PSC en­acts re­forms to the re­tail en­ergy mar­ket

The Saratogian (Saratoga, NY) - - LOCAL NEWS - Staff re­port

NEW YORK >> The New York State Pub­lic Ser­vice Com­mis­sion (Com­mis­sion) re­cently an­nounced sig­nif­i­cant re­forms to the re­tail en­ergy mar­ket to strengthen cus­tomer pro­tec­tions and to en­hance price and op­er­a­tional trans­parency.

The re­set­ting of the re­tail en­ergy mar­ket in New York will im­pact the day-to-day busi­ness of en­ergy ser­vice com­pa­nies, or ESCOs, do­ing busi­ness in the New York State and the two mil­lion res­i­den­tial and small com­mer­cial cus­tomers in New York State who they serve.

“The Com­mis­sion re­cently took steps to pro­tect low-in­come cus­tomers and re­quired that ESCOs guar­an­tee sav­ings for these cus­tomers as a con­di­tion of ser­vice,” Com­mis­sion Chair John B. Rhodes said in a news re­lease. “Our ac­tion to­day stops ESCOs from of­fer­ing prod­ucts that pro­vide no value to re­tail en­ergy cus­tomers and fo­cuses the com­pa­nies on those prod­ucts that do. To­day’s ac­tion pre­vents bad ac­tors among ESCOs from over­charg­ing New York con­sumers, and re­quires all ESCOs to clearly show each cus­tomer how much he or she is be­ing charged for what ser­vice.”

With the de­ci­sion, the Com­mis­sion strength­ened pro­tec­tions for res­i­den­tial and small com­mer­cial cus­tomers in the re­tail en­ergy mar­ket by en­hanc­ing ESCO el­i­gi­bil­ity cri­te­ria and adopt­ing lim­i­ta­tions on the types and prices of prod­ucts that may be of­fered to those cus­tomers by ESCOs to en­sure that those cus­tomers are re­ceiv­ing value from the re­tail en­ergy mar­ket.

In its or­der, the Com­mis­sion took the fol­low­ing ac­tions:

Accountabi­lity: In­creased ESCO accountabi­lity by en­hanc­ing el­i­gi­bil­ity cri­te­ria and in­creas­ing scru­tiny of ESCO el­i­gi­bil­ity and busi­ness prac­tices.

Trans­parency: Em­pow­ered cus­tomers by im­prov­ing trans­parency of ESCO prod­uct and pric­ing in­for­ma­tion by es­tab­lish­ing a path­way to­ward an ESCO to util­ity on-bill com­mod­ity price com­par­i­son and an item­iza­tion of ESCO charges; and,

Prod­ucts: Pro­hib­ited ESCO prod­uct of­fer­ings that lack en­ergy-ser­vice-based value by adopt­ing re­stric­tions on the types of prod­ucts and ser­vices ESCOs are al­lowed to of­fer res­i­den­tial and small-busi­ness cus­tomers.

Dur­ing the last 30 years, the Com­mis­sion has wit­nessed sig­nif­i­cant, and in some in­stances un­ex­pected, de­vel­op­ments in the re­tail en­ergy mar­ket. Ul­ti­mately, the Com­mis­sion de­ter­mined that the mar­ket has not evolved as orig­i­nally in­tended and, more im­por­tantly, was not pro­vid­ing suf­fi­cient en­ergy-re­lated value to cus­tomers.

Com­mis­sion ef­forts to re­form the state’s re­tail mar­kets were re­peat­edly op­posed by the ESCO in­dus­try. In an ef­fort to block the Com­mis­sion from pro­tect­ing con­sumers from un­scrupu­lous in­dus­try prac­tices, ESCOs re­peat­edly sued the Com­mis­sion. Ev­ery court that en­ter­tained an ESCO claim that the Com­mis­sion lacked con­sumer-pro­tec­tion author­ity, how­ever, sided de­ci­sively with the Com­mis­sion.

