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Updated: New York PSC Waiver Allowing ESCOs To Continue Providing Green Gas Products To Existing Customers Includes Conditions

Written Order Reveals ESCOs Receiving Approval To Offer Home Warranty Bundle

PSC Will No Longer Require Formal Waiver Petition For ESCOs To Offer Home Warranty Product, Delegates To Staff Review

January 25, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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The New York PSC issued a written order regarding ESCOs' petitions to offer green natural gas products and home warranty bundles, which includes specific conditions which ESCOs must meet in order to continue serving green gas customers for a limited one-year period while the PSC further studies the issue

Under the PSC's reset order, ESCOs are limited to offering mass market customers: (1) a guaranteed savings (versus the utility) plan, (2) a fixed rate product that is limited in price to a 12-month trailing average utility supply rate plus a 5% premium, or (3) for electricity only, a 50% (above the minimum RPS) renewable plan that meets deliverability and other requirements in the order.

As exclusively first reported by on January 12, the PSC will allow ESCOs to continue to serve existing green gas customers without being subject to the pricing limits or minimum renewable content requirements otherwise required for mass market service, but the PSC has set forth conditions the green gas product must meet to qualify for this limited waiver

Specifically, "the Commission authorizes a one-year, limited waiver that permits ESCOs currently selling natural gas bundled with either a carbon offset component or a REC purchase component (a 'waiver-qualified bundle') to continue to market such eligible bundles to customers already purchasing them."

"The Commission authorizes a limited waiver, in effect for one year from the date of issuance of this Order, of price cap rules for the marketing of natural gas bundled with either carbon offsets or Renewable Energy Certificates according to the terms set forth [below]," the PSC said

"Authorization to market a waiver-qualified bundle is limited to those ESCOs that began marketing the respective waiver-qualified bundle before the Commission finalized its recent rules regarding permissible ESCO products and services. Thus, in order for a product to be eligible for the one-year limited waiver, the ESCO must have been marketing the waiver-qualified bundle prior to our issuance of the September 2020 Order," the PSC said

"ESCOs that wish to avail themselves of the limited waiver must take two steps. First, an ESCO must provide proof to Staff of sufficient history of marketing a waiver-qualified bundle. To meet this standard, an ESCO must, within 30 days of the issuance of this order, file with Department of Public Service Staff, in DMM Matter No. 14-02554, proof of at least one valid mass market sales agreement reflecting the waiver-qualified bundle that the ESCO wishes to continue to market during the waiver period. Such an agreement or agreements must reflect that they were entered into before the issuance of the September 2020 Order (September 18, 2020). Second, the ESCO must, within 30 days of the issuance of this Order, file with Department of Public Service Staff, in DMM Matter No. 14-02554, a standard sales agreement for any product that the ESCO believes meets the aforementioned standards for an eligible bundle and for which the ESCO intends to market during the waiver period to pre-existing customers," the PSC said

"The purpose of this time-limited waiver is to allow customers currently purchasing waiver-qualified bundles to continue, where desirable, to renew the products that they are currently receiving during the next year, without the relevant ESCO having to offer the waiver-qualified bundle in accordance with the default guaranteed savings rule," the PSC said

Apart from this limited waiver, the PSC denied the petition of ESCOs to offer green gas products without being subject to the pricing limits noted above. "We find that, at present, we lack requisite assurances that the natural gas bundle proposals will provide value-added energy related services that are consistent with New York’s clean and renewable energy goals so as to justify providing a permanent exception to the default price guarantee rule. This conclusion is consistent with our previous descriptions of the need for further consideration of 'green gas' product proposals in Track II proceedings," the PSC said

"Track II proceedings will provide the needed opportunity for engagement between interested parties and Staff to permit a better understanding of proposals related to 'green gas' products. The Commission anticipates that collaboration will allow interested ESCO industry representatives to address concerns related to both the provision of value to customers (including the match between marketing and the value a customer actually receives) and the manner in which 'green gas' proposals relate to New York’s aggressive clean energy goals. As to the latter issue, interested ESCOs may wish to address the possibility that an unintended consequence of ESCOs offering 'green gas' products is that customers will be incented to either consume more natural gas or, relatedly, reduce their use of natural gas over time less than they would have otherwise had the commodity not been included in a 'green gas' bundle. These concerns should not be understood as exhaustive, or as Commission conclusions on relevant issues; the concerns are intended to be helpful illustrations of issues interested ESCOs should address, and that other parties may wish to address, in the Track II proceedings," the PSC said

Home Warranty Products

The PSC granted the specific petitions of several ESCOs to offer a home warranty bundle that is not subject to the mass market pricing limits or renewable requirements, and also ruled that, going forward, ESCOs need not seek a formal waiver to offer such a product that complies with the PSC's stated guidance, but shall submit the product for DPS Staff review and approval

"[G]iven the Commission’s rules and guidance set forth in this and previous orders, the Commission finds it unnecessary to continue requiring ESCOs to petition the Commission for a waiver to market qualifying home warranty product bundles that provide an exception to the default guaranteed savings rule. Instead, ESCOs wishing to offer such products shall file the proposed standard sales agreement(s), and any other supporting information, for review and approval by [DPS] Staff, who will review the proposed home warranty product(s) and ensure compliance with the Uniform Business Practices (UBP) and Commission orders," the PSC said

"ESCOs may not market or sell such products without first obtaining Staff approval," the PSC said

The PSC further emphasized that this Staff review process is limited to the exception for home warranty product bundles. The PSC noted several ESCOs filed waiver petitions for green gas products -- which had not been specifically invited by the PSC outside of Track II -- and said that ESCOs should not similarly use the home warranty process to seek approval for other products.

