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N.Y. DPS Staff Cite Supreme Court Ruling on ESCO Mass Market Order As Confirming PSC's Jurisdiction To Issue Subpoenas To Non-Party ESCOs

June 26, 2017

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

A decision from a Supreme Court of New York, which vacated part of the New York PSC's ban (except for limited, compliant products) on ESCO service to mass market customers confirmed the PSC's jurisdiction over ESCOs and, accordingly, the PSC's ability to issue subpoenas to ESCOs who are not a party to the current evidentiary proceeding reviewing the retail mass market, New York Department of Public Service Staff said in a reply to various ESCOs' motions to quash the subpoenas

"Under New York Law, in order to enforce a non-judicial subpoena that has been challenged, the issuing entity need only establish (1) its authority for both engaging in such an investigation and issuing the subpoena; (2) that there is an authentic factual basis to warrant the particular investigation; and (3) that the evidence sought is reasonably related to the subject of inquiry," DPS Staff said in its reply

Concerning the first requirement, DPS Staff said, "As discussed herein, the Public Service Commission (PSC or Commission) clearly has jurisdiction and authority over ESCOs, there is a strong basis for the evidentiary hearings, and the information sought in the subpoenas is directly related to the issues being addressed in the evidentiary hearings."

In its reply, DPS Staff said that arguments challenging the subpoenas, "focus on the applicability of Public Service Law (PSL) Article 4 to ESCOs, but fail to recognize that the Commission need not utilize its 'ratemaking' authority under PSL Article 4 to control ESCOs practices, including pricing."

Referencing a 2016 decision concerning the ESCO mass market ban, DPS Staff said, "In fact, the Supreme Court for Albany County properly found it to be 'counterintuitive to claim that the PSC lacks jurisdiction over the retail energy market. To say that once it was established by the PSC, with a set of guidelines for its regulation and connectivity to public utilities . . . that the Commission cannot regulate these entities with consumer pricing requirements surely defies logic,'" DPS Staff said

"In any event, the Commission also has jurisdiction over ESCOs under PSL Article 1 inasmuch as they are 'gas corporations' and 'electric corporations' under PSL §§2(11), (13). Moreover, ESCOs own and operate gas and electric plants, as those terms are used in the PSL inasmuch as they use personal property to sell gas and electricity at retail. Consequently, the PSC may require ESCOs to carry out their 'public service responsibilities with economy [and] efficiency,'" DPS Staff said

"Additionally, in 2002, the Legislature amended PSL Article 2 to reverse the PSC’s conclusion that ESCOs could not affect utility service. In order to make ESCOs subject the [sic] PSL Article 2 as well as PSL Article 1, the Legislature added PSL §53 to Article 2 which reads in part: '[f]or purposes of this article, a reference to a gas corporation, an electric corporation, a utility company, or a utility corporation shall include, but is not limited to, any entity that, in any manner, sells or facilitates the sale or furnishing of gas or electricity to residential customers.' This language, which is analogous to the PSL Article 1 definitions of gas and electric corporations, was intended to subject ESCOs to the consumer protection provisions of PSL Article 2," DPS Staff said

Turning to the second requirement, DPS Staff said, "with respect to the factual basis for the subpoenas themselves, each of the questions contained in each subpoena are directly related to one or more [sic] the enumerated questions posed in the December [retail mass market evidentiary proceeding] Notice."

"The use of a subpoena to solicit this information from ESCOs who are subject to the Commission’s jurisdiction, but are not parties to these proceedings is supported by the need to evaluate the retail market in the State, particularly given the fact that a majority of the ESCOs operating in the State affirmatively chose not to participate in these proceedings. The NRG Companies further allege that the basis for the subpoenas must be specifically tailored to each ESCO. However, neither the case law cited, nor the CPLR impose such an additional requirement. In any event, the need for the information requested from each ESCO is the same, and thus need not be individually set forth in each subpoena. Each ESCO makes up a part of the market; only by obtaining information about individual pieces of that market can the market be evaluated," DPS Staff said

DPS Staff also called the documents sought under the subpoenas, "plainly relevant," to the proceeding, and consistent with prior ALJ rulings concerning the scope of the proceeding (which have authorized discovery related to profitability and the C&I market, among other things)

DPS Staff also said that the ALJs have authority to issue the subpoenas, as Staff addressed ESCOs' arguments that the proceeding was not properly commenced -- arguments which were rejected in a May 25 ruling by the ALJs in ruling on another procedural matter.

