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New York PSC: Green Gas ESCO Customers Paid 77% More Than Default Service Over Annual Period

Written Order Denying Green Gas Waivers Clarifies Treatment Of Existing Contracts; Obligations If Moving Customers To Compliant Product

July 15, 2022

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Copyright 2010-21
Reporting by Paul Ring •

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The New York PSC issued an order denying waivers to seven specific ESCOs for such suppliers to continue to provide green natural gas products to mass market customers without being subject to the otherwise applicable pricing limits, in which the PSC said that, for the period covering January 2021 until January 2022, customers provided with natural gas commodity bundled with a green gas ESCO product were charged approximately 77% more for natural gas service than they would have paid for the default utility product.

The PSC's denial of the waivers, including the rationale being based on price, had been first reported by on July 14, but the written order provides more details

Additionally, the written order confirms the process ESCOs must follow if they wish to retain their green gas product customers with a product compliant with the mass market price limits, and also addresses the treatment of customers on existing term contracts (noted further below)

The PSC in the order said that, "Significant changes have occurred since issuance of the January 2021 Order that are material to the Commission’s analysis of the value of further extending the limited waiver deadline. Specifically, the market price of natural gas has experienced significant increases and has reached unprecedented levels compared to recent years. At the Commission’s session held on October 7, 2021, Staff provided an informational presentation showing that heating bills were expected to increase for the winter of 2021-22 by 21%. However, the market price of natural gas for the winter of 2021-22 (November through March) actually increased by 82.5% over 2020-21 prices. While utilities have hedging practices that somewhat mitigate increased market prices of gas, there is no question that New Yorkers have been hit by unexpectedly high energy prices over past year. This issue was also highlighted at the Commission’s session held on March 16, 2022, where Staff found the “increase in natural gas commodity prices is due to various factors including higher domestic usage because of colder than normal weather in January and into the beginning of February, increased economic activity, and increased international demand for natural gas.”"

The PSC further said in the order that, "Based on information collected from the Petitioners, for the period covering January 2021 until January 2022, customers provided with natural gas commodity bundled with a “green gas” product were charged approximately 77% more for natural gas service than they would have paid for the default utility product. This premium price charge is on top of the already high natural gas prices being charged through the market. Indeed, it is hard to justify these price premiums on top of significantly higher gas prices as being just and reasonable. From this perspective, allowing ESCOs to continue charging customers a premium above the market price of natural gas balances heavily against extending the one-year waiver. The petitions neither address this issue nor provide any details regarding the clean energy benefits associated with the green gas products being offered to consumers."

The PSC further stated that it, "believes that any potential customer disruption associated with transitioning customers to a different ESCO product or to full utility service can be reasonably addressed."

"Based upon our evaluation, there are currently about 412,000 customers that receive one of the three authorized categories of gas services offered by the ESCOs. According to information obtained from the Petitioners, of this amount, only about 42,000 (or roughly 10%) of those ESCO gas customers receive gas supply bundled with a green gas product. This amounts to roughly 0.96% of the approximately 4.4 million gas customers in New York State," the PSC said in the order

"This shows both the availability and relative popularity of other products to which these minimal number of customers can be potentially transferred. Indeed, all mass-market customers served by ESCOs have been, and are still being, transferred to compliant products or transferred back to utility service as their contracts expire or come up for renewal. Requiring this small subset of mass-market customers to be transferred to a compliant product or returned to utility service, as is already occurring for the larger population of customers, is not expected to result in significant confusion," the PSC said in the order

As previously reported, the seven affected ESCOs, within 120 days, shall transfer any residential and small non-residential customers currently served on a “green gas” product pursuant to a waiver to either: (1) a product that complies with the Commission’s December 12, 2019 Order Adopting Changes to the Retail Access Energy Market and Establishing Further Process and the Commission’s January 25, 2021 Order Addressing ESCO Petitions Requesting Authorization to Provide Additional Products and Services [e.g. the price limits]; or (2) full utility service.

The PSC's order confirms that, as was the case for placing customers on new compliant products when the mass market price limits were adopted, ESCOs seeking to continue service to green gas customers under a compliant product must obtain affirmative customer consent from the customer prior to the product change.

Any affected customers that do not provide such consent within the 120-day period must be returned to full utility service by that time following the process established in Uniform Business Practices Section 5 for changes in service providers.

"Such transfers shall occur on a customers' regularly scheduled meter reading dates, provided that existing contracts will continue until their expiration," the PSC said

"With respect to customers on month-to-month contracts, the expiration of the contract is at the end of the current billing period," the PSC said

"In sum, the Commission finds the potential for customer disruption is likely to be minimal and is heavily outweighed by considerations of energy affordability. For these reasons and those specified above, the petitions are denied. As already noted, several ESCOs filed a petition last week seeking approval of certain “green gas” products. Given the increased gas commodity costs in existence today and the likelihood for such costs to persist into next winter, as well as the premium being charged by ESCOs for gas commodity bundled with the green gas product, the Commission does not see this petition as a sufficient reason to continue the waiver period. In the meantime, Staff and the ESCOs are encouraged to continue Phase II discussions with a focus on value-added energy related services that are consistent with New York’s clean and renewable energy goals, with some direct correlation to incentivizing non-fossil fuel resources for heat and hot water. In the meantime, the Petitioners will be required to comply with the requirements of the December 2019 Order regarding the provision of natural gas products to mass-market customers," the PSC said in the order

As previously reported, the issue of green gas products for the market, on a generic basis, remains pending before the PSC

The seven specific ESCOs whose waiver petitions were denied were: Alpha Gas & Electric, LLC, American Power & Gas LLC, Family Energy, Inc., Green Mountain Energy Company, Just Energy New York Corp., Kiwi Energy NY LLC, and Viridian Energy PA, LLC

Cases 12-M-0476, 15-M-0127, 98-M-1343

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