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Retail Suppliers Seek Stay Of New York Broker Regulation Order

Seek Reconsideration Of Retroactive Applicability, Inclusion Of ESCO Marketing Vendors Under Broker Rules

July 24, 2023

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Copyright 2010-23
Reporting by Paul Ring •

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NRG Energy, Inc., and the NRG Retail Companies sought a stay and reconsideration of the New York PSC's June 23 order implementing the energy broker and consultant regulation statute (PSL §66-t)

See details on the PSC's order here

NRG moved to stay enforcement of the order until ninety (90) days after the Commission issues a determination on reconsideration

In the order, the Commission required all energy brokers and consultants to submit a registration package by August 31, 2023 to continue operating in New York State. ESCOs and DER suppliers must verify that any energy broker or consultant they are doing business with has submitted a registration package to the PSC package by August 31, 2023, the PSC ordered

"NRG moves for a stay of implementation of the entire Order due to the short compliance window remaining – roughly a month before the August 31st registration deadline – and the number of important, outstanding questions that have yet to be addressed by Staff or the Commission. Notably, Staff has still not scheduled the technical conference required by the Order. NRG and other ESCOs need to fully understand their new obligations to the Commission, their customers, and Energy Brokers and Energy Consultants with whom they have contracted. They also need appropriate time to ensure their systems can meet the newly ordered requirements. Until these questions are addressed and regulatory certainly obtained, ESCOs and any would-be Energy Brokers and Energy Consultants will be hesitant to enter into contracts, ultimately harming customers and impairing retail choice. Under the circumstances, a Stay of the Order is necessary for the stability of the retail electric and gas markets," NRG said

NRG noted, "While Staff was directed to convene the technical conference within the “two-plus months” compliance period, at the time of this writing, no notice has been issued to schedule the conference. Thus, there is precariously little time to address the compliance issues, which will have lasting effects on the retail market and cause unnecessary growing pains, for the covered entities attempting to navigate compliance without appropriate guidance, and for Staff, who will only have roughly three months to review hundreds of registration applications."

In a separately filed motion for rehearing, Family Energy, Inc. also sought a stay of the PSC's order pending resolution of its rehearing request

NRG sought clarification that the PSC's order and UBP amendments do not apply retroactively such that payments to Energy Brokers and Energy Consultants for customer contracts entered into prior to August 31, 2023 may continue regardless of whether the Energy Broker or Energy Consultant files or has their registration application approved by Staff.

NRG requested the Commission grant rehearing, "to meaningfully address the lack of statutory authority for the Order’s (1) broad application of third-party vendor compensation disclosure requirements and (2) impermissible requirement that an ESCO cease payments under a valid contract with an Energy Broker or Energy Consultant even where the Energy Broker and Energy Consultant was in compliance with PSL §66-t at the time that the customer contract for enrollment was executed."

With regards to retroactive applicability, NRG cited, "vague language in the Order suggesting that retroactive applicability is intended," as NRG said that the order stated that energy brokers and consultants may not accept compensation where a registration is denied, revoked or has lapsed, and quoting the order as also providing, "[t]his also applies to any contract with an unregistered broker or consultant that was entered into before August 31, 2023."

"The language of PSL § 66-t clearly prohibits an Energy Broker or Energy Consultant from accepting a fee for services covered by the statute if it has not already registered with the Commission. NRG does not object to the PSC requiring the inverse: ensuring ESCOs do not make payments to an unregistered entity. However, this language cannot and should not retroactively apply to payments under existing contracts entered into before August 31, 2023," NRG said

"Under the Commission’s implementation, PSL § 66-t would have retroactive effect as “it would impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed," NRG alleged

"ESCOs, including NRG, currently have existing contractual agreements with Energy Brokers and Energy Consultants requiring the payment of compensation to these entities. Because there was no obligation to register until August 31, 2023, nor even a process to do so, the Order should be clarified to confirm that payment obligations for contracts entered into prior to August 31, 2023 are not affected and may continue," NRG said

NRG also noted that, "Under the Order, an ESCO must cease paying an Energy Broker or Energy Consultant that has their registration denied or later loses its registration, either because it allows it to lapse or it is revoked. However, an ESCO’s contracts with Energy Brokers and Energy Consultants still obligate the ESCOs to pay them the fees the customers owed to them. Thus, an ESCO must choose to either violate the Order or breach their contract."