Turning to the assertion that the subpoenas are procedurally defective, Staff said that the subpoenas were properly issued pursuant to the Commission’s regulations and the CPLR.

"Contrary to the assertions made in several Subpoena Challenges, the Commission Regulations do not require that the application for a subpoena explain in detail how each individual request contained in the subpoena relates to the proceeding. Instead, the subpoena application need only state why the information is rationally related to the proceedings. In satisfaction of this requirement, Staff noted in the application that, in light of the ongoing investigation into the retail market, it was necessary to request this information from non-party ESCOs which make up a significant portion of that market. In other words, it stands to reason that data concerning a majority of the ESCO [sic] participating in the retail market is rationally related to an ongoing investigation into the very same. The requests themselves seek information that would be critical in assessing the workability of the retail market. Information including, but not limited to, interactions with customers, the types of customers served, finances, profitability, and general business practices all ought to be considered as part of this investigation into whether or not the retail market is in fact workability competitive as was the intent of the Commission when it created the market," DPS Staff said

"Additionally, while several of the Subpoena Challenges assert that Staff failed to provide a copy of the request prior to serving the subpoena pursuant to 16 NYCRR §3.4(a), these arguments fail to recognize that this requirement only pertains to parties on which a subpoena might be served. The subpoenas at issue in these proceedings were served on non-parties and thus Staff was not required to serve a copy of the request for a subpoena on those entities," DPS Staff said

"With respect to the assertion that the subpoenas do not 'stat[e] the circumstances or reasons such disclosure is sought or required,' the CPLR does not require that such notice be provided in the subpoena itself. Instead, all ESCOs in operating in New York State previously have been provided with notice of these proceedings and the reasons behind the evidentiary hearing. The various forms of notice include, but are not limited to notices issued on the Commission website, various ALJ rulings sent to all ESCOs, interrogatories including the exact information sought in the subpoenas that were sent to all ESCOs, as well as numerous press releases and articles. Additionally, each of the ESCOs served with the subpoenas had previously been served with information requests by Staff and many have actively engaged with Staff regarding these requests. The purpose of this notice requirement is 'to afford a nonparty who has no idea of the parties' dispute or a party affected by such request an opportunity to decide how to respond.' Velez v. Hunts Point Multi-Servs. Ctr., Inc., 29 A.D.3d 104, 110 (1st Dep’t 2006). However, it is difficult to imagine that any ESCO in New York State could legitimately claim that they are unaware of the ongoing Commission investigation regarding the workability of the ESCO market," DPS Staff said

"Alternatively, should there be any remaining concern about notice to the ESCOs regarding the reason Staff is requesting the information, Staff would urge Your Honors not to grant the motions to quash or the withdrawal requests, but instead employ your powers under CPLR §2304 to impose reasonable conditions upon the denial of a motion to quash and afford Staff the opportunity to correct the alleged procedural deficiency," DPS Staff said

"Finally, with respect to the contention that the subpoenas improperly pose 'interrogatory-styled requests,' Staff asserts that each request posed in the subpoenas relates to a document or record. Simply because the request is presented in the form of a question does not mean that it is improper for a subpoena duces tecum, and given the variety of ESCOs business practices, it is impossible to know exactly what for [sic] those documents or records are held in. Given that the business practices and record retention policies may differ from ESCO to ESCO, the structure of the Staff’s subpoenas is entirely appropriate. However, should Your Honors find any of the requests in the subpoenas to be of improper form, that is not grounds for expulsion of the entire subpoena. Staff would respectfully urge Your Honors to instead construe the questions to clarify that, as clearly set forth in the opening paragraph of the subpoenas, only existing documentation that is responsive to the listed questions is required," DPS Staff said

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