RESA Seeks Further Extension For Compliance With ESCO Product Limits, Other Requirements From New York PSC Reset Order, Cites Potential Utility Rate Deferrals Under New PSC COVID Proceeding

July 13, 2020

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The Retail Energy Supply Association requested from the New York PSC an extension of time to comply with Ordering Clauses 1, 2, 5, 6, and 8 of the PSC's December 2019 retail market reset order (Reset II Order).

The cited ordering clauses include the previously reported limits imposed on ESCO products to mass market customers, which limit ESCOs to a guaranteed savings rate, a fixed rate that does not exceed 5% of a utility average price, or, for electricity only, a 50% (or more) green plan. See the specific ordering clauses here

"RESA respectfully submits that a 90-day extension from the current August 10, 2020 deadline is warranted under the present circumstances and necessary to achieve the numerous requirements set forth in the Reset II Order," RESA said

"The COVID-19 pandemic has introduced an unforeseen level of uncertainty and unrest in every industry sector in the economy, including the energy industry. RESA understands that Commission staff have been diverted to assist with addressing COVID-19 related issues. The Commission recently opened a proceeding, Case 20-M-0266, in order to examine the impact of the COVID-19 emergency and its impact on customers and Commission programs. In the COVID-19 Proceeding, the Commission solicited comments on a number of key policy issues, including reconciliation and deferral of COVID-19 expenses and the treatment of previously authorized rate increases and revenue adjustments," RESA said

"The Reset II Order imposes a number of new requirements on ESCOs. Of key importance, it ties ESCO pricing to utility default pricing, unless the product is a renewable electric product that meets the requirements of the Reset II Order. Variable rate products must be trued up so as to not exceed the trailing 12-month average of the local utility, and fixed rate products are capped at 5% over the trailing 12-month average price of the local utility. Any customer deferrals would warp the default utility price against which ESCOs must compete -- a fact raised in RESA’s Petition for Rehearing and Motion for Stay," RESA said

"While RESA members could not have predicted the COVID-19 pandemic when RESA’s Petition was filed, and while RESA members are truly sympathetic to those in New York struggling with electric and gas bills, RESA did predict scenarios where the utilities would defer certain costs and collect on those costs at a later date. RESA warned the Commission that these deferrals 'hamper the ability of ESCOs to meet or beat the utility default price.' Moreover, this is not the first time that ESCO costs have been compared to utility default costs. Within the past decade, the Polar Vortex caused spikes in energy prices due to unprecedented cold weather and increased energy consumption. Utilities were able to defer these costs; ESCOs were not. This led to an increase in customer complaints about seemingly unfair ESCO prices, a factor which played into the entire Reset Proceeding process. While ESCOs bear no responsibility for either the Polar Vortex price spikes or the ongoing pandemic, under the Reset II Order, ESCOs are now forced to compete against artificially lowered utility prices," RESA said

"To be clear, RESA does not oppose the notion of deferred utility costs related to the COVID-19 pandemic, particularly given the economic hardship burdening so many New York ratepayers. The issue is that ESCOs are forced to compete with a default utility price that is not reflective of reality, is not based on real time pricing, and does not take into account the reality that utilities can and do defer their costs. These deferred costs are ultimately recouped by the utility, with interest, at a later date. This eventual recoupment of costs does nothing when an ESCO is forced to true-up its price against an artificially lowered default price. These are the issues the stakeholders are asked to comment in the newly opened COVID-19 Proceeding, and RESA believes that an adequate time should be given to resolve these issues before the ESCOs can reasonably determine how they would comply with the Reset II Order," RESA said

Case 15-M-0127 et al.

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