New York PSC Denies Rehearing Of Order Directing ESCO To Re-Rate Fixed Price Customers Due To What PSC Ruled Was Impermissible Pass-Through Related To ICAP Tag Peak Hour Change

September 25, 2020

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Reporting by Paul Ring • ring@energychoicematters.com

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The New York PSC denied rehearing of its June decision which ordered Marathon Power LLC d/b/a Marathon Energy to re-rate fixed price customers who experienced an increased rate when Marathon changed rates as a result of a change in the peak hour used to calculate a customer's ICAP tag, as the PSC found that such a rate change did not qualify for treatment under a regulatory change clause, and therefore violated the Uniform Business Practices (UBP)

The PSC's June order had been first reported by EnergyChoiceMatters.com (more details here). As previously reported, the issue concerns a change in the peak hours ConEd uses to calculate a customer’s installed capacity (ICAP) tag. See this prior story for background

Marathon Energy issued the following statement concerning the rehearing order:

Marathon Energy has operated in New York since 2011 and proudly serves over 30,000 customers in the State, and has a long-standing, demonstrated commitment to complying with Public Service Law, and the Public Service Commission’s rules and regulations.

That being said, Marathon Energy vigorously disputes the conclusions in the Public Service Commission’s order, and continues to review the order to determine next steps.

On rehearing, as summarized by the PSC, Marathon had alleged that the Commission erred when it treated the terms of an ESCO contract dispute as the proper subject of a Commission enforcement proceeding, and the Company further argues that the Commission contravened its own precedent by determining rights pursuant to contract law. Marathon argues that, in any event, the Commission made an error of law in interpreting the fixed-price agreements as foreclosing Marathon from altering the rates in the circumstances at issue. Finally, Marathon argues that, even if the Commission correctly interpreted the terms of the fixed-price agreements, the Commission should have used this enforcement proceeding to, "allow Marathon to re-rate . . . customers . . . who benefited from the subject adjustments."

In its rehearing order, the PSC said, "The Commission rejects Marathon’s repeated assertion that the June 2020 Order is based on a Commission determination pursuant to New York common law contract principles. As the Commission clearly stated in the June 2020 Order, the consequences that the Commission imposed were based on exercises of the Commission’s jurisdiction in regard to its enabling statute (the PSL), its rules and regulations, and its prior orders. Specifically, Marathon violated its commitment to abide by the UBP and, more specifically, UBP §2.D.5.b’s requirement that an ESCO 'adhere to the policies and procedures described in its Sales Agreement.' The plain language of this UBP provision, as well as many others, makes clear that the terms of ESCO contracts, and an ESCO’s commitment to the Commission that it will abide by those contract terms, are the proper and necessary subjects of enforcement actions in which the Commission considers whether an ESCO should lose eligibility to do business in New York or face other consequences for consumer protection violations. The June 2020 Order found that, as a condition of continuing eligibility to do business in New York as an ESCO, Marathon was required to re-rate customers that it had overcharged in contravention of the plain terms of its fixed-rate sales agreements."

"Marathon is incorrect in arguing that an ESCO’s failure to abide by the commitments it makes in its customer agreements falls outside of the Commission’s enforcement authority," the PSC said

"Turning to Marathon’s argument that the Commission made an error in construing Marathon’s fixed-rate agreements, the Commission finds that Marathon’s arguments are a mixture of contentions that the Commission already rejected in the June 2020 Order and new arguments regarding the proper construction of the agreements that are unpersuasive for the reasons that the Commission has already set forth in the June 2020 Order. As the June 2020 Order amply explains, Marathon’s interpretation of its fixed-rate agreements is contrary to plain meaning of those agreements and inconsistent with UBP obligations," the PSC said

"[T]he Commission rejects Marathon’s argument that the Commission committed an error of law when it denied Marathon’s request that, if the Commission ordered Marathon to rerate customers the company had overcharged, the Commission would also issue an order permitting Marathon to retroactively bill those customers who were 'undercharged' due to Marathon’s rate alteration. The June 2020 Order considered Marathon’s affirmative request to issue an order, in an ESCO enforcement proceeding, to allow an ESCO to impose costs on customers who had never been provided an opportunity to be heard before the Commission. Setting aside the obvious procedural unfairness of Marathon’s request, the June 2020 Order correctly recognized that Marathon failed to cite any legal basis, such as a regulation or a procedure or process in a customer agreement, establishing that Marathon was legally entitled to backbill customers in circumstances such as these. Marathon does not remedy this lack of legal support for its request when, in the Petition, it claims that 'there is no prohibition in the Public Service Law on ESCO backbilling of non-residential customers' or when it generally offers that there are specific regulations governing public utility backbilling of customers. Accordingly, the Commission did not commit an error of law, as Marathon’s request for an order permitting it to backbill customers was both procedurally improper and substantively without merit," the PSC said [emphasis by PSC]

Under the order, Marathon Power LLC d/b/a Marathon Energy shall, within 60 days from the effective date of the order, re-rate all customers adversely impacted by Marathon’s upward adjustment of the rate for commodity services in those customers’ fixed rate contracts as a result of the increase in the customers’ installed capacity tags, consistent with the body of the order and the Order Imposing Consequences, issued June 12, 2020, in the proceeding.

Case 16-M-0434

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