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NEM Seeks Discovery On PSC's "Deeply Flawed" ESCO-Utility Bill Comparison Data; PSC Says Data Accurate, Opposes Delay In Court Review

December 2, 2016

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

The National Energy Marketers Association is seeking a court order to conduct discovery on data filed by the New York PSC in support of its order imposing a moratorium on ESCO service to Assistance Program Participant customers, alleging that the data is, "deeply flawed." The PSC opposed discovery as adding an, "unnecessary delay," as the PSC called the data accurate

NEM made its motion before an Albany County Supreme Court which is hearing NEM's and other ESCOs' challenges to the PSC's low-income moratorium order, and which has granted a temporary restraining order against the moratorium order.

The PSC alleges that data, which EnergyChoiceMatters.com was first to report on November 21, shows that low-income customers served by ESCOs in aggregate paid $96 million more than what the cost would have been under default service for the period January 2014 through June 2016.

NEM said in a court filing that the when the data, which the PSC obtained after initially adopting the low-income moratorium in July, was released by the PSC in October 2016, "it quickly became clear that the Commission did not fully understand the data provided by the local utilities and that the data was incomplete and misleading."

"At that point, Petitioners sought limited discovery to be able to understand and meaningfully respond to the after-the-fact data," NEM said

"The Commission’s refusal to allow any legitimate review of its ex parte discovery is consistent with the fact that the information on which the Commission now relies is deeply flawed, incomplete, and effectively meaningless," NEM said

"To the extent any conclusion can be drawn from the post-facto information, it is that thousands of New York residents (including low-income customers) save tens of millions of dollars a year by purchasing their energy from ESCOs," NEM said

"A cursory review of this data makes clear that it is entirely unreliable," NEM said

"Discussions held with Commission staff in early November confirmed that the Commission staff does not fully understand the data and that it needed to revise some of the data it presented to correct facial errors," NEM alleged in a brief

NEM further called the data, "highly flawed and unreliable," stating, "The utilities themselves have cautioned that efforts to compare ESCO prices with utility pricing based on utility data alone are fraught with problems that can result in entirely inaccurate and unfair comparisons." NEM cited a disclaimer which National Grid includes with its PSC-mandated ESCO-default service cost comparison tool made available to customers, which notes, among other things, that, "A comparison of a bill that includes ESCO charges with a utility bill in any single period may be affected by the ESCO’s monthly adjustments for prior periods, one-time charges or very short-term changes in energy and natural gas prices," and that, "If the supply service purchased from an ESCO includes a value-added feature such as a price that is fixed for a period of time, green energy, an energy equipment repair package or airline miles, the costs of this value-added feature may be reflected in the charges from your ESCO. The supply service provided by National Grid, however, does not include such value added services. Nor does the price comparison reflect any affinity rewards or rebates that might be provided by an ESCO, separately from a customer’s utility bill."

"[T]he data is apples and oranges insofar as it compares different products without accounting for those differences. For example, the data fails to account for the fact that ESCOs offer renewable energy products that, by definition, are supposed to be more expensive than both ESCOs’ and local utilities’ non-renewable energy. Indeed, many ESCOs charge a self-described 'per kwh adder' plus a monthly fee for premium green energy. Comparing those prices with the prices customers pay for non-renewable energy from utilities is no more helpful than concluding that organic apples cost more than non-organic apples. Similarly, the data fails to account for the fact that ESCOs offer fixed-rate products that local utilities do not offer, by which customers elect to lock in prices that by definition can be lower or higher than those of the variable rates charged by utilities in subsequent months. Comparing those prices with the prices customers pay for fluctuating variable-rate products from utilities is like concluding that Bank of America overcharged customers with a 30-year fixed rate 4% mortgage if variable rates subsequently dip below 4%," NEM said

"[T]he data does not even include the final pricing local utilities charge customers for a given period, but instead uses only placeholder estimated charges that the utilities can and do change after the fact during subsequent billing periods to 'true-up' the placeholder charges to accurate prices," NEM alleged. "Again, the data cited by the Commission expressly disclaims its accuracy because of 'out-of-period adjustments' that are not included in the figures presented, but the Commission uses the data anyway," NEM alleged