Re­cently, the state’s high­est court defini­tively halted ESCOs’ at­tempts to use lit­i­ga­tion to evade and/or de­lay con­sumer-pro­tec­tion reg­u­la­tion. The Court agreed with the Com­mis­sion and defini­tively es­tab­lished that the Com­mis­sion has the le­gal author­ity to pro­tect the pub­lic by reg­u­lat­ing ESCO ac­cess to util­ity dis­tri­bu­tion sys­tems. This author­ity in­cludes the power to deny or re­voke el­i­gi­bil­ity for ESCOs that are un­qual­i­fied to serve New York con­sumers.

To­day, the Com­mis­sion said it pro­vides an op­por­tu­nity for those ESCOs that are will­ing and able to pro­vide mean­ing­ful value for cus­tomers. Rec­og­niz­ing that cer­tain ESCO prod­ucts and ser­vices

have the po­ten­tial to pro­vide ben­e­fits to cus­tomers and help the State ad­vance its clean en­ergy goals, the Com­mis­sion de­ter­mined that, at this time, the reg­u­lated re­tail en­ergy mar­ket will con­tinue.

How­ever, this con­tin­u­a­tion is con­tin­gent upon the par­tic­i­pants’ un­con­di­tional com­mit­ment to, and strict com­pli­ance with, the re­forms adopted in to­day’s or­der, which are in­tended to en­hance trans­parency for cus­tomers, pro­vide greater cus­tomer pro­tec­tion from bad-act­ing ESCOs, and en­sure that only the prod­ucts and ser­vices that truly ben­e­fit the cus­tomers and the State are of­fered.

Be­fore adopt­ing these vi­tal re­forms, the Com­mis­sion re­ceived and con­sid­ered com­ments from var­i­ous stake­holder par­ties, in­clud­ing in­di­vid­ual ESCOs and ESCO trade or­ga­ni­za­tions, state agen­cies, and con­sumer pro­tec­tion or­ga­ni­za­tions. The re­view process in­cluded an ad­min­is­tra­tive hear­ing that took place over the course of 10 days be­fore two ad­min­is­tra­tive law judges. The tran­script of the hear­ing con­sists of 4,233 pages of tes­ti­mony and cross-ex­am­i­na­tion of 22 wit­nesses and pan­els of wit­nesses.

The record com­piled in these pro­ceed­ings demon­strates that, de­spite the Com­mis­sion’s pre­vi­ous re­form ef­forts, lit­tle has changed in New York’s re­tail en­ergy mar­ket since 2014, when the Com­mis­sion ob­served that com­plaint rates re­lated to ESCOs were high, gas and elec­tric com­mod­ity prices for the ma­jor­ity of cus­tomers in the re­tail en­ergy mar­ket were sig­nif­i­cantly higher than the util­ity prices, and no mean­ing­ful en­ergy-re­lated in­no­va­tion had evolved over the mar­ket’s ap­prox­i­mately two-decade-long ex­is­tence.

The com­plaint rate for ESCOs re­mains un­ac­cept­ably high. Be­tween 2014 and 2016, the Com­mis­sion re­ceived more than 11,000 ini­tial com­plaints about ESCOs. The record also shows a pos­i­tive cor­re­la­tion be­tween the level of ex­tra cost associated with ESCO ser­vice and the over­all num­ber of ini­tial com­plaints. ESCOs have been los­ing mar­ket share in New York State.

In 2018, ap­prox­i­mately two mil­lion res­i­den­tial and small com­mer­cial cus­tomers re­ceived elec­tric­ity or nat­u­ral gas from an ESCO, down 12 per­cent from 2.3 mil­lion cus­tomers in 2017.

The most com­monly of­fered ESCO prod­uct con­tin­ues to be a com­mod­ity-only, vari­able-rate prod­uct that, while iden­ti­cal to what cus­tomers can ob­tain from the util­i­ties, nev­er­the­less fre­quently is pro­vided by ESCOs at a higher rate than that charged by the util­i­ties.

