New York Adopts New Broker Registration, Compensation Disclosure, Surety Requirements; Sets Compliance Deadline

Order Described As "Clawing-Back" From Staff Proposal

June 22, 2023

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Reporting by Paul Ring • ring@energychoicematters.com

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The New York State Public Service Commission today approved an order to implement New York's recently passed law which imposes new regulations on brokers and consultants, including a registration requirement, financial surety requirements, and requirements concerning compensation disclosure

A written order was not immediately available. The PSC issued a press release concerning the order, while Commissioner Diane Burman discussed certain aspects of the order during today's PSC session

As described in a PSC press release, "The new regulations establish a registration process for energy brokers and energy consultants that requires an annual registration package consisting of a registration form, a $500 registration fee, and a demonstration of financial accountability."

"In addition, the new rules require disclosure of compensation by brokers and establish enforcement procedures," the PSC said in the release

Brokers and consultants will be given until August 31, 2023, to become fully registered with the Commission, the PSC said in the release

The PSC said in the release that the registration form for brokers and consultants requires:

• Contact information for the company and identification of any affiliates of the applicant conducting energy-related business;

• Identification of any corporate entity with an ownership interest of 10 percent or more in the applicant and information on the methods by which the applicant intends to market energy products and services;

• Identification of other states in which the applicant operates and identification of any criminal or regulatory sanctions from any jurisdiction imposed against the applicant, or any senior officer of the applicant;

• Identification of any pending regulatory actions or investigations from any jurisdiction involving the applicant, identification of any acquisitions, mergers, dissolutions, or bankruptcy involving the applicant in the previous 36 months; and a list and description of any security breaches associated with customer information.

The PSC said in the release that the new requirements also require compensation disclosure to customers, "so customers will be aware of how and why the broker and consultant are being paid, and whether the payments could misalign the interests of consumers and the market."

"The law also prohibits rebates from the broker/consultant to the ratepayer or any representative of the ratepayer, since such rebates could tend to obscure the actual price of clean energy products," the PSC said in the release

"If there is customer harm, the Commission can order the broker/consultant to provide refunds to customers. If the broker/consultant is unwilling or unable to pay, then the Commission can provide refunds to customers by drawing upon a letter of credit the brokers/consultants will have to provide as financial accountability," the PSC said in the release

"The modifications to the Uniform Business Practices (UBP) rules and UBP-distributed energy resources also require brokers and consultants to adhere to certain standards for marketing and responding to customer inquiries and requires them to take certain steps to protect customer data," the PSC said in the release

The PSC said in the release that, "Public Service Law §66-t defines an energy broker as 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."

The PSC said in the release that, "The term energy consultant is similarly inclusively defined to mean 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 energy service companies."

Commissioner Burman said during today's session that the order attempts to "claw-back" from a Staff proposal, specifically with regards to entities covered under the regulations (some stakeholders have argued that Staff's proposal had taken an expansive interpretation of the statutory definitions of broker and consultant)

See background on the Staff proposal here

Burman said that the order recognizes that certain changes will be needed going forward.

Burman indicated that the order would establish a stakeholder process and technical conference

Burman questioned why the PSC was implementing the registration process immediately when the order recognizes there is confusion regarding implementation and that changes will be needed going forward, with Burman citing the approach as a "disconnect".

Burman indicated that attorneys who advise customers on energy contract provisions won't be included in the definitions of those entities required to be registered. Burman also indicated that CCA administrators also won't be included in the definitions of those entities required to be registered, with Burman noting CCA administrators remain subject to various other provisions applicable to CCAs

Burman said that the registration won't resolve the original concerns which ostensibly led to the registration legislation, which were building management companies cutting energy deals for their benefit rather than the building owners

Burman said that the state should want good brokers and consultants in the marketplace to help customers get the best rate and to keep marketers honest. Broker-consultants also offer energy audits and similar services which align with the state's energy goals, Burman said

Burman also said that the registration process would tie up Staff resources better allocated to other pressing policy matters

Case 23-M-0106

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