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NY PSC Alleges ESCOs Will Jack Up Rates While Court Reviews Full Stop Order, Asks Court to Require ESCOs To Post $100 Million Undertaking (Security)

March 10, 2016

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

Alleging that ESCOs may jack up rates under the assumption this is the "final opportunity" to make money in New York, the New York PSC has asked a court to require ESCOs petitioning for review of the PSC's full stop retail markets order to provide an undertaking in the amount of $100 million to compensate customers should the court uphold the PSC's order.

An undertaking is essentially a promise to provide security. The PSC said that a $98.6 million undertaking is required to compensate customers who continue to be served by ESCOs during a temporary restraining order (TRO) preventing enforcement of the PSC's order

"[T]he Commission is concerned that overcharges may be even greater during the period of the stay than they have been in the past. ESCOs concerned that the Commission will prevail in these cases or will take other action can increase monthly charges for many of their customers without notice or consent on the expectation that this is their final opportunity to make money by overcharging customers," the PSC alleged in its request (emphasis added).

The danger is heightened, a PSC staffer alleged in an affidavit, because of the existence of non-recourse POR in New York.

"The POR program without recourse, in which the POR discount is uniform across all ESCOs, decreases the incentive for ESCOs to charge existing customers reasonable rates. Moreover, POR without recourse actually disadvantages ESCOs that enroll and retain good-paying customers at competitive prices. Since ESCOs have no motivation to charge reasonable rates because they will collect the vast majority of every cent they charge customers, we expect overcharges to increase during the period of the stay as ESCOs concerned about the future of the retail market attempt to extract as much revenue out of customers as possible," the PSC staffer alleged in the affidavit

"This type of 'run on the bank' is exactly the type of harm the Commission was concerned about in the Order. Moreover, customers on month-to-month contracts -- which is a majority of ESCO customers -- are particularly susceptible to this kind of increase in overcharges during the pendency of the TRO because the variable nature of their monthly energy bills permits the ESCO to increase the customer's price for energy without notice or consent from the customer," the PSC staffer alleged in the affidavit

The PSC staffer averred that National Grid has provided the PSC with data showing that consumers in its New York footprint, including NiMo and the KeySpan LDCs, paid approximately $19.6 million in the aggregate more than they would have paid for electric and gas commodity service purchased from National Grid during the month of January 2016. Approximately $15.9 million of those "overcharges," as labeled by the PSC, are attributable to service of residential customers.

The PSC noted that the 575,000 residential ESCO customers in National Grid's service territory represent about one-quarter of the ESCO customers statewide.

"For that reason, it is appropriate to require an undertaking equal to $15.9 million multiplied by four to represent all ESCO customers statewide and pro-rated to the 48 day period between the issuance of the Orders to Show Cause and the hearing on the requested preliminary injunctions. That results in an undertaking of $98.6 million," the PSC said.

Should the court ultimately determine that petitioning ESCOs are not entitled to injunctive relief, that $98.6 million would be distributed to customers, "harmed by ESCO overcharges during the pendency of the stay," the PSC said

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