NEM: "Forcible" De-Enrollment of Low-Income NY Customers From ESCO Service Deprives Customers of Savings, Value-Add Products; Subjects Customers To Utilities' "Monopoly Whims"

The "forcible de-enrollment" of New York low-income customers from ESCO service in New York, as ordered by the New York PSC (with such order subject to a temporary court injunction), will deprive low-income customers of savings available versus utility supply rates, compels low-income customers, "to be subject to the monopoly whims of the local utilities just because of those residents’ economic status," the National Energy Marketers Association said in comments to the PSC

NEM's comments were in response to the most recent SAPA notice to re-adopt the moratorium.

"The Moratorium Orders threaten to cause immediate and irreparable harm to hundreds of New York ESCOs and hundreds of thousands of New York low-income customers, as the forcible de-enrollment of hundreds of thousands of New York residents cannot be undone," NEM said

"NEM respectfully requests that the Commission suspend implementation of the Orders. NEM further requests that the Commission implement a process by which the data and assumptions upon which the Orders are based can be analyzed, tested, and discussed by interested parties – including by collecting reliable data and providing interested parties (including NEM and ESCOs) with an opportunity to challenge and understand the data on which the Commission purports to rely without proper testing. NEM disputes the predicate assumptions underlying the Orders, including that ESCOs 'overcharge'; that ESCOs do not offer value-added products that benefit low-income customers; that the Commission does not have available to it sufficient mechanisms for protecting customers against UBP abuses by bad actors; and that the Commission has performed sufficient meaningful analyses of data to determine that low-income customers are best served by depriving them of the ability to choose their energy providers," NEM said

NEM challenged the PSC's rationale that low-income customers will necessarily be better off under utility supply pricing

"The Orders obviously assume that low-income customers will be better off if they are subject to the monopoly pricing of local utilities based on the false premise that local utilities charge market rates. They do not. There is little or no correlation between what the local utility charges and market rates. Moreover, there is virtually no clarity or transparency into the local utility’s actual cost of the electric and gas commodities they purchase, as the local utility bury part of their costs in a host of line items that appear on customer bills, including in the delivery portion of those bills, for which there is no itemization or explanation," NEM said

"Low-income consumers, for example, will not be able to enter into long-term fixed-rate contracts for their electricity or gas supply needs because only ESCOs can offer consumers those products. Utilities cannot offer those products and services. Fixed-rate contracts can provide consumers dramatic savings as compared with those of local utilities," NEM said

NEM further illustrated that, "As of September 24, 2016, for example, a customer in Suffern, New York (zip code 10901), could have entered into a 12-month fixed-rate contract with an ESCO for as low as 7¢ per kilowatt hour. See www.newyorkpowertochoose.com."

"That same website also showed that the variable rate charged by the local utility (Orange and Rockland Utilities, Inc. ('O&R')) for the prior 12-month period ranged between 6.19¢ to 9.06¢ per kilowatt hour. That same customer also has the option of entering into a 36-month fixed-rate contract for 7.8¢ per kilowatt hour. The variable rate charged by O&R for the prior 36-month period ranged from 6.2¢ (April 2016) to 15.9¢ (March 2014) per kilowatt hour. In short, customers who contract with ESCOs for a fixed rate can save a substantial amount of money, avoid fluctuation in their energy supply cost, and increase certainty and predictability in their budgets," NEM said

Citing equal protection concerns, NEM said, "there is no legitimate policy basis to implement the moratorium, compelling low-income customers to be subject to the monopoly whims of the local utilities just because of those residents’ economic status. The moratorium is based on fatally flawed and unsupportable assumptions that low-income consumers will be better off as utility customers, that ESCOs somehow took advantage of all low-income consumers, and that low-income consumers are incapable of deciding for themselves which products or services are most advantageous. Treating ESCOs differently than local utilities in these circumstances does not further the purported policy justification for the Orders. The Orders thus fail because they will lead to preferential treatment for the utilities and undermine the Orders’ stated purpose."

