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ESCO: NY Policies "Encourage" Predatory ESCOs; POR "Must End"

March 23, 2016

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Copyright 2010-16
Reporting by Paul Ring •

The existence and proliferation of "predatory" ESCOs in New York, "is the direct result of the [Public Service] Commission’s policies that allow and encourage them to exist," Infinite Energy said in comments to the PSC

Infinite Energy said such policies include:

• Failure to implement meaningful licensing of ESCOs and brokers (despite repeated requests from reputable ESCOs to implement meaningful licensing and standards);

• Failure to take public and effective corrective action against ESCOs and utilities that have misbehaved (despite repeated requests from reputable ESCOs to initiate corrective actions);

• Failure to eliminate the consolidated billing and related purchase of receivables by utilities (despite repeated requests from reputable ESCOs to eliminate such programs);

• Failure to fully unbundle utility pricing structures and to mandate equitable release of upstream assets to the entities serving the customers those assets were purchased by; and

• Ultimately, the failure to remove the market power and monopolistic distortion caused by the utilities’ continued participation in the market.

"Respectfully, Infinite Energy asserts that the failures apparent in the New York energy market are due entirely to the decisions made by the Commission itself. Throughout the development of the retail market, in every utility rate case since the opening of the market, and in its current actions, the Commission has created a paradox: the expectation that ESCOs, reliant entirely on utility systems and asset releases, somehow compete with those very utilities," Infinite Energy said

"The retail energy market in New York is built on a system that rewards bad ESCOs," Infinite Energy said

"Purchase of receivables must be ended, because it has run its course and no longer benefits the market – it now incentivizes bad actors to harm ESCO customers in New York," Infinite Energy said

"[C]onsolidated utility billing ('CUB') and the purchase of receivables give ESCOs little incentive to charge competitive prices," Infinite Energy said

"Combined with the minimal standards for ESCOs in New York, many ESCOs have only one clear incentive – to quickly sign up as many customers as possible. If the goal is to grow a competitive market quickly, this makes sense. But it almost guarantees that ESCOs will be tempted to take advantage of customers," Infinite Energy said

"By 2012, the effects of CUB were clear as a number of unethical ESCOs used deceptive sales tactics to prey on senior citizens, non-English speakers, and customers on assistance. Despite all of the other market issues identified the Commission, these abuses could not have happened to this degree had ESCOs been allowed to be responsible for issuing and collecting their own bills," Infinite Energy said

"They [the abuses in the market] will continue as long as anyone can register an ESCO and then earn fast, guaranteed money by signing customers to high rates. Tightening ESCO registration standards would address this problem, as would financial assurances geared at protecting customers. But to eliminate these harmful incentives, the Commission must finally end the purchase of receivables and require all ESCOs to be responsible for their own billing," Infinite Energy said

Additionally, "Beyond bad actors, New York’s retail energy market is fundamentally crippled by a lack of transparent utility pricing, by opaque capacity releases, and by duplicative delivery costs," Infinite Energy said

"New York customers pay disproportionately high delivery costs – and until the utility no longer serves commodity, no consumer can be certain that he or she is paying a 'fair and just' rate for the monopoly delivery service that the Commission is responsible for regulating. Even in the absence of full restructuring, the ratepayers of New York are inevitably abused when tariff rates are not fully and transparently unbundled. While ESCOs, individually and as a group, should be held accountable for any abuses that are truly attributable to them, the Commission should regulate those abuses under their watch, including those caused to the retail market by utility market power. This is particularly true in the context of a competitive market in which those very utilities are simultaneously competitors, distributors, and service providers," Infinite Energy alleged

Infinite Energy pointed to the Texas model as lowering customer rates -- in contrast to New York where delivery rates have comprised an increasing portion of overall customer costs.

"There is no consolidated utility billing in Texas – in fact, ESCOs must purchase the utility’s receivables without recourse – there are fewer bad actors. ESCOs there are responsible for all costs, so those that can’t collect and operate efficiently simply go out of business. Where these basic incentives aren’t enough to stop ESCOs from abusive behavior, Texas regulators protect the competitive marketplace through strict standards for market participation, customer protection rules, and ESCO requirements. Texas electricity prices have fallen over 20 percent since 2000, falling further still where prices are adjusted for inflation," Infinite Energy said

"The Commission already has the authority necessary to oversee, regulate, and penalize ESCOs under the Public Service Law, including the power to require higher certification standards and the authority to remove them from the market altogether. Higher standards for ESCO certification will also help New York’s retail energy market, and should be based on a combination of credit requirements, financial assurances, technical capabilities, and industry experience. This will protect customers and reestablish public trust. Financial assurances, however, should also be scaled appropriately to ESCOs’ customer counts and system share, so that ESCOs of all sizes have an equal opportunity to serve New Yorkers and add value to the New York market. There is no need to scale technical capabilities and industry experience as all ESCOs participating in the market should meet the same high standard," Infinite Energy said

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