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Update: N.Y. PSC Orders ESCOs To Return Month-to-Month Variable Rate Customers To Default Service, Or "Enroll" Customers Onto "Compliant" Product

February 24, 2016

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Copyright 2010-16
Reporting by Karen Abbott •

The New York PSC has ordered that ESCOs servicing mass market electric and natural gas customers on month-to-month variable rate products must return these customers to default service, or "enroll" the customers onto a compliant product under the PSC's "full stop" of the retail market. was first to report yesterday that the New York PSC banned ESCOs from enrolling or renewing mass market customers, unless the product guarantees savings versus the utility rate over an "annual" period or the product includes at least 30% renewable electricity (more specifics on these requirements below).

During a discussion during yesterday's PSC meeting, Commissioners indicated that the PSC's action would not impact current ESCO "contracts", until such time as such contracts are due to be "renewed," at which point ESCOs must provide one of the two products enumerated above to continue serving the customer, and receive affirmative consent from the customer for such service.

However, this provision for continued service under existing contracts does not apply to "month-to-month variable rate agreements," with the PSC's order providing, "that ESCOs that currently serve mass market customers through month-to-month variable rate agreements must enroll those customers in a compliant product at the end of the current billing cycle or return the customers to utility supply service."

The PSC is not explicit regarding whether an ESCO's action to "enroll" a customer currently on a month-to-month variable rate agreement onto a compliant product requires affirmative consent of the customer.

Mass market customers are defined in the order as including residential and small non-residential customers. Small non-residential customers are defined as either a non-demand metered electric customer or a non-residential gas customer with annual gas consumption that does not exceed 750 dekatherms per year or the equivalent.

Regarding the limited service ESCOs may offer mass market customers, the order specifically states, "Effective ten calendar days from the date of this Order, ESCOs shall only enroll new mass market customers or renew existing mass market customers in gas or electric service if at least one of the following two conditions is met: (1) enrollment where the contract guarantees that the customer will pay no more than were the customer a full-service customer of the utility; or (2) enrollment based on a contract for an electricity product derived from at least 30% renewable sources."

Note that the renewable product exception applies only to "electricity," with no equivalent for natural gas service. Additionally, as explained further below, new renewable products backed by RECs do not qualify for this exception (though for existing renewable contracts, this issue is less clear).

"In addition, ESCOs must receive affirmative consent from a mass market customer prior to renewing that customer from a fixed rate or guaranteed savings contract into a contract that provides renewable energy but does not guarantee savings," the order states.

"Regarding the guaranteed savings requirement, the ESCO must guarantee that the customer will pay no more, on an annual basis, than the customer would have paid as a full service customer of the utility," the order states.

There does not appear to be a minimum threshold for these guaranteed savings contained in the order

"The ESCO may ensure that this [guaranteed savings] requirement is met by refunding at the end of each year any customers charged more than they would have paid as a full service customer of the utility for that year. For customers who are only a customer of an ESCO for a portion of the year, the ESCO must guarantee that the customer will pay no more than he or she would have paid as a full service utility customer for the period in which the ESCO provided the customer’s energy," the order states

"With respect to the renewable energy requirement, ESCOs that offered green products including at least 30% renewable energy prior to the date of this Order may continue to offer and enroll mass market customers in that product at this time," the order states

"Any new green product offerings by ESCOs after the date of this Order must guarantee that at least 30% of the energy provided to the customer will be generated by renewable sources, eligible under the Commission’s Environmental Disclosure Labeling Program (EDP) rules, to ensure that these products contribute to greater renewable energy achievement. Pursuant to the EDP, energy labels are based on the environmental attributes of the energy purchased by the load serving entity (LSE) and are not affected by the separate purchase of Renewable Energy Certificates (RECs)," the order states

At this time, to meet the renewable requirement, "an ESCO must guarantee that at least 30% of the energy provided to the customer will be generated by deliverable renewable energy resources, including biomass, biogas, hydropower, solar energy, and wind energy, and will include renewable attributes," the order states

The PSC noted that efforts are now underway which may substantially change the EDP rules, including the treatment of RECs. To the extent that any changes are made to the EDP rules, accompanying changes to this requirement will be considered, the order states

