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ESCOs Claim Release of Average Pricing Data Would Allow Competitors To Determine Margin, Hedging Strategy

January 12, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

New York ESCOs claimed that releasing average residential pricing data of ESCOs by New York ISO Zone and utility service area would allow competitors to determine their margin and hedging strategy, harming the competitive market

As was first reported by EnergyChoiceMatters.com, the New York PSC Staff recently informed ESCOs that it would begin publishing the historic average pricing of individual ESCOs in compliance with a February 2014 PSC order

The February 2014 order (as amended by a stay) provided that ESCOs file separate average unit price for products with no energy-related value-added services for a: i) residential price fixed for a minimum 12 month period; and ii) residential variable price. The PSC had said that the averages should be weighted by the amount of commodity sold at each price within each category. ESCOs were also directed to file the number of customers purchasing products in those categories.

In the February 2014 order, the PSC explained how it would publicly post the ESCO pricing information as follows:

"We now confirm our intention ... to publish comparative pricing information for the categories identified above. We anticipate development of a list of the average price billed for each ESCO, separately for consumers in specific geographic areas of a utility service territory. We expect to sort the list based on average price, and organize ESCOs into quartiles, based on the average price charged to customers in the historical period. For the category of variable priced products with no energy-related value-added attributes, we anticipate that comparable information regarding utility charges will also be presented. The utility information will be adjusted to account for differences between how ESCOs and utilities charge for bill processing and other charges in order charges in order facilitate a direct comparison."

In informing ESCOs of its intent to commence publication of the data, the PSC's Record Access Office noted that Staff is not seeking to release customer counts, though, "Staff is seeking that the information released will tie each ESCOs to its specific customer data."

The latter provision has caused some confusion, as the format in which ESCOs currently reported the data, which has not been publicly released yet, including both customer count and volume (kWh) data

While there is concern that the statement that the, "information released will tie each ESCOs to its specific customer data," means that the volume data could be made public, we read this statement as only meaning that ESCOs will be linked to their specific average pricing (as opposed to masked reporting, such as ESCO "A" published previously), and not an indication that volume data will be published, though this interpretation cold be incorrect.

In any case, ESCOs claimed that publication of the data would harm the competitive market and therefore is entitled to trade secret protection.

The Retail Energy Supply Association said, "Most critically, public access of this pricing data will enable a competitor to track the historical data filed by each identified ESCO over time and compare it to the forward electric price curves in each period containing the reported data. Based on the data reported, a competitor cognizant of market conditions in each reported period will be able to determine the contours of the individual ESCO’s proprietary pricing strategy, proprietary margin strategy and proprietary hedging strategy. With this knowledge in hand the competitor will have an otherwise-unknowable insight into the ESCO’s previous proprietary activity, and even more critically, have the ability to predict how an ESCO will act in response to future or subsequent market conditions. Thus, in prospective changing market conditions, the competitor will have an unfair advantage of knowing how each ESCO competitor will apply its proprietary pricing, margin, and hedging strategies. Such knowledge will be of significant competitive value, and its dissemination will cause substantial competitive harm to the disclosing ESCO, while conferring an unfair competitive advantage upon its competitors."

The National Energy Marketers Association questioned the value in publishing such data, and offered that the goal of helping consumers understand prices could be accomplished in a better manner through use of benchmarked prices

"[I]f this objective is to have current average or benchmark pricing information, such information is available in the marketplace without attribution by very credible research councils, and NEM would consider partnering with the NYPSC to fund the publication of such information to help both consumers understand the competitiveness of any given offer, and inform suppliers as to whether their offerings are, in fact, competitive," NEM said

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