"[T]he data does not even purport to capture actual net ESCO charges to customers and it fails to account for, among other significant amounts, all rebates and promotional amounts that ESCOs provide their customers directly. For example, some ESCOs provide customers a 'Free Month,' which gives customers free energy for an entire month of their choosing when they stay with an ESCO for a certain period of time. This is a valuable financial savings that the Ex-Parte Interrogatory and resulting data totally ignores, resulting in significantly inflated figures for the ESCO prices cited by the Commission," NEM said

"The data – which the Commission admits was obtained exclusively from the local utilities (who are the ESCOs’ competitors and the primary beneficiaries of the Orders) – contains only 'summary' figures that are essentially a black box that raise more questions than it answers," NEM said

Noting a corrected analysis produced by the PSC which revised the figures at one utility, NEM alleges, "The Commission also noted that it discovered several facial errors in the figures it provided the Court in the Alch Affidavit, but it did not undertake to audit or test the data for additional errors."

"[T]he Commission self-selected a limited, unrepresentative period (2014, 2015, and the early part of 2016) for which it requested pricing data from the utilities, comprising less than 15% of the available historical pricing data. A review of ESCO pricing for its two decades of existence would provide a far more complete basis for analyzing the core issues that the Commission purports to want to address," NEM said

However, the PSC opposed discovery, arguing that discovery would cause, "unnecessary delay," in the proceedings, and alleging that the data, "accurately represents the delta amounts between ESCO and utility service." Moreover, the PSC said that in adopting the moratorium order, it relied on prior utility bill comparisons (which also alleged to show ESCO aggregate overcharges), not the more recent data, with such prior data contained in the record

The PSC said that Moratorium Orders relied on older utility bill comparison data, which is part of the administrative record, in reaching the conclusion in 2014 that, "customers who take service from an ESCO on average pay more than they would had they taken full utility service."

Such prior bill comparisons in the record, "fully show that residential customers, including low-income customers, pay more when taking ESCO service. The Commission relied upon this finding in Orders issued in February 2014, February 2015 and, most recently, in the Moratorium Orders of July 2016 and September 2016," the PSC said

"The comparisons justifying the Moratorium Orders are not, however, based on the most recent data, but are from the period of August 2010 to July 2012. The Commission provided the Court with summary numbers based on the interrogatory responses, in order to make sure the Court has the most recent data on ESCO overcharges of residential customers when considering the injunction," the PSC said

"The Commission’s underlying decision to protect the public interest in the appropriate use of monies supporting low-income ratepayers was not based on new information, but on the ESCO failure to 1) challenge Commission conclusions that ESCOs were charging customers more for service than the distribution utilities, and 2) prior bill comparisons in the record, which also show ESCO overcharges," the PSC said in a brief

"Those comparisons were produced by the utilities pursuant to a standing requirement in the underlying proceeding that the utilities develop a bill comparison mechanism, and were supplied to the ESCOs, at their request, in advance of the Commission’s papers in this matter. Those comparisons reflect routine operation of utility billing systems and there is no reason to question their validity," the PSC said

"The Commission has provided to Petitioners a full explanation of its use of those bill comparisons, also obviating any need for discovery," the PSC said

Citing precedent regarding discovery in Article 78 proceedings (such as the forum under which NEM and ESCOs are seeking to vacate the PSC's moratorium), the PSC said that NEM, "has failed to establish a 'demonstrated need' for discovery in this special proceeding."

"And such discovery will merely delay relief to ratepayers and the public that pay for overcharges by ESCOs," the PSC alleged.

"[T]o the extent NEMA wishes to test the methodology for the bill comparisons, they had to do so in the proceedings before the Commission and should not attempt to do so in this Court," the PSC said. "NEMA seeks information of interest to it, but not to the resolution of issues before the Court; accordingly, discovery should be denied," the PSC said

"Moreover, there is no basis for questioning the utility bill comparisons, given the utility role in implementing retail access. Significantly, the utility comparisons are derived from operation of their billing systems, which bill for both the ESCOs and utilities. Utilities use ESCO billing information to bill ESCO customers. It is straightforward for utilities to determine what ESCO customers would have been billed had they been utility customers," the PSC said

"Use of utility bill comparisons to test whether ESCOs are overcharging is perfectly appropriate, given the utility role in billing for ESCOs. Petitioners criticize an alleged Commission use of utility data over ESCO data. The utilities have total bill amounts for ESCO customers because in the vast majority of the cases they bill ESCO customers on behalf of the ESCOs. The utility comparisons thus reflect ESCO data, contrary to NEMA’s claims," the PSC said