"[T]the Commission has no authority to impair or invalidate an ESCO’s contract with its vendors, nor does the language of PSL § 66-t provide or even imply such authority," NRG said

Regarding the PSC's order which, as reported in our June 23 story, held that, "Any third parties that market on behalf of ESCOs, including telemarketers, door-to-door marketers, kiosk marketers, and any other vendors, fall under PSL §66-t’s definition of an 'energy consultant,'" NRG alleged that this finding exceeds that broker statute. In concluding that third-party ESCO marketing representatives fall within the definition of "energy consultant", the order, requires, among other things, disclosure of compensation paid to ESCO marketing representatives

"NRG reiterates that it does not object to registration requirements (and in turn compensation disclosure) for third-party vendors, to the extent their independent activities render them an Energy Broker or Energy Consultant under the statute’s definitions. However, many third-party vendors, particularly ESCO marketing representatives, perform a variety of activities and have relationships with ESCOs that are different than the relationship between an ESCO and an Energy Broker or Energy Consultant. The disclosure of compensation for these incidental activities would be both impracticable and unworkable because the compensation is not attributable to any specific customer or contract," NRG said

"Third-party marketers should be treated similarly to in-house ESCO employees. NRG’s payment to third-party vendors to support NRG’s operations should not be considered Broker Compensation. The Order’s requirements that ESCOs disclose payments to their contracted marketers and other vendors is both arbitrary and capricious," NRG said

NRG noted that third-party ESCO marketing representatives and similar ESCO vendors must already conform their conduct to the requirements and guidelines of the UBP and UBP-DERS.

"Even assuming these third-party vendors are Energy Consultants as the Order concludes, the Broker Bill does not require that an ESCO disclose their compensation," NRG said, noting that PSL 66-t(4)(b) requires an ESCO to disclose only such compensation that is “collects ... on behalf of an energy broker or energy consultant.”

NRG said, "ESCOs do not collect the compensation paid to their third-party vendors. Their compensation is not tied to a specific product offering or rate. It also is not included in a customer’s rate. Rather, it is a cost of business to the ESCO, not charged to the customer or collected from the rate that a specific customer pays. Accordingly, as NRG does not collect the compensation paid to its third-party vendors, even if the vendor must register as an Energy Consultant and the compensation falls within the definition of Broker Compensation (which NRG disputes), there can be no obligation on an ESCO to disclose that compensation. The Order’s contrary directive is not supported by PSL 66-t’s plain language."

NRG further alleged that the PSC's decision that the broker regulations apply to ESCO marketing representatives and similar ESCO vendors violates SAPA because, "NRG and other stakeholders were not given adequate notice and were not afforded an opportunity for comments on several actions not previously proposed."

The order, "impermissibly expands to third-party vendors compensation disclosure requirements that are unrelated to brokering of customer contracts," NRG alleged

"The Staff Proposal does not even consider these requirements, nor is this discrete issue raised in the NOPR. Therefore, NRG, other stakeholders, and the public at large were not apprised of the possibility that the Commission would add these additional ESCO compliance obligations. Tellingly, no third-party vendors or other entities that would be captured under these additional obligations have participated in this proceeding; since such entities do not engage in broker conduct or other activities that would implicate them, these entities may be unaware of the proceeding in its entirety. The Order is not in conformance with SAPA requirements and must be reheard," NRG alleged

Case 23-M-0106 et. al.


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