An ESCO's Chief Executive Officer (CEO) or equivalent corporate officer of the ESCO must make a filing by 4:00pm on the tenth calendar day after the date of the February 23 PSC order certifying that any enrollments will comply with the conditions listed above

The PSC has initiated a further process to consider under what other conditions ESCO service to mass market customers will be permitted, including whether the requirements above should be retained and what other specific energy-related services, where bundled with commodity service, demonstrate sufficient value to customers

Other issues for consideration under this process include:

• Whether the three-day period for customer rescission of ESCO contracts should be extended or modified;

• Whether and under what circumstances ESCOs should be required to post performance bonds or other forms of demonstrated financial capability; and

• What penalties may apply to ESCOs that violate the UBP or other Commission Orders or provisions of the PSL (for example, the application of PSL §§ 25 and 25-a, which include fines of up to $100,000 per day).

More specifically, the PSC issued the following questions for comment:

1. Whether prospective ESCO sales to mass market customers, including renewal of expiring contracts, should be limited to products that include guaranteed savings or a defined energy-related value-added service. If not, precisely how should this requirement be broadened or narrowed?

2. What specific products or categories of products should constitute energy-related value-added services. For example, if energy efficiency products are to qualify, should a specific minimum energy savings be required and if so, of what amount? If certain commodity-only products are to qualify, such as fixed price products or green energy products, should any restrictions be placed on the prices for such products and, if so, how should those restrictions be determined?

3. Whether other requirements, in addition to those identified in question 1, above, should be imposed on ESCO marketing or sales to mass market customers.

4. What changes, if any, should be made to the three-day period for residential customer rescission/cancellation of an agreement with an ESCO. Should this period be extended to 30 days?

5. Whether a rescission/cancellation period should be applied to small non-residential customers. If so, what period is appropriate?

6. Whether and under what circumstances ESCOs should be required to post performance bonds or other forms of demonstrated financial capability. If so, what magnitude is appropriate and how can this be administered most efficiently?

7. Whether the Commission should reconsider the framework for ESCO oversight under the Public Service Law and, if so, what changes should be made.

8. What penalties may apply to ESCOs that violate the UBP or other Commission Orders or provisions of the PSL (for example, the application of PSL §§ 25 and 25-a).

As noted in our story yesterday, the PSC is not prohibiting door-to-door marketing outright, but is placing into the UBPs requirements that ESCOs follow all applicable local and federal laws regarding such marketing. As part of this, the PSC will consider ESCOs ignoring "No Solicitation" signs a violation of the UBPs

Link to PSC order

Case 15-M-0127 et. al.

The Retail Energy Supply Association provided the following statement on the PSC's order:

Today the NY Public Service Commission took the unprecedented action of effectively eliminating retail choice for residential and small commercial customers in New York by substituting the Commission’s judgment for that of consumers in determining what energy products offer value.

Today’s sweeping decision would effectively end a customer’s option to choose what energy products and pricing plans best suit his or her needs. Under the Commission’s Order, retail suppliers would be forced to guarantee savings against a future utility price that, as a monthly variable price, is unknown. The only alternative allowed under the Commission’s Order is a premium 'green' product. However not all consumers want green energy or are willing to pay extra for it. The Commission’s action would remove all other pricing plans and force ESCOs to terminate service with consumers who have actively chosen a supplier.

The Commission’s actions today were partly in response to the marketing practices of a few ESCOs. Consumer protection is a key objective for all market participants, including RESA members. The Commission has promulgated myriad rules governing market conduct that can be effectively used to address abusive marketing practices. Rather than exercise its existing authority to penalize rule violations, the Commission instead is seeking to shut down retail competition for all ESCOs, including the majority of suppliers who diligently follow the rules. This action is akin to shutting down the highway in order to stop a few drivers from speeding.

RESA is concerned that the measures enacted today will have unintended adverse consequences for the competitive energy market and consumers including loss of jobs, marketplace confusion, uncertainty for customers, and loss of investment by companies integral to increasing customer choice and expanding value-added services for New York energy consumers.

We stand ready to continue our support for developing the best market practices possible. But any changes going forward need to be carefully balanced with other initiatives pending before the commission, such as Reforming the Energy Vision (REV) and development of new renewable energy goals. Ultimately, today’s actions don’t support these initiatives.

RESA intends to work diligently with the Commission, staff and other interested stakeholders to secure the benefits of competition for New York consumers.

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