.3K and Enercare to pick their heater from the curb for free as it used to be in the past. Basically for me Enercare imposes rent termination penalty of $1.2K. It clearly looks like Enercare is violating Competition Act in this case.

Let’s see another example, I want to switch to another water heater rental provider who charges $19/month for the similar water heater. Enercare does not allow me to do so by imposing $1200 penalty to terminate their rental agreement. I want to rent water heater, but want to pay less for it. It also looks like Competition Act violation by Enercare.

What does the Canadian Government do in order to enforce Competition Law with respect to water heater rentals anti-competitive practices of Enercare and other companies?

Unfortunately, it looks like not enough, since such outrageous rent termination fees are still part of Enercare’s residential water heater rental agreement. Enercare is even increasing those penalties more and more.

Competition Bureau at least tried to do something, but without any effect for the customers unfortunately. Here is what Trueler found:

Competition Bureau Takes Action to Support Competition in Ontario’s Residential Water Heater Market:

Some quotes from the document:

“OTTAWA, December 20, 2012 – The Competition Bureau announced today that it is taking action against Direct Energy Marketing Limited and Reliance Comfort Limited Partnership, two companies that rent water heaters to residential customers in Ontario”

“Following an extensive investigation, the Bureau determined that Direct Energy and Reliance each engaged in practices that intentionally suppress competition and restrict consumer choice. Specifically, each company implemented water heater return policies and procedures aimed at preventing consumers from switching to competitors. This anti‑competitive conduct affects consumers, other rental water heater companies, and businesses that sell water heaters, such as home improvement centres.”

“Many customers have been forced to continue their rental agreements with either Direct Energy or Reliance, even if they want to switch to another provider, because of the anti‑competitive practices we found in our investigation.”

Here is the resolution from Competition Bureau as of October 30, 2015:

“Agreement with Direct Energy to resolve concerns in Ontario water heater industry”:

http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03997.html

 “In December 2012, the Bureau filed applications with the Tribunal against Reliance Comfort Limited Partnership and Direct Energy. The applications alleged that both companies had implemented anti‑competitive water heater return policies and procedures aimed at preventing consumers from switching to competitors. The Bureau alleged that, as a result of those practices, many customers were left with little choice but to continue their rental agreements, even if they wanted to purchase a new water heater or switch to another rental provider. For consumers who wish to purchase new water heaters, instead of continuing to pay rental fees, this is an important issue. The decision to purchase, rather than rent a water heater, can lead to substantial savings for consumers.

“In November 2014, the Bureau obtained commitments from EnerCare Inc., the company which acquired Direct Energy’s water heater rental business in Ontario, that it would not continue Direct Energy’s alleged anti‑competitive policies and practices. At the same time, the Bureau announced that it had reached a consent agreement with Reliance that resolved the competition concerns raised by the Bureau”

Based on this information it looks like Enercare is breaking its own commitments to Competition Bureau as well as violating Competition Act.

Whenever I talk to contractors about water heater rentals, everyone is calling it a scam. They are frustrated as well as customers, since huge corporations, like Enercare, Direct Energy, Reliance home comfort, National Energy, Enbridge have basically stolen huge part of water heater business from contractors by specifying anti-competitive rent termination conditions in their water heater rental agreements preventing consumers to switch to more competitive options.

Even if Competition Bureau is not doing further steps in order to enforce Competition Law and commitments from Enercare, it’s still beneficial to stop renting water heater right away and buy it from the provider for their buyout price. Just divide your buyout price at this moment by your monthly rate and see that it may take just around 3-4 years in order to spend the same amount of money for paying rent. Even if you are going to sell you house sooner, new owners will say a big “thank you” instead of damning you for transferring rental agreement on them.

If you read till this point you probably care and want to put an end to such unfair business practices in Canada instead of remaining silent and do whatever big corporations want you to do.

