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New York PSC Issues Show Cause Order To ESCO Over Billing Of CDG Charges, Allocation Of Credits

November 18, 2022

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Copyright 2010-21
Reporting by Paul Ring •

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The New York PSC issued a show cause order to Source Power Company Services, LLC and ICON Energy, LLC d/b/a Source Power Company (collectively Source Power) directing Source to show cause why its eligibility to act as an ESCO and as a DER [Distributed Energy Resource] Provider in New York State should not be revoked for alleged violations of the Commission’s Uniform Business Practices and Uniform Business Practices for DER Suppliers (UBP & UBP-DERS, respectively), or why other consequences should not be imposed.

The PSC alleged that Source Power has:

(1) violated the Public Service Commission’s Order Establishing a Community Distributed Generation Program and Making Other Findings by over-allocating community distributed generation (CDG) credits to customer accounts;

2) violated the New York Public Service Commission’s Uniform Business Practices (UBP) by being nonresponsive to Staff’s request for customer enrollment documentation; and

(3) failed to properly bill and credit CDG customer accounts for multiple projects under the rules set forth in the Order Regarding Consolidated Billing for Community Distributed Generation

In brief, the PSC alleged that, among other things, Source Power attempted to collect charges relating to a CDG subscription through EDI on the supply side of the customer’s utility bill, which the PSC said is not permissible

The PSC noted that a July 29, 2022 letter from Department of Public Service Staff also directed Source Power to return affected customers to distribution utility service and cancel all CDG adjustment charges that Source Power was attempting to collect through the customers’ utility bills or through direct billing.

As previously reported, the New York Independent System Operator had terminated Icon Energy, LLC's ability to participate in the NYISO-Administered Markets in June, returning its electric customers at such time to default service. Icon cured the default shortly thereafter

Discussing the background of the issues giving rise to the alleged violations, the PSC said, "as a DER provider, Source Power presented Staff with a new offering for review – a bundled guaranteed savings and a CDG sales contract, along with an individual disclosure form for each respective customer."

"After meeting with Source Power in August 2021 to discuss how the company’s product would work, Staff granted product eligibility as an ESCO guaranteed savings product with the understanding that the ESCO and DER products are presented to the customer as a combined offering. Under these expectations and conditions, the customer is guaranteed to net a savings in comparison to the utility default rate once the Source Power supply rate and the CDG credits were applied to the customer’s bill. The CDG net credit benefit to the customer was sufficient to satisfy the requirements of an ESCO guaranteed savings product pursuant to the December 2019 Reset Order. Staff provided final eligibility letters stating compliance with the UBPs for Source Power on August 27, 2021," the PSC said

The PSC said that, "A CDG member/utility customer buys into a CDG project and pays a subscription fee to the CDG Provider. The CDG member then receives a credit for the generation facility's excess output (CDG Credit) that is proportionally distributed to all of the members of the project, based off their historic usage. When the CDG program began, there was only a dual billing model with New York State Electric & Gas Corporation (NYSEG) and Rochester Gas and Electric Corporation (RG&E). The full value of the CDG credit was applied to the customers’ utility bills and the CDG Providers directly billed their members for the subscription fees at 90% of the CDG credit they received, resulting in the customer realizing a net 10% CDG benefit."

The PSC said that, "In its December 12, 2019 Order Regarding Consolidated Billing for Community Distributed Generation the Commission created a net crediting model for all utilities in New York to simplify CDG billing. Under the net crediting model, the net of the subscription fee and CDG Credit is billed on a separate line item on customers’ utility bills. The CDG Provider, once enrolled in the program, no longer issues bills for subscription fees. NYSEG and RG&E fully implemented the net crediting program, which went live on April 21, 2021. Source Power, however, did not successfully complete a Net Crediting Application with NYSEG and RG&E for its five CDG projects until September 30, 2021, and October 10, 2021, respectively."

The PSC noted that, "The Net Crediting Order allows for CDG projects to be billed on the utility bill. There are no other approved billing methods for consolidated billing of CDG products. Billing by ESCOs for CDG allocations has remained independent from commodity service charges in order to protect CDG customers from utility termination, collections for CDG portions of the bill, and ESCO supply side charges."

