On February 23, 2016, the New York Public Service Commission (PSC) issued an order setting new consumer protection guidelines for energy service companies, or “ESCOs.”
An ESCO is a business supplying electricity and/or gas to a variety of industrial, residential and/or commercial consumers. These entities regularly market themselves to consumers as a cost-sa
ving alternative to purchasing energy from a utility, and offer a range of pricing options, such as long-term fixed prices and/or variable rates.
The issuance of the new regulations was prompted by a rise in consumer complaints concerning questionable ESCO marketing practices, dissatisfaction with the prices charged by ESCOs after no price savings were realized, and unauthorized enrollment of consumers into ESCO products.
Effective March 4th, ESCOs may only enroll new mass market consumers or renew existing consumers in gas or electric services if one of two conditions are met: (1) the enrollment includes a contractual guarantee that the customer will pay no more than if he/she were purchasing energy from a utility; or (2) the enrollment is based on a contract for an electricity product derived from at least 30% renewable energy sources.
ESCOs currently serving consumers via month-to-month variable rate contracts must enroll those customers in a compliant product by the end of the current billing cycle or return them to utility supply services. If an ESCO customer pays more than he would have had he purchased energy through a local utility, the ESCO is required to refund the difference at the end of the year.
For existing customers in the latter case, the ESCO must obtain affirmative consent from the consumer prior to renewing them from a fixed rate or guaranteed savings contract into a contract that provides renewable energy but does not guarantee savings. Renewable energy sources that qualify under the second exception include biomass, biogas, hydropower, solar energy, and wind energy, as well as renewable attributes.
The order also set forth certain issues that the PSC promised to further study within 60 days, including:
- Examining under what conditions ESCOs may enroll mass market consumers on a going forward basis, to determine whether the conditions above should be imposed against ESCOs on a long-term basis;
- Whether the existing three-day period for customer rescission of ESCO contracts should be extended or modified;
- Whether ESCOs should be required to post performance bonds or take other measures of demonstrated financial capability; and
- What penalties should apply to ESCOs that violate the provisions of the order.
With respect to enforcement, the PSC indicated it would proceed via Order to Show Cause for ESCO eligibility revocation (or any less severe action it deemed appropriate) against any ESCO that has a single violation of the requirements prescribed by the Order.
Commenting on the new regulations, Governor Cuomo stated, “We have zero tolerance for these unscrupulous companies, whose business model is to prey on ratepayers with promises of lower energy costs only to deliver skyrocketing bills. These actions will root out these bad actors and protect New Yorkers from these unfair and dishonest tactics.”
The February 23, 2016 decision is available for download on the docket at the following site: