ESCOs Seek Stay Of New York PSC Reset Order Limiting Product Types, Imposing Other New Requirements

RESA: Implementation Of Order "Will Lead To Chaos In The Marketplace"

Clarification Sought On Whether Affirmative Consent Required Every Month For Compliant Variable Rate Product, As Suggested By New UBP

January 14, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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Various individual ESCOs and retail supplier parties, including the Retail Energy Supply Association and National Energy Marketers Association, filed for rehearing, reconsideration and/or clarification of the New York PSC's December ESCO 'reset' order, as various ESCO parties sought a stay of the order

See background on the PSC's retail energy reset order here. As first reported by EnergyChoiceMatters.com, the order includes new product limits and price caps for ESCOs, a prohibition on bundling non-energy services (including enrollment inducements), and would itemize ESCO rates (separating out the commodity cost from any energy-related value-added service) on a new on-bill comparison

Generally, ESCO parties sought a stay of the entire order until 60 days after the Commission issues a determination on the rehearing petitions

RESA in its petition said that, "Implementation of the 2019 Order as written is simply unworkable and will lead to chaos in the marketplace."

Noting the new product limits imposed by he PSC (fully discussed in our prior story here), RESA said that, "After February 10, 2020, unless these ESCOs can guarantee savings against an unattainable price that is backwards-looking and not reflective of the day-ahead market ... the reality is that a significant number of customers will be dropped by their ESCOs back to default utility service."

Much of the various rehearing and reconsideration petitions reiterate previously reported positions taken during the hearing or in prior litigation of the PSC's prior (vacated) reset order, including allegations that the PSC's latest order violates various federal constitutional protections concerning contracts, and is preempted by the Sherman anti-trust act

Of more note are several sought clarifications, and concerns that implementation under the timeline in the order is impractical.

A group of over a dozen ESCOs (joint petitioners) alleged that the Second Reset Order, "contains internal inconsistencies and ambiguities that make compliance with it impractical and impossible."

Of note is that ESCO parties said that the UBP changes were inconsistent with the discussion of affirmative consent requirements in the order

As a result, various ESCO parties sought clarification on whether affirmative consent is needed in various situations due to new language in the UBPs defining a rate change or product type change as a material change. These situations include moving a customer from a fixed rate to a compliant guaranteed savings variable rate, and serving a customer under a compliant guaranteed savings variable rate in which the rate changes each month

The joint petitioners noted that, "pursuant to language included in the body of the Second Reset Order, ESCOs are permitted to automatically enroll existing customers into guaranteed savings products without obtaining a customer’s affirmative consent. Indeed, the Second Reset Order states: 'Considering that all future variable-price commodity-only ESCO contracts will be required to be offered at a guaranteed savings, a fixed-rate ESCO customer that is rolled over to a variable-price commodity-only contract will be protected from unreasonably high prices and/or rate shock associated with the change in contract terms. Thus, any ESCO that automatically renews a fixed-price customer shall be required to place that customer on a variable-price commodity-only contract, unless the ESCO obtains affirmative customer consent to continue with a fixed-rate plan, even if the contract otherwise provides for the renewal of the existing fixed-rate plan.'"

However, joint petitioners said that, "Elsewhere in the Second Reset Order, however, and as outlined in the revised Uniform Business Practices ('UBP'), affirmative consent is required for all changes to the terms of existing contracts, including changes in service type. Clearly, the Commission recognized the potential benefits of enrolling existing customers into guaranteed savings products without the need to obtain affirmative consent. Yet, this is not permitted by the plain language in the revised UBP."

The joint petitioners said that, "Due to the inconsistencies in the Second Reset Order and the UBP, the Commission should issue a clarification clearly establishing an ESCO’s ability to provide such products without first receiving a customer’s consent and revise the UBP accordingly. The Joint Petitioners suggest the following language be included in the UBP to correct this issue: 'Regarding contract renewals or an initial sales agreement that specifies that the agreement automatically renews on a monthly basis, all changes to the terms of the contract, including changes to the commodity rate, product or service type, will be considered material and will require that the ESCO obtain the customer’s express consent for renewal, unless the customer is renewed into a compliant product, in which case no consent is necessary.'"

The National Energy Marketers Association likewise said that the issue of service to variable rate customers requires clarification

NEM noted that, "Revisions were incorporated to Section 5 of the UBP regarding a material change requiring affirmative consent that require clarification. The Order addresses this issue in some detail with respect to fixed rate products. However, revised Section 5.B.5.d. has been worded in a manner that could be construed to include monthly variable rate products as requiring affirmative consent for a rate change. Specifically, Revised UBP Section 5.B.5.d., is now worded to state that 'Regarding contract renewals or an initial sales agreement that specifies that the agreement automatically renews on a monthly basis, all changes to the terms of the contract, including changes to the commodity rate, product or service type, will be considered material and will require that the ESCO obtain the customer’s express consent for renewal.' UBP Section 5.B.5.d. previously provided that, 'Regarding contract renewals, with the exception of a rate change, or an initial sales agreement that specifies that the agreement renews on a monthly basis with a variable rate methodology which was specified in the initial sales agreement, all changes will be considered material and will require that the ESCO obtain the customer’s express consent for renewal.' No reasonable justification has been provided to explain why monthly variable rate products should be subject to an affirmative consent requirement. The Commission has historically accepted that customers on monthly variable rate products have been adequately protected from rate changes by the ability to leave the agreement without the imposition of an early termination fee. The Order would also impose the variable rate cap as an additional measure of protection. Requiring affirmative consent for monthly variable rate products is not justified and should not be required."

The joint petitioners also said that the proposed timeline for compliance with the Second Reset Order is, "confusing and impractical."

The joint petitioners said, "In particular, the Second Reset Order requires ESCOs 'to submit a new application within 30 calendar days of the effective date of the UBP as modified in th[e] order.' As part of the application, ESCOs must provide proof of financial assurance. It is not possible, however, for ESCOs to comply with this requirement because Staff has yet to determine appropriate forms of financial security or any methodology for calculating a required amount. Indeed, there is not even any timetable for when this consultation will be initiated, what the process will entail, who will be eligible to participate, or when financial assurance obligations will be recommended for Commission review and approval. In the meantime while such matters are being considered, ESCOs cannot complete the application process."

The joint petitioners also said that, "the Second Reset Order expressly states that '[e]xisting ESCOs that currently are validly operating in New York will continue to be eligible to operate pending the effective date of the modified UBP adopted in this Order,' including enrolling new customers and renewing contracts with existing customers. Yet, as a result of the new re-application process, it appears that Department of Public Service staff ('Staff') must make an initial determination of an ESCO’s ability to sell any of the new compliant products before an ESCO can enroll or renew customers. The problem with this process is that the deadline for re-application is 30 days after the Second Reset Order takes effect, and approval will take even longer as Staff will be inundated with ESCO applications for the approximately 200 ESCOs eligible to operate in the State. Since the UBP will go into effect prior to submission of re-applications, ESCOs could arguably neither enroll nor renew customers without violating the Second Reset Order. As such, the established re-application process is in clear contradiction of the Commission’s stated intent to allow ESCOs to continue operating. For this reason, the timeline for implementing the Second Reset Order should be stayed pending completion of the re-application process and determinations from Staff related to ESCOs’ ability to sell new compliant products to customers."

Case 15-M-0127 et al.

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