NYPSC Institutes Moratorium on ESCO Activity to Protect Low-Income Consumers

July, 29, 2016
Roni Epstein
Legal Policy Advisor
Community EnergyRenewable Energy

The Energy Service Company (ESCO) program for low and moderate-income households has long been a source of concern. After consumers filed numerous complaints, the New York Public Service Commission (NYPSC) in Case 12-M-0476, instituted proceedings to investigate the ESCO market.

In its Order dated February 6, 2015, (February 6 Order) the NYPSC initiated an extensive investigation in response to numerous complaints that low-income customers were not receiving any benefit from retail marketing initiatives and in many cases were being economically hurt. Forty-three intervenors were active in the proceeding including the Utility Intervention Unit of the Department of State and the Public Utility Law Project.

The February 6 Order affirmed that, given the critical goal of ensuring that the financial assistance provided to Program Participants (Participants or Customers) in utility low-income assistance programs is spent most efficiently, when an ESCO serves such a Customer, it must satisfy one of two conditions. First, the ESCO must guarantee that the Customer will pay no more than it would have paid as a full service utility customer. Alternatively, the ESCO must provide the Customer with energy-related value-added products or services in a manner that does not dilute the effectiveness of the financial assistance programs.

In its July 6 Order, the NYPSC reiterated its concern that the objective of ratepayer-funded low-income assistance programs administered by utilities are being subverted by ESCO service to Customers, i.e. the higher prices charged by ESCOs often exceed the
amount of the assistance provided to the Customer, and thus the goal of reducing that Customer bill is undermined.

On July 14, 2016 the NYPSC issued an Order (July 14 Order) in Case 12-M-0476, et. al. establishing a moratorium on ESCO enrollments of new Customers and on renewals of existing Customers based on evidence that ESCOs are unable or unwilling to offer a guaranteed savings product and because energy related value added products designed to reduce the customer bill have not been developed. The NYPSC ordered that a block be placed on Customer accounts for all electric and gas distribution utilities that have tariffed provisions providing for retail; that electric and gas distribution utilities communicate to each energy service company that the ESCO is no longer eligible to serve, and the direction to file with the NYPSC Secretary, drafts of the letters to be sent to Customers informing them that they will be returned to utility service. 

In instituting a moratorium on ESCO enrollments and renewals, the NYPSC cited the inability to address the fundamental concern that Customers are experiencing a diminution in their assistance dollars, funded by all ratepayers and taxpayers.

NYPSC Chair Audrey Zibelman stated: “The record is clear that low-income customers have not benefitted from electric and gas supply services from ESCOs when that’s all that’s being purchased. The Commission is taking steps to ensure energy affordability for low-income customers. Unless and until these guarantees can be made, it is critical that we ensure that low-income customers are not paying any more than necessary for gas and electricity. We challenged the competitive retailers to look for ways to guarantee savings at or below the cost of utility supplied power and gas.”

“This action will help protect low-income households from unscrupulous energy service providers and deliver much-need relief to New Yorkers across the state,” Governor Cuomo said. “By taking aggressive action to keep energy costs affordable, we are building a stronger, more sustainable New York.”

Energy affordability policy is an important part of Reforming the Energy Vision, Governor Cuomo’s comprehensive strategy to fight climate change and grow New York’s economy by investing in clean energy technology and generating 50 percent of the state’s electricity needs from renewable energy by 2030. The new policy establishes a goal that energy costs for low-income New Yorkers will be no more than 6 percent of household income – half of what many low-income customers are currently paying.”

Pursuant to the July 14 Order, the NYPSC will ensure that ESCOs provide tangible benefits to low and moderate-income consumers going forward.

Pace applauds the NYPSC for establishing this moratorium, which will protect low-income customers. Since the launch of New York’s Reforming the Energy Vision (REV) proceeding, Pace has actively worked to ensure that low- to moderate income customers have the opportunity to take charge of their energy bills through the energy efficiency and clean energy programs that are coming on line through REV. Most recently, Pace created an umbrella management effort to address low and moderate-income energy issues in a coordinated and efficient manner. Through its Equitable Access to Sustainable Energy (EASE) Program, Pace will focus on bridging the gap between low-income customers and the new rate designs, programs, and distributed energy resource offerings that are becoming available through the REV process, and we look forward to continuing to work with the NYPSC and stakeholders on these critical issues.