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Breaking: N.Y. Court Upholds PSC Ban On ESCO Service To Low-Income Customers

Says ESCOs Collaterally Estopped From Arguing PSC Lacks Jurisdiction Over ESCOs

Court: ESCOs, "Have Focused On Litigation To Frustrate The Plain Purpose Of The PSC And PSL"

June 30, 2017

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Copyright 2010-17
Reporting by Paul Ring •

A New York Supreme Court for the County of Albany has denied several ESCO petitions against the New York PSC and has upheld the PSC's authority to issue an order generally banning ESCOs from serving assistance program participant (APP) customers

The Court's order means the PSC's December APP prohibition order can be implemented. Such order (see background here) prohibits ESCOs from serving APP customers except where the PSC approves a waiver for a guaranteed savings product. Existing contracts were permitted to continue until their expiration, and the order set forth a process for the treatment of certain month to month customers (month to month customers must cease being served at the end of the current month, unless the product includes a gift/benefit for the customer for staying with the ESCO for a set term, see prior story for details)

Most notable from the Court's order is the finding "Addressing petitioner’s argument that the PSC has no authority to regulate ESCO [sic] with respect to consumer pricing requirements, the Court notes that it has already determined that the PSC has such authority, and petitioners are collaterally estopped from arguing otherwise." was first to note the severity of the Court's finding last year when, although it vacated the PSC's mass market ban order, the Court affirmed the PSC has broad jurisdiction over ESCOs

There was some contrary commentary by some stakeholders at the time, who argued that last year's finding, as it was contained in dicta, carried less importance, but the weight of such finding as been borne out (We'd note the current finding related to collateral estoppel is also contained in dicta).

"To reiterate the Court’s previous determination: 'Clearly, the Public Service Commission has the authority to establish public utility rates, in fact, it has been 'recognized as the very broadest of powers,''" the Court said in its Friday order

"The notion that ESCOs, direct offshoots of the PSC’s activity of unbundling rates, and whose conduct is prescribed by the Uniform Business Practices ('UBP') adopted by the PSC, have somehow morphed into a separate energy sector with independent rights, simply has no basis in law," the Court said in its Friday order

"As for petitioner’s constitutional arguments, the Court finds no violations of the contract, due process or takings clause with respect to the implementation of the Prohibition. As to the Contracts Clause, the Prohibition involves only the making of new contracts with low- income customers, and present contracts clearly remain place [sic]. As to the Equal Protection claim, the Prohibition reasonably reflects the different situation of low-income customers and ratepayer subsidies," the Court said

"Absent an identifiable property interest — and it has already been established that a customer is not a property interest — petitioners cannot successfully assert a violation of the takings clause or due process. As to any interference with the petitioner’s contractual relationship with its customers, the Prohibition does not require that any existing contracts be breached. Rather, and permissibly, it is only at the conclusion of an existing agreement petitioners [sic] that the ESCOs are precluded from entering into a new agreement with a low-income customer," the Court said

"Turning to petitioners’ argument that the PSC is violating the privacy rights of the APP’s with the Prohibition, on this issue they simply lack standing," the Court said

"All said, weighing the issue of total privacy of low-income customers against insuring their right not to overpay for energy services, and the public’s right not to subsidize these energy companies, the provisions in the Prohibition which amount to the sharing of the HEAP status of customers is well within the authority of the PSC," the Court said

"Addressing petitioners’s SAPA arguments, they cannot in good faith argue that they were not given an opportunity to be heard at a meaningful time and in a meaningful manner regarding the PSC’s serious and repeated concerns regarding low-income customers being overcharged for services," the Court said, noting the protracted low-income collaborative process dating to 2012

"Further, albeit petitioners argue that the data used by the PSC was unreliable and incomplete, they have simply failed to offer any actual alternative numbers based on the data shared with it by the utilities and the PSC, and instead offer only conclusions, speculation and hyperbole in opposition, in the Court’s view, to the PSC’s reliable and accurate data. Here, the Court has particularly considered the Affidavit of Bruce Alch, PSC’s Chief of Retail Access and Economic Development Section of the Office of Consumer Services — which the petitioners simply failed to offer any proof in evidentiary form to refute," the Court said

"On this record, since the collaborative report of 2015, what is clear, despite the PSC affording ESCOs ample opportunity to produce some evidence of some “value added energy product” that has simply not happened. What can also be reasonably concluded is that the ESCOs have instead focused on litigation to frustrate the plain purpose of the PSC and PSL — consumer protection through the adoption of reasonable rates, particularly for those whose utility costs are being subsidized by the public. To claim now that they were unaware that such a Prohibition would be forthcoming is disingenuous at best. The Low Income Collaborative certainly put ESCOs on notice that value added energy products and services needed to be developed and demonstrated," the Court said

The Court also found that the PSC's low-income ESCO ban was not arbitrary or capricious.

"The record before the PSC fully supports the Prohibition, which followed an extensive process in which the ESCOs fully participated, and the Court notes that the ESCOs did not dispute the PSC’s concerns during the extensive low income collaborative process that higher ESCO prices eroded the benefits of low-assistance programs funded by taxpayers and ratepayers. In spite of ESCOs repeated insistence that the Commission recognized the price guarantee offered by the energy companies as a value added project, this simply is not and was never the case, and instead the record establishes that the ESCOs during the Collaborative -- and to this day -- were unwilling or unable to identify a value added energy product which would provide a price guarantee. Given the overwhelming evidence that low-income energy ESCO customers are paying more than the utility would charge for energy so that ESCOs may maintain their distribution services (and profits), together with the inability of ESCOs to offer an energy based solution to this persistent problem, the PSC was left with no alternative but to prohibit these customers from utilizing an ESCO until such time as these energy companies take some action to provide protections to low-income customers," the Court said

The Court also found that, as the PSC adopted a new low-income moratorium, the PSC's action did not violate restraining orders issued by the Court against prior emergency low-income bans

"Although petitioners assert that the PSC was barred from any proceedings concerning a low-income moratorium, the court does not agree. The PSC did not try to enforce the prior Moratoriums, and in good faith has not sought to enforce the Prohibition while this determination has been pending, and the status quo has been maintained," the Court said

"[A]s discussed above, petitioners [ESCOs] have simply not met their burden for permanent injunctive relief, as the balance of the equities is clearly with the PSC and which has acted pursuant to statutory authority to protect New York consumers. Any financial loss the ESCOs may experience as a result of the Prohibition — which is imposed on the limited class of low-income customers (APPs) — does not compare to the necessity of cost saving for APPs and the ratepayers who subsidize them," the Court said

The Court also granted the PSC's motion to vacate a previously issued temporary restraining order regarding the low-income ban

John Rhodes, chair of the New York State Public Service Commission, issued the following statement: "Today’s court decision is a major step forward in New York State’s efforts to protect energy customers, particularly low-income households, from predatory pricing practices and overcharging by a large number of energy service companies. We are gratified by today’s court ruling and we will continue our aggressive actions to protect New Yorkers and bring meaningful services at reasonable prices to all ESCO customers."

Link to Court order

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