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Retail Suppliers Say Brokers, Door-to-Door Marketers Should be Licensed in New York

January 28, 2013

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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Brokers and/or marketing agents should be required to be licensed in New York, several retail suppliers told the New York PSC.

Specifically, Constellation NewEnergy said that certain types of third parties should require licensure, while Direct Energy Services, LLC recommended the licensure of only door-to-door agents.

The New York State Attorney General's Office also said that brokers should be licensed. The comments came in the New York PSC's proceeding to assess the current state of the retail energy markets.

Noting the continued innovation in the types of third-parties involved in retail energy transactions, Constellation NewEnergy said that compiling a specific list of entities requiring to be licensed may not be appropriate at this time, and instead suggested that the PSC institute a criteria to determine if a third party requires a license.

"Specifically, Constellation recommends that -- in addition to those entities that are currently required to be licensed under New York State Law and the Commission’s Regulations -- the Commission should require a third-party to be licensed where:

"(a) The third-party is paid through an ESCO on behalf of a customer with respect to a particular transaction/contract between the ESCO and customer; and

"(b) Such third-party takes actions on behalf of the customer that amount to more than an endorsement or referral of the ESCO."

"To illustrate how this rule may operate," Constellation explained, "an organization or company that merely endorses an ESCO to its members or employees – perhaps via a link to the ESCO’s offering or through a presentation by the ESCO to such members or employees – is not taking actions that warrant licensure. However, if that organization or company takes steps to actively participate in the ESCO’s transaction with new customers – e.g., negotiating contractual terms or prices, or providing advice or analyses regarding various offerings by the ESCO or between ESCOs – then such a third-party organization or company should be required to obtain a license, as it is doing more than mere promotion. In the same way, an individual customer of an ESCO need not obtain a license if the customer receives a promotional gift or service from the ESCO for referring a family member or friend, so long as the customer does not actively participate in actual enrollment or other more involved aspects of the ESCO’s transaction with the referred consumer (e.g., preparing and distributing advertisement materials, performing and communicating price analyses, presenting contracts for consideration/signature, or advising on contract language)."

The New York State Attorney General's Office said that the PSC, "should expand its supervision to include brokers who purport to represent multiple ESCOs."

"These entities should be required to register with the DPS and provide basic information identifying the principals of the entity, its form of organization, contact information, history of business in other jurisdictions and any prior regulatory or law enforcement sanctions," the AG said.

"Unregistered businesses that engage in broker activities should be barred from doing business with New York consumers," the AG said.

"Registered brokers should be required to certify that their employees and agents have been trained to comply with the UBP rules. Deceptive practices should be prohibited and the nature of the broker's compensation (is it paid by the ESCO or the customer, by fixed commission or as a surcharge on each unit consumed) disclosed to prospective customers before any ESCO contract can become valid," the AG said.

Direct Energy Services recommended that, "Every agent that is engaged in door-to-door sales should be registered with the Commission."

"Companies in the business of conducting door-to-door sales on behalf of an ESCO should be subject to some kind of registration and bonding requirement enforced by the Commission," Direct Energy said.

"If reasonably practicable, the Commission should also maintain a registry, which would be made available to ESCOs, of agents who have been found by the Commission to have engaged in conduct that violates the UBPs or other applicable regulations," Direct Energy said.

"All agents engaged in door-to-door sales should have a background check and drug test performed before being allowed to sell on behalf of an ESCO," Direct Energy said

"Finally, a TPV should be required for all door-to-door sales and should only be conducted after the agent has left the premises," Direct Energy recommended.

See related stories today:

Backwards: Suppliers Want Long-Term Fixed Price Default Service for New York

New York Attorney General Investigating "Several" ESCOs for Deceptive Marketing Practices


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