Public Service Commission Resets Retail Energy Marketplace:
All ESCOs Required to Re-Register Under New Rules and Completely Revise Product Offerings

On December 12, 2019, the New York State Public Service Commission (“Commission”) voted to reset the retail energy marketplace by requiring all Energy Service Companies (ESCOs) to re-register for eligibility to serve customers. While the final order remains to be issued, the Department of Public Service (DPS) explained that as part of the re-registration process, it will subject each ESCO to new eligibility requirements and require all ESCOs to modify their product offerings to fit one of four categories.

Based on discussions at the session meeting, it appears that permissible products under this new regulatory landscape are limited to:

  1. Variable priced products that include guaranteed savings;
  2. Fixed price products that are priced as a trailing historic average plus 5%;
  3. Energy commodity that includes a renewable energy component that is 50% greater than the Renewable Energy Standard (RES); or
  4. Energy commodity that includes narrowly defined “energy-related” value-added products (the Commission mentioned that only Agway Energy has an approved product).

Furthermore, new eligibility requirements will be comprised of eight major components:

  1. ESCOs shall identify their methods used to market to customers.
  2. ESCOs shall disclose specified complaint data that have been made in other states.
  3. ESCOs shall disclose specified security breaches in other states.
  4. ESCOs shall specify policies directed at securing customer data.
  5. ESCOs shall disclose bankruptcy history.
  6. ESCO officers shall affirm via affidavit that it will comply with applicable rules and regulations.
  7. In order to continue to enter new agreements with customers in New York State, ESCOs must submit updated eligibility applications within 90 days.
  8. DPS staff will “substantially review” eligibility applications and, where appropriate, recommend to the Commission that eligibility be denied.

Commissioner Diane Burman expressed concern that the pending order does not appear to impose a time frame for DPS staff to “substantially review” and recommend action, potentially causing market disruption and issues of fairness if the applications are not timely decided, or decided inconsistently.

Concerns were also expressed regarding how ESCOs will migrate their existing customers to these newly required products, what type of consent would be required, how that consent needs to obtained and when. The Commission explained that there would be a 60-day lag period before the new Uniform Business Practices (UBP) would go into effect, after which all new ESCO contracts would need to satisfy the criteria set forth in the order. ESCOs would need to obtain “affirmative consent” from all customers migrating to a new product, even if that customer is enrolled in an automatic renewal agreement.

With this upcoming order, there is a growing disconnect between the UBP rules for ESCOs and rules for other customer-facing energy product markets such as Community Distributed Generation and Community Choice Aggregation. As the Commission has in the past expressed its intent to merge the ESCO UBPs and UBPs for Distributed Energy Resources into one regulatory framework, these requirements may soon be replicated in other energy market sectors.

These new eligibility requirements represent a significant revision to the retail energy market rules and will require coordination on behalf of the retail energy market industry to ensure the transition occurs in a fair and reasonable manner.

Phillips Lytle’s Energy Practice Team has extensive expertise in Public Service Commission/Utility regulatory matters, including all aspects of retail energy regulation in New York State. For more information about Phillips Lytle’s Public Service Commission expertise, please contact Thomas F. Puchner at (518) 618-1214, tpuchner@phillipslytle.com, or Kevin C. Blake at (716) 847-7082, kblake@phillipslytle.com.

The waning hours of the 2019 New York State legislative session saw both houses pass an extraordinary piece of legislation. The Climate Leadership and Community Protection Act (“Act”) requires the State to achieve a carbon-free electricity system by 2040 and reduce greenhouse gas emissions 85% below 1990 levels by 2050. The Act creates and empowers a council to determine how the State will achieve these goals. It is anticipated that the Act will also drive investment and a number of clean energy solutions, as well as target investments to benefit disadvantaged communities. The Act will also clearly impact existing energy consumers, including large industrial users. The Act was signed into law by Governor Cuomo on July 18, 2019. The new law is likely to profoundly impact and transform New York’s economy over the coming 50 years.

On April 1, 2019, the State Legislature approved a $175.5 billion budget for 2019-2020, which, among other things, eliminates an important sales tax exemption that allowed certain commercial customers of Energy Service Companies (“ESCOs”) to receive electric and gas supply without paying sales tax on transmission and distribution charges.

Since 2000, shortly after New York restructured its energy markets, the NYS Tax Law has included an exemption for commercial ESCO customers that was designed to incentivize consumer choice and enhance the ability of ESCOs to offer competitive prices (“Exemption”). Under the Exemption, commercial customers that received service from an ESCO would pay sales tax on the commodity portion of their bills, but not the delivery service. In contrast, default utility customers paid sales tax on both the commodity and delivery provided by the utility. Continue Reading New York Repeals ESCO Sales Tax Exemption for Businesses

Throughout the first four years of New York’s Reforming the Energy Vision (“REV”) initiative, the precise role of energy storage has been unclear. There was no energy storage goal, only sparse incentives were available to spur development, the regulatory framework remained under construction, and the relatively nascent storage applications did not seem to fit within currently existing market mechanisms.