The PSC alleged that, in February 2022, Staff became aware of a billing dispute among NYSEG, RG&E, and Source Power. "NYSEG and RG&E claimed that Source Power was erroneously sending CDG charges via EDI to be placed as an adjustment to the ESCO supply portion of the bill. The adjustment charges were large and did not include a description for customers. Following the billing dispute, Staff began to receive complaints from municipalities and elected officials on behalf of affected customers that received large charges on their utility bills without explanation," the PSC alleged

"Between February 3, 2022, and February 23, 2022, the DPS call center opened 13 customer complaints containing consistent reports of large charges appearing in the supply section of customers bill. These increased charges ranged in amounts up to $1,300 with no itemization or explanation," the PSC alleged

The PSC alleged that, "In response to the customers’ complaints, NYSEG and RG&E investigated and determined that Source Power attempted to recover CDG charges through an adjustment to the ESCO supply portion of the bill. In response to the billing error, both NYSEG and RG&E cancelled impacted customer invoices and reversed both the commodity and the adjustment charges that had been inappropriately submitted by Source Power on the ESCO supply portion of the consolidated utility bill. NYSEG and RG&E notified Source Power of this through a Notice of Breach and Demand for Cure on February 11, 2022, and instructed Source Power to resubmit supply commodity charges without adjustments."

The PSC alleged that, "On March 4, 2022, Staff convened a meeting with Source Power, in which Source Power stated that the charges in question stemmed from an error in allocating CDG credits to customers’ bills. From approximately April 2021 through February 2022, Source Power applied 100% of the credit value to customer’s bills without deducting the 90% subscription fee, creating a surplus of financial credits accruing to customer accounts. Source Power was not approved by NYSEG and RG&E to participate in utility net crediting for the period in question; Source Power had the sole responsibility to independently bill their customers for the 90% subscription fee for CDG services provided prior to completing its Net Crediting Applications with NYSEG and RG&E."

The PSC alleged that, "Instead of independently billing, Source Power attempted to improperly collect the subscription fees through the POR program on the ESCO supply side of the bill - charges which are solely related to the CDG program. As described above, the CDG adjustments applied were for projects and time periods that both NYSEG and RG&E claim were prior to Source Power participating in the Net Crediting program, and therefore should only be recouped by Source Power directly billing its customers, not by being charged on the utility bill. Source Power disagreed with this assertion and claimed that with the approval of the combined CDG/ESCO product, Source Power could bill the CDG charges the same as it would ESCO supply charges. Source Power claims it has never attempted to collect the CDG charges by directly billing customers."

The PSC alleged that, after reviewing the company’s response to DPS Staff inquiries, "Staff determined that customers were not only receiving 100% of the credit value but Source Power was also over-allocating CDG credits beyond each customer’s usage in multiple projects."

The PSC said that, "The CDG Framework Order states, '[m]embers must take a percentage that amounts to at least a minimum of 1,000 kWh annually and cannot take a percentage that is more than its historic average annual consumption.'"

The PSC alleged that, "Staff found that customers were being allocated CDG credits at levels well beyond their consumption for the months in question in 2021."

The PSC alleged that, "Staff found that not only were customers receiving 100% of the credit value, but the credit value itself was set beyond what is allowed in Commission rules."

The PSC alleged that, "Further, as part of its review Staff sought proof of enrollment, including express consent, for all impacted customers within the Information Requests and has yet to be provided with those documents."

The PSC alleged that, "Staff requested this information within the IR to Source Power on March 10, 2022. Staff also repeatedly asked for the documentation during phone calls on April 13, 2022, and April 27, 2022. Source Power affirmatively represented on multiple occasions to Staff that the information was forthcoming, but the company has yet to supply even one verified customer enrollment. The failure to retain these documents and provide them in a timely manner violates the UBP."

The PSC alleged that, "Source Power’s attempt to collect charges relating to a CDG subscription through EDI on the supply side of the customer’s utility bill is not appropriate or permissible. By including these charges with the charges for electricity supply, it not only affects transparency in allowing customers to accurately determine what they paid for actual supply versus their CDG subscription, it was comingled with the charges for electric commodity, which if unpaid can trigger collection action and ultimately lead to termination of service."

Case 22-M-0536


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