NEM also faulted the "black box" utility data on aggregate ESCO bills, versus shadow-billed default service costs, which purports to indicate that ESCOs are "overcharging" customers. See the utility data on ESCO charges here

"The Utility-Provided Data is essentially a black box. On its face, the spreadsheets raise more questions than they answer, and they include thousands of summary figures that the ESCOs’ competitors (the local utilities) purport to have calculated – without any explanation for the methodology used to arrive at those figures. Remarkably, the PSC appears to be relying on the utilities’ account of what ESCOs are charging their customers, rather than on information provided by the ESCOs themselves," NEM said

Among other failings, NEM cited faults of utility data as including:

• The data also does not segregate the multiple product offerings that ESCOs offer, nor does it indicate what efforts were undertaken to do so, or what analysis the PSC or the utilities undertook to determine how failure to disaggregate such product offerings would affect the rate-comparison exercise and resulting figures.

• The data does not indicate how, if at all, the utility-provided comparisons account for adjustments made to past-period bills, and the extent to which there are deferred costs not included in the line-item prices for utilities.

NEM further said that the utility data lack any explanation for the methodology used to arrive at the figures, and lack raw data which could be used to verify the calculations

NEM also alleged, "The metadata on the spreadsheets reflects that they were modified by a Commission staff employee after they were created."

"In sum, the Commission appears to have predicated its industry-changing Orders on ambiguous and manipulated data provided by the ESCOs’ competitors -- the local utilities -- and now seeks to preclude the ESCOs from even analyzing or challenging that supposedly reliable data. It is in the public interest that interested parties be afforded a meaningful opportunity to understand, analyze, and address the data on which the Commission is relying in depriving hundreds of thousands of consumers of choice," NEM alleged

"As a threshold matter, meaningful utility delivery rate unbundling is needed for the Commission, ESCOs, and consumers to understand and properly compare the prices at issue – so as to avoid using artificially low utility default rates as a baseline for discussion. This has been an oft-repeated recommendation by NEM in this and other proceedings. The failure to promote greater transparency and comparability in utility rates has been the actual source of consumer harm over the years because it has perpetuated consumer misunderstanding about the relative value of utility 'plain vanilla' service relative to competitive ESCO product and service offerings," NEM said

NEM cited value-added products available to low-income customers in New York exclusively from ESCOs as including, "rate stability from fixed rate contracts; the ability to better control energy usage through energy efficiency and demand response products; achievement of environmental goals through green energy products; providing home heating equipment and repair to consumers on an affordable basis; rewards, points and rebates for customer loyalty."

NEM further said, "Underscoring the absence of factual support for the moratorium is the fact that year-over-year, the number of complaints against ESCOs has plummeted in all major categories, including for alleged deceptive marketing practices. The data shows that initial complaints against ESCOs dropped by more than 60% (391 initial complaints in July 2015 compared to 139 initial complaints in July 2016); escalated complaints—which are complaints that are not initially resolved by the ESCO—dropped by more than 70% (97 escalated complaints in July 2015 compared to 27 escalated complaints in July 2016); and complaints alleging deceptive marketing dropped nearly 80% (213 complaints in July 2015 compared to 48 complaints in July 2016). (Id.). Thus, the data decidedly undermines any premise that the Orders are necessary because there is a pattern of ESCOs taking advantage of or otherwise engaging in wrongful behavior with respect to low-income consumers through marketing practices or the like."

NEM reiterated arguments that adoption of the low-income order was procedurally deficient under SAPA, and also reiterated constitutional arguments prohibiting such an order

The PSC provided the following statement to EnergyChoiceMatters.com:

"The PSC will be reviewing all of the comments received in the ESCO moratorium proceeding, including strong comments received by seven low-income advocacy groups supporting the moratorium against energy service companies enrolling new low income assistance program participants and requiring them to de-enroll existing low-income customers from their services."

The PSC also pointed to the ESCO billing data, recently reported on by EnergyChoiceMatters.com (see story), with PSC Staff previously stating in court filings that for the 30 months ended June 30, 2016, New York State residential customers who chose to take service from an ESCO paid nearly $820 million more than if they instead elected to take commodity supply from their incumbent utility. PSC Staff have also said that low-income customers who chose to take service from an ESCO paid almost $96 million more than residential customers that elected to take commodity supply from their utility for the same period.