RESA: NY Staff Price Benchmark Proposal Would Focus on Making ESCOs "Jockey" Around Commodity-Only Reference Price, Contravening PSC's Stated Intent To Move To Value-Added Retail Market

The introduction of a reference benchmark price to which all mass market ESCO fixed rates would be subject create a market where ESCOs are forced to focus on, "jockeying around an administratively set benchmark," for a commodity-only product, rather than creating energy-related value-added products and services beyond the commodity, which has been the stated desire of the PSC, the Retail Energy Supply Association said in comments on the whitepaper

As previously reported, the price benchmark whitepaper proposes to establish a not-to-exceed 12-month reference price on a monthly basis for ESCO fixed products, six weeks in advance of the first month of the 12-month period for which the price cap would be in effect. ESCO prices exceeding the benchmark would invite PSC review.

In particular, ESCOs' pricing would be unbundled for purposes of complying with the benchmark, with ESCOs forced to separately value any non-commodity value-adding services and to separately list the price of the commodity

"The Staff Whitepaper proposes to create a formula for establishing a retail reference price for electricity based on commodity cost components and risks of supplying customer load. However, the way in which Staff proposes to do so undermines the stated goal of, as Staff quotes, '... the Commission's interest in 'an immediate transition away from a retail market focused on commodity only without price protection, to a market in which competitive ESCOs provide services of demonstrated value to consumers ...'' The attempt by Staff to bifurcate commodity related costs from energy related value added products and services highlights the misunderstanding of the complex ESCO pricing process and could stymie ESCO product innovation. If this was understood, for instance, Staff would not have proposed to have ESCOs separately disclose the additional cost attributed to the energy related value added product or service. Instead of focusing on new energy related value added products and services as separate from electricity commodity, the Commission should foster a market in which ESCOs compete and focus on supplying the electricity commodity, the price and the quantity, better than is done today, not by jockeying around an administratively set benchmark," RESA said

"ESCOs provide customers with price risk management services. ESCOs are not commercializing new technology and software related to value added products and services. Rather, ESCOs leverage them to better manage price risk exposure for customers, both price and quantity of electricity consumed. New technology and software provide a new tool for ESCOs to achieve that goal. For example, controllable thermostats or customer-sited solar power are on-peak blocks of energy that can be integrated into an ESCO's portfolio wide electricity hedging strategy for its customers that utilize such technology as well as for those that do not. In order for the market to evolve into one like the Commission envisions in which more ESCOs take a total energy management approach for their customers, a lighter regulatory 'touch' is required, far from the approach embodied in the Staff whitepaper," RESA said