ESCO Raises Questions Concerning If New York DPS Staff's Position Is That Audio Recordings May Not Be Relied Upon For Enrollments -- EnergyChoiceMatters.com

ESCO Raises Questions Concerning If New York DPS Staff's Position Is That Audio Recordings May Not Be Relied Upon For Enrollments

PSC Issues Further Show Cause Order To ESCO

September 15, 2023

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Reporting by Paul Ring • ring@energychoicematters.com

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The New York PSC directed Source Power Company Services, LLC [sic] and ICON Energy, LLC d/b/a Source Power Company (collectively, "Source") to, within 14 days, show cause why the Commission should not revoke its eligibility to operate as an Energy Service Company in the State of New York or impose other consequences for alleged violations detailed in a prior show cause order

See background on the prior show cause order here

As previously reported, 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

While most of the alleged violations related to billing community distributed generation (details here), most notable is that, during the proceeding, Source has questioned whether Department of Public Service Staff has taken a position that audio recordings are not a permissible means of executing a contract (it is unclear if that position, if true, is for ESCO contracts, CDG contracts; Source notably offered a bundled/"hybrid" supply-CDG plan). Staff's position is not clear from Staff's limited public filings in the proceeding nor from the PSC's orders to show cause, and alleged slamming violations which gave rise to Source's question have not been specifically detailed publicly.

Source made several filings in response to a November 2022 PSC show cause order but, until Sept. 13, 2023, Source had not filed a formal response to the order to show cause. The prior filings from Source consisted of extension requests which included Source's discussion of confusion with respect to certain matters, including slamming allegations raised by Department of Public Service Staff which were noted in the November 2022 show cause order, but not as slamming allegations themselves, but rather as an example of an alleged non-responsiveness of Source to DPS Staff, as Staff alleged that Staff had not received information to verify the enrollments. Source has said that it has provided enrollment documentation responsive to Staff and is confused as to the nature of the alleged slamming allegations raised by Staff.

It was unclear if the slamming allegations from DPS Staff related to ESCO service, or community distributed generation (CDG) service. As noted in the background linked above, Source was offering a bundled retail supply-CDG product. Source's order to show cause response, discussed further below, heavily references the UBP-DERS, for CDG service, but it remains unclear if Staff's slamming allegations are limited to CDG service

Notably, Source in a May 17 filing alleged, "To date, Staff has not identified the specific customers enrollment rules that ICON allegedly violated, making it impossible for ICON to fully respond to the Order and necessitating the previous extension requests. Only recently has ICON become aware, through a third party and not through any notice or communication from Staff, that Staff appears to have taken the position that audio recordings are not permissible for customer enrollment. Source now believes that this may be the issue referred to in the Order, but since this matter was only brought to ICON’s attention by a third-party, is still unable to fully respond to the Order without final confirmation."

DPS Staff said in an August 2023 response that, "Source Power has intimated that it does not know what potential flaws exist with respect to its enrollment of customers. Given that it operates in New York, Source Power should be familiar with the parameters for appropriately enrolling customers, and it should be at the ready to discuss how it has complied with those parameters."

DPS Staff included the following footnote in its August 2023 filing: "UBP Section 5, Attachment 2(E), states, '[a]n ESCO shall retain documentation of a customer’s agreement in a retrievable format for two years from the effective date of the customer’s acceptance and/or authorization or for the length of the sales agreement whichever is longer. In the event of any dispute involving an electronic agreement or authorization, the ESCO shall provide a copy of the customer’s acceptance of the sales agreement and/or authorization for release of information or provide on-line access to the acceptance and/or authorization within five calendar days after a request from the Department.' DPS Staff initially requested, for each impacted customer, copies of the signed contract and Customer Disclosure Statement in an Interrogatory Request, dated March 10, 2022."

DPS Staff did not further elaborate on its request for a "signed contract" given that Source had stated that it had executed the contracts via audio recordings, which Source says complies with the UBPs

In its September 13 formal response to the November 2022 show cause order, Source stated, "Source has provided documentation to demonstrate proper enrollment for its customers. Initially, when the Order was issued in November 2022, there was apparently some discrepancy with DPS Staff access to such customer enrollment documentation, but DPS Staff later confirmed that it had access to the more than 1,000 previously submitted documents. As evidenced by the recordings and customer contracts provided to DPS Staff, Source obtained customers’ consent for enrollment, consistent with Department of Public Service Staff regulations."

In its September 13 formal response to the November 2022 show cause order, Source alleged, "However, in the months preceding issuance of the Order when Source was seeking clarity on whether the slamming allegations were moot given DPS Staff access to the enrollment documentation, DPS Staff still asserted that the customer enrollments were invalid and that Source had slammed customers but would not further elaborate on the specific underlying issues with the enrollments. Since that time, Source has not gotten any further information from Staff on the slamming allegations contained in the Order."

