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NY PSC Staff Whitepaper Provides Options For Imposing Additional Security Requirements on ESCOs

May 5, 2016

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

Staff of the New York PSC have issued a whitepaper that provides potential options for imposing additional security requirements on ESCOs

Such new security requirements would serve a distinct purpose, and are described as, "necessary to ensure an ESCO’s ability to, at a minimum, ensure the price savings guarantee and other elements of the Reset Order."

"The additional security requirements should apply to ESCOs that are serving mass market customers and should be based on the number of customers the ESCO serves, the annual revenues, or the quantity of electric or gas provided to customers," the whitepaper states

The whitepaper offers the following options for establishing such new security requirements

"First, the amount of a performance bond or security instrument could be set annually, based on the number of customers served by an ESCO and the average charges in excess of what the utility would have charged in a prior period. This customer focused approach would utilize historic data to determine the average amount customers paid for service from an ESCO in excess of what would have been paid to the utility, and then multiplies that amount by the number of customers a particular ESCO is serving. Further, the level of security could be moderated based on an ESCOs historic performance as well as complaint levels," the whitepaper states

"Second, another option would be to calculate the performance bond or security instrument based only on the number of customers served. This approach would establish tiers based on the number of customers served and would require higher bonds for larger customer bases," the whitepaper states

"Similar to this approach, the performance bond or security instrument could also be based on the amount of load served by the ESCO. This method will also likely utilize a tiered system where larger bonds will be required for higher levels of load. Whether based on number of customers or the size of the load served, the amount of the performance bond or security instrument can be updated on an annual basis," the whitepaper states

"Third, the performance bond or security instrument could be based on the percentage of annual revenues of the ESCO. For example, an ESCO may be required to post a performance bond or security instrument each year, in an amount equal to 10 percent of the ESCO’s annual revenues for commodity sales in the prior calendar year," the whitepaper states

"Other options include basing the amount of a performance bond or security instrument on the type of customers served, simply establishing a flat amount that all ESCOs are required to post regardless of the size of the ESCO or number of customers served, or any combination of the examples provided above," the whitepaper states

"The Commission is also considering the use of the existing Purchases of Receivables (POR) discount or supplementing existing utility creditworthiness criteria ... The POR discount could be increased to include a component related to the guaranteed savings commitment and the utility could establish a fund to be used in a similar fashion that a performance bond or security instrument would be used," the whitepaper states

The whitepaper does not propose any specific dollar amounts associated with any of the options described above.

The whitepaper sought comments on what other security instruments or options make sense, in light of the Commission’s goal to supplement existing creditworthiness criteria, for the purpose of ensuring an ESCOs ability to provide a price guarantee to customers

Case 15-M-0127 et. al.

NY PSC Staff Whitepaper Proposes Benchmark Price That ESCOs Would Need to Beat To Offer Fixed Price Product

NY PSC Staff Whitepaper Proposes Alternatives To Receiving Express Customer Consent For Material Changes in Contract Terms/Renewals

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