Here is what we can do to stop water heater outrageous rent cancellation fees, or at least minimize water heater cost for us – consumers:

1) Contact your water heater rental provider and inform that you want to terminate rent and you don’t need their water heater anymore. Most likely they will say that you have to buy it out for over $1000, depending on the model and year installed (if it was installed after Sep 15, 2010). If it was installed before Sep 15, 2010, then you don’t have a problem and they should just remove it from your curb for free or for $75 if their depots are very far from your home. The price they quote to you is basically rent termination fee, since you don’t need their water heater. Call it this way and refer to the Competition Act and Competition Bureau’s resolutions which are provided earlier in this article. Talk to their manager/supervisor who can really make decisions. Sometimes it may be more effective to do it in writing via letter/fax/e-mail/contact form. If it’s over the phone make sure you capture all information about the person who you speak to before starting to discuss anything. If the person you talk to realize that the company indeed violates Competition Law (this is exactly what you need to convince them) and their representative can make decisions, they can offer you significantly reduced buyout price. It’s up to you if to accept it or not. $75 would be fair termination fee – it was the case in the past. Considering your own circumstances you may decide.

2) If you have not reached agreement with your water heater rental provider, or instead of contacting them, file a complaint to the Competition Bureau here (may take about a month or two to investigate):

http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/frm-eng/GH%C3%89T-7TDNA5

Explain that you want to install your own water heater, but your water heater rental provider asks you to pay buyout price which is basically a rent termination fee of over a thousand dollars. The main point is that you don’t need their water heater, you want to install your own, but the penalty to terminate rent is $X,XXX which is really anti-competitive and water heater company forces you to stay with them or pay ridiculous cancellation fee.

Only in case of action (complaints to the Competition Bureau and the companies) by multiple victims of their unfair and perhaps unlawful (anti-competitive) practices we can put an end to it.

Please share your thoughts and experience in comments! It may really help other consumers like you.
Note for companies: if you see any inaccuracy regarding information in this article or in the comments, please contact us first and we’ll gladly fix it after appropriate verification.

5 thoughts on “Anti-competitive Enercare Rental Water Heater Business Scheme in Ontario”

  1. @Ben: Thanks for your feedback! Please start complaint to the Competition Bureau. This practice is against the law

  2. I have the same problem with them, just got a place in Ajax, living by myself . I didn’t want an 50 gallon tank and the rental fee. I called them regards the cancellation. They need me to buyout which ask for $1500 for a 3 years old tank. I could of buy a new one and install wonldnt cost that much. It just doesn’t make sense to me that we need to buyout something that we don’t want. These company are robbery . Has anyone successfully beat their system? Thanks I would love to get more info on that

  3. I am also stuck in this rage-inducing situation. In 2015 I bought a house from Claridge, and the tankless hot-water heater was “assumed” in the contract, even though I was never shown nor provided with a contract outlining the rental cost and conditions with the scammers at Enercare at the time of our house purchase. How the hell is this even legal?

    I have been paying $45 a month for a little over 18 months now for a unit that retails for about $2000 after tax, which means I’m already out over $800.

    Let’s assume a few hundred for installation – $2300. At $45 / mo that would be paid off in about four years, but you’d still be stuck paying this perpetually. Assuming a 10-15 year lifespan, you could feasibly pay it 2-3 times before having to replace it. Even with the occasional service call, renting just doesn’t make sense.

    When I called last summer to enquire about the buyout after finally receiving a copy of the extremely lopsided and unfair bs contract that I’d never seen, I was quoted a ridiculous $3500. It’s now about $3200. If I do the buyout next month I’ll have paid almost $4000. I won’t be ahead for having done the buyout for another 8 years.

    It is absolutely infuriating that they are getting away with this, and I wish this would gain momentum so we could file a class action.

  4. Thanks Joel. Please tell us when you have a resolution from Competition Bureau. It’s still outrageous anti-competitive practice from Enercare

    Trueler

  5. I contacted Enercare to end my hot water tank rental contract. They informed me that I must pay the buyout fee. The buyout fee was more than twice the price of a brand new hot water tank at Home Depot with a 6 year warranty. I mentioned this is a violation to the Canada Competition Act and that Enercare had said that they would not continue the anti-competitive practices. The manager on the phone said they do not negotiate buyout prices and there was nothing he could do. I have submitted a complaint with the Competition Bureau. Hot water tank rentals are a scam, and Enercare is stealing money from innocent people.

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