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NY Agency Backs RESA Contention That NY Retail Evidentiary Proceeding Limited To Mass Market; DPS Staff Disagrees

April 24, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

New York State Office of General Services (OGS) filed comments with the New York PSC agreeing with the Retail Energy Supply Association that the scope of the PSC's evidentiary review of the retail market is limited to mass market customers, but Department of Public Service Staff said that the notice initiating the conference did not limit the proceeding in such manner.

OGS said that RESA is correct that the proceeding shall exclude issues relating to large commercial and industrial customers. "As demonstrated by RESA, this proceeding was clearly established to investigate the efficacy of competitive retail markets in serving mass market customers," OGS noted

OGS quoted the Secretarial notice initiating the proceeding which stated that the proceeding was to review, "whether [energy service companies ('ESCOs')] should be completely prohibited from serving their current products to mass-market customers ... [and] whether new ESCO rules and products can be developed that would provide sufficient real value to mass-market customers such that new products could be provided to them by ESCOs in the future in a manner that would ensure just and reasonable rates."

OGS further noted that the Secretarial notice stated that, "after considerable experience with the offering of retail service to mass market customers by ESCOs, the Commission has determined that the retail markets serving mass-market customers are not providing sufficient competition or innovation to properly serve consumers," and therefore explained that, "the Commission continues to examine measures that must be taken to ensure that these customers receive valuable services and pay just and reasonable rates for commodity and other services." [emphasis by OGS]

"Parties in this proceeding had no reason to expect that its scope may cover the admittedly well-functioning C&I retail access market, and it is unreasonable to expect them to adequately prepare testimony on C&I issues at this late date," OGS said

However, DPS Staff said that, "While the December Notice in these proceedings focuses on the mass-market, the Notice itself does not limit the scope of Track I or the scope of discovery."

"Of the 20 questions posed in the Notice, questions 10 through 13, and 20 clearly are not limited to the mass-market and are addressed to the entire retail access market, including C&I. Questions 10 through 13 seek data regarding the number of customers served by the ESCOs, volume of sales, whether it is offering or has offered lower prices compared to the utility, whether it is possible for an ESCO to profitably offer lower prices than the utility. These are broad questions and appear to have been intentionally designed as such. Question 20 seeks testimony regarding what can be done to strengthen the retail market. Limiting this proceeding to mass-market inquiries would thwart Staff’s efforts to respond to this question because if the C&I market is indeed functioning well, there are possibly lessons to be learned that could be implemented for the mass-market that have proven to be effective in the C&I portion of the retail market," Staff said

To the extent the ALJs rule that the scope of the proceeding excludes the large C&I market, Staff said that discovery concerning large C&Is should be permitted to inform mass market reforms. "Even if the ALJs rule that the scope of Track I is limited to the mass-market, they should find that discovery is not burdened by this determination ... Obtaining only information related to the ESCO’s mass-market business will limit Staff’s ability to analyze profitability and limit Staff’s opportunity to learn about what may or may not be contributing to the C&I market’s successes and the mass-market’s weaknesses or failings. For example, Staff could find that an ESCO or ESCOs is using its mass-market revenues to offset losses on the C&I side of its business as a result of losses or tighter margins. Denying or in any way limiting Staff’s access to this information will result in an incomplete understanding of the retail market," Staff said.

Staff also countered other assertions by RESA which alleged that the proceeding was not properly noticed and that the Secretary lacked authority to initiate the hearings.

"RESA misinterprets the PSL and Commission’s rules and regulations to state that the Secretary to the Commission does not have the authority to issue a notice instituting a hearing without some specific grant of authority from the Commission. Such an interpretation runs counter to the language of the statute and regulations, as well as years of practice by the Secretary, who acts on behalf of the Commission when issuing such notices," Staff said

While RESA cited statutes concerning the conduct of hearings, Staff said that, "while specific authorization is necessary for the Secretary to conduct hearings, the PSL requires no such authorization to simply issue a notice of hearings."

"[T]he Secretary is specifically granted the authority to issue notices with respect to the scheduling of hearings, which is readily distinguished from conducting the hearings themselves," as Staff noted that the initiating notice specifically noted that an ALJ would conduct the hearings.

"[C]ontrary to RESA’s suggestion, has the Secretary acted in violation of Rule 4.1 by independently directing that a hearing be held. Here, the Secretary, under the authority of 16 NYCRR §4.2, merely performed the ministerial act of noticing the hearing. As has always been the Commission’s practice, the Secretary acts on behalf of the Commission when issuing notices. The Chair may direct the Secretary, as was the case here, to issue a notice for any number of purposes without a specific grant of authority. Therefore, when the Secretary issued the Notice establishing the two procedural tracks in these proceedings, she acted on behalf of the Commission," Staff said

Staff also countered RESA's argument that ESCO profitability is outside the scope of the proceedings

"The question of whether these products are profitable is a critical, if not indispensable, to understanding whether consumers are paying reasonable prices or being overcharged," Staff said

RESA argued that since ESCOs are not regulated under Article 4, ESCO profit data is not relevant

"RESA errs in assuming that because the Commission has previously declined to regulate the ESCOs under PSL Article 4 that it cannot reconsider its decision," Staff said, noting several of the questions from the Secretarial notice directly implicate ESCO profitability

"The profit margin ESCOs have been able to obtain is directly relevant to whether there is a functioning retail market and whether abuses need to be addressed. It is necessary to evaluate whether profits appropriately reflect market conditions, or whether they are resulting from overcharges or abuses, to determine whether the retail market can and should be saved," Staff said

Staff is amenable to a 30-day extension in the procedural schedule, but opposed RESA's request for an indefinite delay, as Staff said various discovery disputes have been addressed

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