Source alleged, "Upon information and belief, DPS Staff has taken a position that 'unsigned audio recordings' are not an acceptable form of customer enrollment, and that customer signatures are required for valid enrollment. This issue has never directly been raised with or communicated to Source, but rather came to Source’s attention recently, after one of its partners took issue with acceptance of audio recordings and contacted DPS Staff to discuss the matter further. Per the terms of the Uniform Business Practices for Distributed Energy Resources ('UBP-DERS'), audio recordings are a valid method of enrollment for customer contracts. Specifically, the UBP-DERS states that '[a] DER supplier shall retain, for a minimum of two years or for the length of the sales agreement, whichever is longer, verifiable proof, including but not limited to a recording or signed writing, of authorization for each customer. Verification records shall be provided by a DER supplier, upon request of the Department, within five calendar days after a request is made. Locations for storage of the records shall be at the discretion of the DER supplier.' This language matches the language in the Commission order, as referenced below, for proper authorization to enroll a customer. While a sales agreement with the customer is required, the UBP-DERS allows that agreement to be entered into via several methods, including recording. Indeed, the definition of 'Sales Agreement' in the UBP-DERS states that the agreement may be 'a written contract signed by the customer or a statement supporting a customer’s verifiable verbal or electronic authorization to enter into an agreement with the DER supplier for the products and services specified.' This is further supported by the language in the Commission order adopting the UBP-DERS where the Commission made clear that customers could enter into contracts through verbal acceptance. In particular, the Order states that '[a]ll DER suppliers must obtain a customer’s consent to a sales agreement, which may be a written contract signed by the customer or a customer’s verbal or electronic authorization to enter into an agreement with the DER supplier for the products and services specified, prior to enrolling a customer in a DSP, utility, NYSERDA, Commission, or Department-run or authorized program or billing a customer. This requirement is not intended to create an additional step for DER suppliers; the Commission expects that DER suppliers already obtain consent before providing service or billing a customer, whether through that customer signing a contract, swiping his or her credit card, clicking a purchase button online, or verbally agreeing to a service.' The UBP-DERS also include an entire section on required conduct for enrolling customers via telephone, UBP-DERS, Section 3B (D)(3), which would be completely invalidated if telemarketing enrollments were not permissible."

"To the extent that the aforementioned reasoning is not the basis for DPS Staff’s allegation that Source slammed customers, Source again respectfully requests further information as to why DPS Staff views the customer enrollments as invalid so it may appropriately respond to this allegation," Source said

It was unclear if the PSC's September 15 written order directing a response, voted on at the Sept. 14 PSC public session, was informed by the Sept. 13 response from Source, or if September 15 written order did not consider the Sept. 13 response due to timing issues

The PSC's September 15 order stated, "The Commission has evaluated correspondence and filings in this proceeding’s record, and hereby directs Source Power to submit a response to the allegations contained in the November 2022 OTSC and show cause, within 14 days, why the Commission should not revoke the company’s eligibility or impose other consequences consistent with the Uniform Business Practices or Commission authority. No further extensions will be entertained or granted."

As to the alleged violations related to CDG billing and credits, Source said in its Sept. 13 response that it had several discussions with DPS Staff concerning the nature of its bundled product and Source said that it believed that, in how it initially billed the product, it was acting in compliance with Department of Public Service rules and regulations and the Billing Services Agreement with the Utility

Source stated, "When Source sought approval to provide a hybrid CDG product to customers, Source thought it had clearly communicated its intent to include CDG costs in ESCO bill and that DPS Staff had approved Source to do so. Only later did it appear that there may have been a misunderstanding or miscommunication and that DPS Staff was not granting Source authority to include CDG costs on the ESCO bill. As soon as this was communicated to Source by DPS Staff and the Utility, Source immediately stopped billing customers for CDG costs in the ESCO bill and worked with the Utility for consolidated billing approvals for its CDG projects. An unfortunate yet unintended consequence of this switch, however, resulted in customers receiving more than their apportioned share of the CDG project, creating significant overcrediting to those customers’ accounts. Source regrets that customers were over-credited and that its attempts to resolve the matter resulted in more issues, customer complaints, and confusion. Ultimately, however, Source forfeited more than $1.2 million, was forced to return all of its customers to the Utility, and is effectively no longer operating in New York – substantial penalties for a company that, at all times, was acting in good faith pursuant to the rules and regulations as Source understood them based on its request for approval to provide customers with a hybrid product."

Source stated, "Source is the only party that experienced harm here. While Source recognizes that communications related to the over-crediting of customer accounts could have been handled better so as to minimize or avoid customer complaints and confusion, Source voluntarily forfeited any right to the over-crediting amounts (roughly worth $1.2 million), ensured that all developers were made whole for any potential losses and assumed the full monetary loss for the billing issues. As a result, customers received in excess of $1 million in additional credits for which they were not otherwise entitled."

Source stated, "the allegations in the Order all stem from one nexus – Source’s understanding that DPS Staff had approved a hybrid product that allowed Source to charge customers for CDG products on their supply bill. The over-crediting issues and default on NYISO obligations are all related to that same issue and are not a repeated pattern of non-compliance by the company. Rather, at every instance, Source worked with the Utility, DPS Staff, and impacted customers to address and resolve their issues and concerns, despite Source’s belief that it was acting in accordance with relevant rules and regulations based on its prior approval for the hybrid product. Therefore, since all of the allegations of non-compliance arise from one singular issue, and Source has no previous history of non-compliance, the Commission should not revoke Source’s eligibility or impose additional consequences, and should instead allow Source to voluntarily withdraw from the market."

Source stated, "In sum, although Source acknowledges that there were billing issues that regrettably led to customer confusion and complaints (which admittedly could have been better managed), Source was ultimately the only party harmed by the billing errors. Customers received approximately $1.2 million worth of excess bill credits, which Source previously voluntarily forfeited, meaning customers actually received greater benefits than they were entitled. 11 These extra benefits came at Source’s expense since Source made the project developer whole, causing Source to suffer financial distress that ultimately led to the company ceasing operations in the summer of 2022."

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 2022, returning its electric customers at such time to default service.

Source said in its Sept. 13 response that, "Source is currently only maintaining eligibility to ensure any remaining customer or company issues are resolved, but plans to voluntarily withdraw its eligibility to operate in the State."

Given the considerations discussed above, Source stated that, "revoking Source’s ability to operate (which it plans to forfeit voluntarily) or imposing any additional penalties would be excessively punitive in this circumstance."

Case 22-M-0536

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