Shock: Retail Supplier Says Low Income Customers Should Be Excluded from Retail Choice

Low-income residential customers -- specifically those receiving HEAP and other forms of public assistance -- should be excluded from New York's retail energy choice programs, ESCO Great Eastern Energy said in comments to the New York PSC.

Great Eastern Energy's comments came in a New York PSC proceeding investigating the retail market, including low income participation and the continuation of non-recourse purchase of receivables (click here for prior story)

"In the case of low income residential consumers -- specifically those receiving HEAP and other forms of public assistance -- it is our position that this group be excluded from retail choice programs. Unfortunately, this market is most vulnerable to the predatory practices of unscrupulous ESCOs. While an alternative approach might be to create stricter regulations in order to protect low income residential customers, it may prove difficult to enforce," Great Eastern Energy said.

"We have yet to observe any tangible benefit to low income customers provided by ESCOs serving this market," Great Eastern Energy told the PSC.

While Great Eastern Energy is not in favor of extending choice to low-income customers, to the extent such customers participate in the choice program, Great Eastern Energy would support regulations that require proactively notifying low income or payment troubled residential customers of, "gross inequities regarding charges levied by ESCOs versus the utilities."

"Gross inequities could be defined by some % variation threshold," Great Eastern Energy suggested.

For non-low-income residential customers, Great Eastern Energy said that choice should continue, but suggested tighter regulation of ESCO practices.

In contrast, Great Eastern Energy said that due to the sophistication of small commercial customers, various additional protections being examined by the PSC should not be implemented for this customer class.

"Great Eastern agrees that there have been cases in the past wherein the customer is unwittingly paying commodity charges that were significantly higher than the LDC's. Unfortunately this has had the greatest impact on those who are most economically disadvantaged. The Commission may want to consider a three-tiered approach in managing customer protections in the commodity marketplace. In our opinion, customers on public assistance are the most vulnerable to predatory practices. It may be in everyone's best interest to preclude this group from participating in retail access programs. But rather, allow them to default to LDC service which is far more regulated then the deregulated market. Residential customers would fall into the next tier of customers. This group should not be precluded from the retail access market but should be given the tools described by the Commission to make a more informed decision regarding the purchase [of] their energy supplies. This group should not be denied the right to take advantage of value-added goods and services as well as pricing advantages that may only be available through an ESCO. The last tier, small to mid-size commercial customers[,] should be excluded from this proceeding. Unlike residential customers, commercial customers are in business to make a profit. They conduct business in the marketplace every day and make sophisticated decisions as to what goods and services best meet their interests and needs. Energy is no different from any other product and the small to mid-size commercial customer must shop for the best price and value in order to be successful. This is the basis of free enterprise," Great Eastern Energy said.

Additionally, Great Eastern Energy said that the ESCO Referral Programs should be discontinued. "At best they are underutilized, not cost effective and of insignificant value to customers. At worst, they are tantamount to a 'bait and switch' program. Without an affirmative acknowledgement by a consumer that they fully understand and accept the new pricing when the referral program period ends, the program lends itself to predatory pricing. This is not to say that all ESCOs act in this manner, however it does open the door to such practices," Great Eastern Energy said.

Case 12-M-0476