As further noted below, the PSC emphasized that the home warranty products are, "closely related to ensuring that customers are able to use electricity and/or natural gas in a manner that provides essential services to the customers," and thus are appropriate for a bundle. "The functions the home warranty products support include lighting and powering homes and buildings, heating and cooling air, heating water, and ensuring reliable water service. All of these functions are closely related to the reasons commodity energy supply is an essential service to New Yorkers. Moreover, the products are designed to insure against consumers suddenly facing a high-cost repair bills, for which the inability to pay may threaten access to these essential functions," the PSC said

The PSC contrasted this with a product bundling light bulbs with commodity supply

"As an example that would contrast these relevant features, we have not been persuaded that ESCOs that have historically bundled commodity with low-cost, widely available consumer retail goods that generally require little or no professional maintenance, such as lightbulbs, have shown that they provided an energy-related value-added service that would justify charging premiums to consumers," the PSC said

In terms of specific ESCOs receiving approval for their home warranty products, the PSC approved petitions from Interstate Gas Supply, Inc., Accent Energy Midwest Gas, LLC dba IGS Energy, and Accent Energy Midwest II, LLC dba IGS Energy; Mpower Energy LLC; Kiwi Energy NY LLC; and Constellation NewEnergy – Gas Division, LLC and Constellation NewEnergy, Inc. to offer their home warranty product bundles. Additional details concerning each ESCO's product is below

"Authorization is appropriate here because each of the respective petitions satisfy the criteria for a home warranty product bundle not subject to the default price guarantee rule," the PSC said

In describing the proposals, the PSC said, "The proposals bundle commodity service with maintenance agreements closely related to ensuring that customers are able to use electricity and/or natural gas in a manner that provides essential services to the customers. The functions the home warranty products support include lighting and powering homes and buildings, heating and cooling air, heating water, and ensuring reliable water service. All of these functions are closely related to the reasons commodity energy supply is an essential service to New Yorkers. Moreover, the products are designed to insure against consumers suddenly facing a high-cost repair bills, for which the inability to pay may threaten access to these essential functions. Moreover, we find that each petition reasonably describes the relationship between the benefits provided by the proposed products and cost."

As a condition of such authorization, each of the ESCOs named above shall, within 30 days, file, with Department of Public Service Staff, standard sales agreements for each of the products authorized by this determination.

The PSC summarized each ESCO's home warranty plan as follows:

• IGS proposes to bundle electric and natural gas service with a variety of home warranty plans. These plans include inside/outside utility line protection, HVAC system protection, and complete home protection. These plans variously cover warranties for gas, electric, water, and sewer lines (inside and outside) and furnaces, central air conditioning systems, boilers, heat pumps, and water heaters. The plans have differing annual limits for coverage.

• Kiwi Energy NY LLC (Kiwi) petitioned for authorization to sell 'Kiwi Guard' not subject to a price cap. According to Kiwi, Kiwi Guard provides twenty-four hours, seven days per week (24/7) customer support and the product covers central air and heating systems and ductwork. The cap on annual coverage for Kiwi Guard is $750 a year, plus a $25 credit that applies to the cost of an air filter. The product includes a $125 deductible per claim. For certain types of equipment outages, Kiwi Guard provides up to $1,200 of coverage for needed emergency lodging. Kiwi Guard provides technicians who are prescreened and licensed.

• Mpower Energy LLC's proposed home warranty product would provide customers with a warranty covering parts and labor for certain repairs of heating and/or cooling equipment and household wiring. The warranty covers the cost of parts and repairs up to $1,000 annually for a customer’s air-conditioning unit, home wiring, and heating system repairs. Mpower would be available at all times to receive reports of problems at all times. Mpower would dispatch a licensed and bonded technician to address reported problems. To deter unwarranted service calls and account for parking costs, Mpower would charge a $150 deductible. According to Mpower, commercially available home warranties generally range in price from $20-$50/month, and Mpower asserts that its warranty will be competitively priced in this range, subject to future market changes.

• Constellation NewEnergy – Gas Division, LLC and Constellation NewEnergy, Inc. (collectively, 'Constellation') sought approval for two home warranty products to be sold without price restriction. The first product would bundle retail electric service with an HVAC protection plan and electronic surge protection. This product would be paired with electricity supply, sold at a fixed or variable rate. The second product would bundle retail natural gas service with water heater maintenance and gas line protection. This product offering would provide customers a fixed or variable natural gas supply rate, coverage on the cost of gas line failures within the home, and coverage on a residential hot water heater. Constellation proposes to offer 24-hour call service and to dispatch appropriate contractors in a timely fashion. Constellation would charge a $100 deductible for HVAC maintenance and a $50 deductible for service to the other covered products. For each proposed product, Constellation would impose a cap of $1,500 in total claims per twelve-month period. Constellation represents that it would ensure that contractors have appropriate licensing and liability insurance and would hold contractors to minimum customer satisfaction ratings.

Track II Collaborative On Value Added Services

As previously reported, the PSC ruled that the Track II collaboration on energy-related value-added products and services, "should commence after the implementation of the new product rules set forth in the," retail mass market order.

"To this end, the Secretary shall, within 60 days of the implementation of such rules, issue a notice establishing the date and time of an initial collaborative opportunity for interested parties," the PSC said

Such pricing rules are currently scheduled to take effect on February 15, 2021.

In setting this deadline, the PSC said, "Commencement of Track II during the pre-implementation stage of the product rules established in the December 2019 Order would be premature and unwarranted."

Case 15-M-0127 et al.

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