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National Energy Marketers Association Seeks Reargument Of New York Court Of Appeals Decision Affirming PSC Authority To Cap ESCO Rates

June 11, 2019

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Copyright 2010-19
Reporting by Paul Ring •

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The National Energy Marketers Association and several ESCOs have sought reargument of the State of New York Court of Appeals's recent decision which held that the New York PSC may impose a cap on ESCO pricing because the PSC has the authority to determine the terms and conditions by which ESCOs may access the utilities' systems and infrastructure in order to supply commodity to customers

A statement from the New York PSC's press office concerning NEM's motion is below was first to report the Court of Appeals's decision, which, in brief, rejected the PSC’s argument that ESCOs fall within the definitions of 'gas corporations' and 'electric corporations' set forth in Public Service Law § 2 such that they are subject to the PSC’s direct rate-making authority under Public Service Law article 4, but also found that the PSC may cap ESCO pricing as a condition of ESCOs' "eligibility" to access utility systems.

The Court of Appeals found that, in authorizing the PSC to ensure that the terms by which utilities provide ESCOs access to public infrastructure remain 'just and reasonable,' sections 65 (1) and 66-d (2) of the PSL support the PSC’s long-held position that it has the authority to regulate ESCOs’ eligibility to transport energy over public utilities’ infrastructure

"Because the PSC is empowered to regulate utilities’ transportation of gas and electricity and created the ESCO markets for the benefit of consumers, and because the legislature has delegated to the PSC the authority to condition ESCOs’ eligibility to access utility lines on such terms and conditions that the PSC determines to be just and reasonable, it follows that the PSC has authority to prohibit utilities from distributing overpriced products by conditioning ESCOs’ access on a price cap," the Court of Appeals had said

In the motion for reargument, NEM said that the reasoning which led the Court to reject the PSC's argument that ESCOs fall within the statutory definitions 'gas corporations' and 'electric corporations' (and thus subject to PSC ratemaking authority) also requires rejection of the PSC's "eligibility" argument

Specifically, the Court of Appeals had concluded that adoption of the PSC's argument that ESCOs are included within the definition of 'gas corporations' and 'electric corporations' would render the 2002 adoption of Public Service Law § 53 meaningless. Section 53 provides that, for purposes of Public Service Law article 2 only -- which addresses limited consumer protection measures -- "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."

"If the more general definitions of gas and electric corporations in Public Service Law § 2 covered ESCOs, there would have been no need for the legislature to enact section 53 in 2002," the Court had noted

In the motion for reargument, NEM argued that, "that exact reasoning also applies to undermine the PSC’s alternative [eligibility] argument[.]".

NEM argued that, if the PSC were empowered to condition ESCOs' use of utility infrastructure on adherence to various terms, legislation to subject ESCOs to customer protections contained in the Public Service Law article 2, such as that adopted in 2002, was not needed. The PSC simply could have subjected ESCOs to the customer protections as a condition of access.

A finding that the PSC may regulate ESCOs via terms and conditions for eligibility, "similarly renders the 2002 legislative amendment meaningless – in the Court’s words, 'there would have been no need for the legislature to enact section 53 in 2002' if the PSC already had the authority to impose all of those regulations on non-utilities by making them conditions for accessing utility lines," NEM said in the motion for reargument

Furthermore, NEM said in the motion for reargument that, "As applied to a price regulation, the reasoning in the Opinion could permit the PSC to regulate precisely the things the Legislature affirmatively elected not to allow the PSC to regulate with respect to ESCOs. In specifically recognizing that the PSL did not cover ESCO regulation at all in 2002, and then deciding to amend only one of the PSL’s articles (Article 2) to extend to ESCOs, the Legislature affirmatively decided not to do the same for Article 4 (price regulation)."

"Enabling the PSC to impose restrictions through 'conditioned access' to utility infrastructure that it could not impose through direct statutory authorization would allow the PSC to bypass the very limits the Legislature imposed on it by expanding its authority over 'gas and electric companies' (public utilities over which the Legislature gave the PSC the power to set rates) to regulate ESCOs – over which the Legislature specifically declined to permit the PSC to decide rates," NEM said in the motion for reargument

NEM respectfully asked for reargument to address this inconsistency

NEM also said that Public Service Law § 66-d, cited by the Court of Appeals as authorizing the PSC to place conditions on ESCO access to utility infrastructure, specifically only applies to gas corporations, and no similar provision exists in statute for electricity

The Court of Appeals had stated that, quoting § 66-d, "the PSC is authorized to order, 'upon such terms and subject to such conditions as the commission considers just and reasonable, . . . any gas corporation to transport or contract with others to transport gas under contract for sale by such producer or owned by such consumer,' subject to certain limitations, including a finding that 'the gas corporation has available capacity.'"

In discussing § 66-d, the Court of Appeals noted in a footnote that, "the PSC adopted a similar scheme for the electric industry, leading to the formation of ESCOs as a direct result of the PSC’s decision to increase market competition and make utility infrastructure available to nonutility service providers."

However, NEM said that no statutory provision similar to § 66-d exists for the provision of the electric commodity.

"The record demonstrates that there is no 66-d equivalent for the provision of electricity,", and therefore reargument is warranted, NEM said in its motion

The press office of the New York PSC issued the following statement concerning NEM's motion for reargument: "Last month, the New York State Court of Appeals issued a unanimous ruling against the ESCOs’ legal challenges and upheld the power of the Public Service Commission to protect New York ratepayers. Yesterday, the ESCOs requested a 'do over' and ask the Court to reconsider its unanimous ruling that rejected their arguments. The PSC is reviewing the ESCOs’ motion and will respond at the appropriate time."

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