New York Bill Would Require Registration of Broker/Consultants; Disclosure Of Broker Compensation

Would Require Brokers To Meet $100,000 Financial Security, Prohibit Certain Rebates/Inducements

January 26, 2021

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Reporting by Paul Ring • ring@energychoicematters.com

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A bill, A03166, has been introduced into the New York State Assembly that would require energy brokers and consultants to be registered with the New York PSC, and which would require the disclosure, to customers, of the amount of compensation to brokers

A03166 would provide that no person, firm, association or corporation shall act as an energy broker or energy consultant without first registering with the commission.

Furthermore, no person shall accept any commission, service fee, brokerage or other valuable consideration for selling, soliciting or negotiating an energy contract in this state if that person is required to be registered under this section and is not so registered

Under A03166, "energy broker" means, "an entity that assumes the contractual and legal responsibility for the sale of electric supply service, transmission or other services to end-use retail customers, but does not take title to any of the electricity sold, or an entity that assumes the contractual and legal obligation to provide for the sale of natural gas supply service, transportation or other services to end-use retail customers, but does not take title to any of the natural gas sold."

Under A03166, "energy consultant" means any person, firm, association or corporation who acts as broker in soliciting, negotiating or advising any electric or natural gas contract, or acts as an agent in accepting any electric or natural gas contract on behalf of an ESCO.

The bill requires that, as part of the registration process with the PSC, energy brokers obtain a $100,000 bond

Specifically, A03166 provides that the registration process provide that such, "(i) energy broker or energy consultant demonstrates financial accountability as evidenced by a bond or other method of financial accountability in an amount not less than one hundred thousand dollars; and (ii) energy consultant demonstrates financial accountability as evidenced by a bond or other method of financial accountability in an amount not less than fifty thousand dollars."

Each registered energy broker or energy consultant shall annually pay the PSC a $500 registration fee.

A03166 requires the disclosure of the amount of compensation received by brokers and consultants

"Energy brokers and energy consultants shall be required to disclose their form and amount of compensation to customers via a conspicuous statement on any such contract or agreement between the energy agent, energy consultant, energy broker or energy intermediary and its customer," the bill provides

Furthermore, if an ESCO collects broker compensation on behalf of an energy broker or energy consultant, such broker compensation shall be added as a provision to the customer disclosure label and shall reflect the amount and method of broker compensation, the bill provides. "Broker compensation" means any payment made to an energy broker or energy consultant for the purposes of securing or procuring of energy for the end-use customer, or advising on the securing or procuring of energy for the end-use consumer

The bill would also prohibit certain rebates and inducements as follows

"Rebates prohibited. (a) No energy broker, energy consultant or any other person acting for or on behalf of the energy broker or energy consultant shall offer or make, directly or indirectly, any rebate of any portion of the fee, premium or charge made, or pay or give to any applicant, or to any person, firm, or corporation acting as agent, representative, attorney, or employee of the energy rate payer or any interest therein, either directly or indirectly, any commission, any part of its fees or charges, or any other consideration or valuable thing, as an inducement for, or as compensation for, any energy supply or energy-related business, nor shall any applicant, or any person, firm, or corporation acting as agent, representative, attorney, or employee of the energy rate payer or of the prospective energy rate payer or anyone having any interest in the real property knowingly receive, directly or indirectly, any such rebate or other consideration or valuable thing," the bill provides

"For the purposes of this section, 'an inducement for, or as compensation for, any energy supply business" shall mean a benefit given with the intention to compensate or offer compensation, directly or indirectly, for any past or present placement for a particular piece of energy supply or energy-related business to any applicant, or person, firm, or corporation acting as agent, representative, attorney, or employee of the energy rate payer, lessee, mortgagee or the prospective energy ratepayer, or any interest therein. Nothing contained in subdivision one of this section to the contrary shall prohibit any energy supplier corporation, energy broker, or energy consultant, or any other person acting for or on behalf of the energy service company, energy broker or energy consultant from undertaking any usual and customary marketing activity aimed at acquainting present and prospective customers with the advantages of using a particular energy supplier, energy broker, or energy consultant that are not intended for the purpose of a reward for the future placement of, or the past placement of, a particular piece of energy supply business," the bill provides

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