"NEMA’s complaints about the alleged need for a deposition to test NYPSC summaries of the latest utility bill comparisons are also without merit. The ESCOs complain that the spreadsheets supporting the Alch Injunction Affidavit Exhibit B include thousands of figures without any explanation of the methodology. The Alch Injunction Affidavit Exhibit B simply summarizes the utility spreadsheets by adding the columns for total ESCO bills, total utility billings for ESCO customers and the differences. The Commission’s addition has been explained to the ESCOs," the PSC said

"The ESCOs also complain about an alleged inability to understand and test the utility methodology. This claim is baseless, given that the utilities have been doing comparisons of their bills with those of the ESCO bills since 2003 [due to HEFPA disconnection requirements] and were required to develop a bill calculator in 2014. The Department interrogatories sought 1) total ESCO bills for their customers, 2) total utility bills, had the ESCO customers been utility customers, and 3) the delta between those bills based on an apples-to-apples comparison. The utility bill comparisons are calculated using exactly what the customer was billed as an ESCO customer and comparing that to what the customer would have been billed, had they received full utility service pursuant to the publicly filed utility tariffs. The accuracy of the utility billing systems is audited and verified by the Department," the PSC said

"NEMA asserts that the need for discovery outweighs any delay. Not only is there no need for discovery, but any delay will cause further harm to low-income customers. The Commission found a need for emergency action under the New York State Administrative Procedure Act (SAPA) because of the onset of the heating season. ESCO overcharges spike during the winter months, when gas and electric usage is higher. Even a two-week delay will result in more overpayments from low-income customers. Allowing NEMA to inquire into the utility bill comparisons will insert an unnecessary issue into this proceeding, and occasion further, damaging delay," the PSC alleged

In an affidavit supporting the PSC's brief, a PSC Staffer said in defense of the underlying utility data that, "In 2016, the Office of Consumer Services took nearly 80,000 customer complaints, many of which were related to utility high bills. In investigating high bills the staff will review the reasonableness of the customer's usage and the bill details. The staff will also compare what the customer was billed to the utility tariffs. The staff generally does not find variances between its calculations and the utilities of more than a few cents."

In a court filing, NEM, however, characterized the PSC's production of the utility billing data thusly: "The PSC has taken the unprecedented step of conducting its own previously undisclosed, unilateral, one-sided post hoc discovery2 – after the issuance of the TRO – and using its own administrative discovery powers over utilities to gather information it now claims supports its arguments that the Moratorium is necessary and proper ... But while the PSC relies heavily on the Post-Hac Data to support these claims and the Moratorium, it has denied Petitioners/Plaintiffs a reasonable and meaningful opportunity to understand the data ... By serving its own administrative interrogatories outside this Court, the PSC has acknowledged that the administrative record is inadequate and that further discovery is material and necessary. Petitioners/Plaintiffs simply seek the most basic of opportunities to fully understand the scope and meaning of the data on which the PSC is now relying, by conducting a targeted deposition concerning the origin, meaning, and context of the data."

"By its own admission, the Commission has been considering the issues that allegedly gave rise to its issuance of the Moratorium for more than two years. The requested deposition will, at most, delay proceedings by two to three weeks, a delay that is inconsequential when considered in light of the time the Commission has considered the issues it claims underpin its issuance of the Moratorium," NEM said in a court filing (emphasis in original)

Craig Goodman, President of the National Energy Marketers Association, issued the following statement: "The PSC is seeking to deprive low-income customers of an opportunity afforded to all other New Yorkers -- to shop for the best energy plan -- simply because of their economic status. Inexplicably, the PSC is seeking to justify its unprecedented action by using data comparing ESCO and utility supply bills which is known to be inaccurate. Putting aside other policy deficiencies in the PSC's low-income moratorium, NEM simply asks that any data used by the PSC, which has been presented as a 'black box', be analyzed through discovery in order to root out any fallacies and arrive at incontrovertible conclusions -- before low-income customers are denied the opportunity to save on their energy bills that is afforded to all other customers."

The PSC issued the following statement: "The PSC submitted facts that show ESCO customers pay hundreds of millions dollars more for gas and electric service annually than necessary. The facts clearly demonstrate that customers, especially low-income customers, are being harmed. The filing was made in the hopes that the court will support the Commission’s efforts to protect low-income customers from predatory ESCO billing practices."

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