N.Y. Utilities Oppose SCMC Prepay Rehearing Request, Cite Potential for POR Gaming

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February 4, 2011  

The joint New York utilities have opposed a rehearing request filed by the Small Customer Marketer Coalition related to the New York PSC's recent order that ESCOs may only offer prepaid service when the ESCO is the billing party (98-M-1343).

The PSC's finding was contained in its order modifying the Uniform Business Practices to incorporate the ESCO Consumer Bill of Rights.  SCMC said that nothing in the enabling legislation limits prepaid service to situations where the ESCO is the billing party, and said that the order inappropriately denies prepay customers the ability to receive a utility consolidated bill.

Among various arguments in opposition to SCMC's rehearing request, the joint utilities raised concern that allowing ESCOs to offer prepaid service on a utility consolidated bill could be used to game the Purchase of Receivables program.

"The rationale for customer prepayments to an ESCO when the utility provides consolidated bills under a POR program is not abundantly clear.  While the Joint Utilities believe there is business rationale for the ESCOs to secure their own receivables via customer prepayment when the ESCOs bill customers, receivables from utility consolidated bills under POR programs are utility receivables.  Based upon the examples provided in the SCMC Petition, if the ESCO charges on the utility consolidated bill are reduced, then the dollar amount of the ESCO's contribution to POR discount is reduced.  If voluntary prepayments were to be used as a backdoor means to skim good-paying customers out of the POR, then receivable risk would ultimately be spread over fewer customers at a higher POR discount rate," the utilities said.

"This is no small matter - POR programs have been embraced as a means to simplify the market for ESCO customers.  Calls to utilities from ESCOs asking to terminate customers for non-payment are a 'thing of the past.'  Use of customer prepayments to ESCOs potentially interferes with this market development and creates a risk for customers.  For example, if an ESCO defaults on its prepayment arrangement with the customer and the utility owns the receivable, then the customer potentially faces termination from the utility unless it makes up the difference that the customer presumed would have been paid by the ESCO.  At the very least, UBP Section 5.B.4 should to be modified to require the ESCOs to inform customers of the risk," the utilities added.

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