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Shock: N.Y. Bans Commodity-Only ESCO Service To Mass Market Customers ("Full Stop" To Retail Market With Limited Exceptions)

February 23, 2016

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Copyright 2010-16
Reporting by Paul Ring •

Note: The following story is based on discussion at the PSC's meeting this morning. Based on such discussion as well as PSC procedure, it is understood that the PSC was voting on a Staff draft for final adoption and that the PSC's vote constituted final action, and that the PSC was not simply issuing a draft for comment. However, a final order has not been issued, nor was a discussion document posted in advance of the meeting, and our story should be read in such context.

With PSC Staff citing continued complaints against ESCOs as evidence that the mass market for retail energy is, "not working," the New York PSC adopted an order which prohibits ESCOs from offering commodity-only service to mass market (residential and small commercial) customers, with limited exceptions.

The ban takes effect 10 days after issuance of the PSC's order

ESCOs will only be permitted to enroll or renew mass market customers with a commodity-only product under two exceptions:

• The product guarantees savings versus the utility rate over an "annual" period

• The product includes at least 30% renewable energy

The PSC will also require that for any renewal from a guaranteed savings product onto a 30% renewable energy product (the only other alternative at this time), the ESCO must obtain affirmative consent from the customer.

Existing contracts are not impacted by the PSC's order, but any "renewal" of an existing mass market contract will be subject to the new requirements above.

A subsequent PSC proceeding is to examine whether ESCOs should be allowed to serve mass market customers with energy-related value-added products and services. The process is to be conducted in 60 days.

PSC Chair Audrey Zibelman described the action as a, "full stop," to the retail mass market.

Staff said that the reality is that ESCOs, due to their acquisition costs, cannot beat utility supply rates, and there is, "very little to no value," provided to mass market customers in the commodity-only ESCO market

Staff said that further action is needed because multiple revisions to marketing rules and increased enforcement actions over the past several years has not resulted in an appreciable decline in complaints.

Zibelman, agreed that the mass market, "is not a competitive market," citing a lack of transparency and the complex nature of energy. Zibelman noted that a PSC review showed most customers were paying more for ESCO service than default service, stating that such an outcome is "intolerable" and is not just and reasonable.

Zibelman said that the PSC, "has to act," and that yet another rulemaking on ESCO marketing would not be sufficient to address the problems.

Commissioner Patricia Acampora agreed that the PSC's prior approach of flexibility in fine-tuning the market isn't working.

ESCO bonding requirements are also to be addressed by the PSC, particularly in light of ensuring ESCOs can meet any guaranteed savings

The PSC is to also consider whether PSL 25, which permits penalties of up to $100,000 per day, is applicable to ESCOs

The order will give the PSC discretion to implement a "one strike and you're out" policy against ESCOs

The PSC is not prohibiting door-to-door marketing outright, but is placing into UBPs requirements that ESCOs follow all applicable local and federal laws regarding such marketing

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