PSC DEFINING AN ESCO “VALUE ADDED” SERVICE OPTION THAT WOULD ALLOW ESCOs TO CHARGE LOW-INCOME UTILITY CUSTOMERS MORE THAN THE RATE THE UTILITY WOULD HAVE CHARGED THEM

Many ESCO marketers promise utility customers they will save money on their utility bills.   However, it is very difficult for customers who switch to ESCO service to know whether they are paying more or less for electricity or gas than if they had continued to take full service from the utility. The reason for this is that the PSC has required utility prices to change significantly from month to month without notice to consumers.

The utilities buy ESCO receivables for residential service and collect the bills for ESCO service through their regular utility billing, often under threat of shutoff if amounts demanded are not paid.  The utilities, therefore, have the data on the residential ESCO charges.  Under the Home Energy Fair Practices Act (HEFPA), utilities are required to base payment plans on what the utility would have charged or what the ESCO charged, whichever is less.  So, they also have the capability to make comparisons between ESCO charges and utility charges, which when investigated, shows evidence of systematic overcharging.

In the 2012 Niagara Mohawk (Nat’l Grid) electric and gas rate cases, the Utility Project discovered after analyzing more than 2 million NIMO residential electric and gas customer bills (covering a 2yr period), that ESCOs generally charged considerably more for electricity and gas than the utility would charge if the customer had not switched. The ESCOs’ claim that this information provided under seal in discovery was a “trade secret” was rejected, and the information eventually became public.

Utility Project analysis of the NIMO data found that many of those paying significantly higher charges for ESCO Service are low income customers who may have switched based on high pressure door to door or telephone solicitations promising lower prices.

The data showed:

  • For low-income customers, 91.5% of electricity bills and 93.4% of gas bills were higher for those customers who had switched to ESCO service.  Only 8.5% of electricity bills and 6.6% of gas bills were lower.
  • The data also shows that the net extra cost incurred by ESCO customers over what they would be charged by Niagara Mohawk was $101,775,321 for electricity and $27,375,032 for gas.
  • An estimated 207,842 customers  (84.3%) paid $103,711,214 more for ESCO electricity service while an estimated 107,225 customers (92.1%) paid $27,931,488 more for ESCO gas service.

On October 19, 2012, the PSC began a generic investigation and review of ESCO service and retail markets in Case 98-M-1343, etc.  In response to the Commission’s notice seeking comments, AARP and the Utility Project filed Comments urging numerous reforms, including

•greater price transparency;

•improved protections against slamming;

•improved protection against deceptive, misleading, and high pressure sales tactics;

•means to facilitate ESCO price comparison; and

•a ban on marketing of ESCO service to low-income customers.

In its February 25, 2014 decision and order, PSC adopted a number of measures, including a requirement that utilities to put bill calculators on their websites so ESCO customers (with internet access) can check to see if they are paying more.  The PSC also barred ESCOs from reselling commodity electricity and gas to low income customers — unless they also provide some additional, unspecified “value-added” service.

The ESCOs petitioned for rehearing, and numerous critical aspects of the Order were stayed, including the restriction on marketing ESCO service to low-income customers.Nearly a year later, on February 6, 2015, the PSC issued an Order Granting and Denying Rehearing Petitions in Part. The Commission expressed concern that ESCOs preying upon low-income customers could negate the Commission’s initiatives to improve affordability and reduce energy burdens of low-income customers.

The PSC said the following in the February Order:

[T]he Commission has authorized more than $100 million annually for ratepayer-funded low-income discount programs administered by the utilities. These ratepayer funds augment taxpayer funds that provide financial assistance to utility customers through HEAP. The purpose of these important assistance programs is subverted if these significant ratepayer and taxpayer funds are merely passed through to ESCOs for comparatively higher priced gas and electricity, without any corresponding value for Assistance Program Participants. Further, diminishing the value of these financial assistance programs in relation to Assistance Program Participants’ bills will make it more difficult for those consumers to pay their utility bills in full. The increased arrears and utility shut-offs that result are detrimental to both customers and utilities, and interfere with the Commission’s interest in minimizing the unnecessary termination of electricity and natural gas service to residential customers.

The PSC reiterated in its rehearing decision:

The ESCO must guarantee that the customer will pay no more, on an annual basis, than the customer would have paid as a full service customer of the utility, or the ESCO must provide Assistance Program Participants with energy-related value-added products or services.

The PSC Staff recently issued a notice scheduling a collaborative meeting on March 19, 2015, to consider the definition of “value-added” ESCO service, and mechanisms to protect low-income customers, including third party verification of switching.

Background

LIST OF NEW NY PSC REQUIREMENTS FOR ESCOS WHICH ARE NOT STAYED PENDING A DECISION ON REHEARING MOTIONS, NYUP MAY 5, 2014

RULING: ESCO CHARGE DATA PROVIDED TO PSC BY UTILITIES NOT A “TRADE SECRET” UNDER THE NEW YORK FREEDOM OF INFORMATION LAW, NYUP MARCH 27, 2014

ESCOS OPPOSE RELEASE OF ELECTRIC AND GAS BILL COMPARISONS, NYUP MARCH 14, 2014

PSC LAUNCHES NEW PHASE OF ESCO POLICY DEVELOPMENT, SHIFTING FROM RESALE OF ELECTRICITY AND GAS TO “VALUE-ADDED” SERVICES, NYUP MARCH 6, 2014

PSC ISSUES ORDER MODIFYING ESCO REGULATORY REGIME TO ADDRESS LACK OF SMALL CUSTOMER BENEFIT AND ABUSES, NYUP FEBRUARY 25, 2014

NEW YORK PSC SEEKS CUSTOMER INPUT ON THEIR EXPERIENCES WITH ESCO ELECTRIC OR GAS SERVICES VIA ONLINE SURVEY, NYUP JAN 13, 2013

PSC TO LOOK AT ESCO SERVICE ISSUES, NYUP OCTOBER 25, 2012

VALUE OF ESCO SERVICE QUESTIONEDNYUPSeptember 21, 2009

ESCO TAX SUBSIDIES:  A HIDDEN COST OF THE NEW YORK PSC’S  “RETAIL ACCESS” SCHEME, NYUP January 12, 2009

THINK TWICE BEFORE SWITCHING UTILITIES, NYUP September 26, 2006

RETAIL CHOICE:  A RACE TO THE BOTTOM, Public Utility Fortnightly, January 1, 1998

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