While some ESCOs pro­vide fixed-rate prod­ucts, ESCO cus­tomers who re­ceive such ser­vice — an es­ti­mated 20 per­cent of all ESCO cus­tomers — fre­quently pay a sig­nif­i­cant and un­rea­son­able pre­mium for that ser­vice.

To the ex­tent that any value-added prod­ucts and ser­vices are avail­able to New York cus­tomers, those prod­ucts and ser­vices are, by and large, not en­er­gyre­lated. Rather, they are typ­i­cally prod­ucts that are more ac­cu­rately de­scribed as mar­ket­ing de­vices or one-time of­fers in­tended to in­duce cus­tomers to en­roll with the ESCO. The items — such as fre­quent flyer miles, gift cards, sports tick­ets, LED light bulbs, and “smart” ther­mostats — fre­quently have a mar­ket value that is much lower than the amount cus­tomers ul­ti­mately pay to the ESCO over the course of the con­tract in ex­cess of what they would have paid to the util­i­ties.

Through­out these pro­ceed­ings, non-ESCO par­ties raised many con­cerns about the cur­rent op­er­a­tion of the re­tail en­ergy mar­ket. The Com­mis­sion shares those con­cerns, par­tic­u­larly re­gard­ing the lack of eas­ily ac­ces­si­ble and com­pre­hen­si­ble prod­uct and pric­ing in­for­ma­tion and the num­ber of com­plaints al­leg­ing that bad-act­ing ESCOs were ex­ploit­ing cus­tomers.

Thus, the Com­mis­sion con­cludes that sig­nif­i­cant changes to pro­vi­sions gov­ern­ing re­tail ac­cess are needed to pro­vide ad­e­quate pro­tec­tions for New York cus­tomers. If mar­ket par­tic­i­pants are un­will­ing or un­able to pro­vide ma­te­rial ben­e­fits to cus­tomers — be­yond those pro­vided by util­i­ties — at rea­son­able prices, the mar­ket serves no proper pub­lic in­ter­est pur­pose and should be ended.

The strength­ened cri­te­ria by which ESCOs ob­tain and ex­er­cise the priv­i­lege of ac­cess to util­ity dis­tri­bu­tion sys­tems, thereby par­tic­i­pat­ing in the re­tail en­ergy mar­ket, ap­proved to­day by the Com­mis­sion take ef­fect in 60 days.

In a sep­a­rate ac­tion con­cern­ing an ESCO, the Com­mis­sion to­day re­voked the el­i­gi­bil­ity of At­lantic Power & Gas (AP&G) to par­tic­i­pate in the re­tail en­ergy mar­ket for con­tin­ued vi­o­la­tions of the Com­mis­sion’s rules gov­ern­ing ESCOs. AP&G is a mid­sized ESCO op­er­at­ing in the ser­vice ter­ri­to­ries of Cen­tral Hudson Gas & Elec­tric Cor­po­ra­tion; Con­sol­i­dated Edi­son Com­pany of New York, Inc.; and Na­tional Grid. AP&G has shown a pat­tern of per­sis­tent dis­re­gard for the Com­mis­sion’s con­sumer pro­tec­tions for the re­tail en­ergy mar­ket. AP&G has pre­vi­ously been pe­nal­ized by the Com­mis­sion for its vi­o­la­tions of con­sumer pro­tec­tion prac­tices, and the record be­fore the Com­mis­sion es­tab­lished that AP&G had once again vi­o­lated the rights of New York con­sumers.

The Com­mis­sion de­ter­mined that the com­pany ap­pears either un­will­ing or un­able to ob­serve the re­quired busi­ness prac­tices, even af­ter hav­ing its el­i­gi­bil­ity to mar­ket to and en­roll res­i­den­tial and non-res­i­den­tial cus­tomers re­voked in 2017.

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