New York is now paving the way for a robust storage industry. In December 2018, the Public Service Commission (“Commission”) adopted an energy storage goal of 3,000 MW by 2030, with an interim target of 1,500 MW by 2025 (the “Storage Order”). To jumpstart the program, the Commission ordered Consolidated Edison to competitively procure and deploy 300 MW of energy storage by 2022, and the remaining utilities to each procure 10 MW of energy storage in their respective service territories. Continue Reading New York Transforms Energy Storage Economics

The New York Public Service Commission (“PSC”) appears to be creating a new Office of Investigations and Enforcement (“OIE”) and has posted a job listing for a Director of OIE (“Director”) who would report to the CEO of the Department of Public Service (“DPS”), as well as the Chairman of the PSC. The Director would be tasked with managing the OIE’s efforts in investigating and enforcing the regulations promulgated pursuant to §25 and §25-a of the Public Service Law. This mandate may include a vast field of public utilities and comes at a time when New York is in the midst of updating its complex Value of Distributed Energy Resources mechanism, which regulates electric utilities in their dealings with the ever-increasing number of privately owned distributed energy resources. Continue Reading New York Public Service Commission to Create “Office of Investigations and Enforcement” to Centralize Compliance Regime

On August 21, 2018, the Environmental Protection Agency (“EPA”) proposed a new rule which would replace the Obama-era Clean Power Plan (“CPP”) and establish new emissions guidelines for states to address greenhouse gas (“GHG”) emissions from electric-generating power plants. As background, the CPP was stayed by the Supreme Court in a 5-4 decision in February of 2016 before the rule ever went into effect. More recently, in October 2017, the EPA announced its intention to effectively repeal the CPP because it “exceeded” the EPA’s authority. Now, the EPA is proposing to enact the Affordable Clean Energy rule (“ACE Rule”) to reduce GHGs while giving states more flexibility to achieve that goal. Continue Reading EPA Proposes to Replace Clean Power Plan with Affordable Clean Energy Rule

Recently, Phillips Lytle’s own Dennis Elsenbeck made an appearance on Spectrum News’ Capital Tonight program with host Liz Benjamin to discuss the energy landscape in New York and the economic impact of energy-related policy decisions. As the State legislative calendar year comes to a close, the conversation centered around how energy policy should be focused on meeting market demands so that it aligns with the current economic goals to drive development. As the energy industry continues to undergo changes through innovation and entrepreneurship, synergy amongst the key players – State policymakers, economic developers and the utilities – will influence the effectiveness and efficiency of energy-related development across the State. The interview in its entirety may be viewed in this video.

New York State (“NYS” or “State”) is launching a second round of request for proposals (“RFPs”) for large-scale renewable projects. According to NYS Energy Research and Development Authority (“NYSERDA”), the State is seeking to accelerate progress to achieve the lofty goals set in the Clean Energy Standard initiative that went into effect in August of 2016. As we have previously reported, the Clean Energy Standard mandates that renewable energy supply 50 percent of the State’s electricity needs by 2030. Large-scale renewable projects, such as utility-scale solar and wind, have been expected to carry a huge load in bridging the gap between the mandated 50 percent and the roughly 23 percent that was produced by renewables in 2016. Continue Reading New York State Seeks Proposals for Large-Scale Renewable Projects

Governor Andrew Cuomo’s proposed 2019 budget originally proposed the elimination of an important sales tax exemption that allows certain customers of Energy Service Companies (“ESCOs”) to receive electric and gas supply without paying transmission and distribution sales tax. Currently, nonresidential default utility customers pay sales tax on both commodity and delivery, while nonresidential ESCO customers pay sales tax only on commodity. The sales tax exemption is designed to incentivize consumer choice and allows ESCOs to offer competitive prices to their customer base.

Early Saturday morning, New York State lawmakers approved a $168 billion budget for fiscal year 2019. The budget for fiscal year 2019, which began on April 1, 2018, does not include the controversial repeal of the ESCO sales tax exemption.

Maintaining the long-standing ESCO sales tax exemption in the final budget is good news for ESCOs and their customers, which remain under continued pressure from the Public Service Commission to reform their business practices.

Following a series of extensions, the New York Public Service Commission (“Commission”) has once again extended the deadline for Community Distributed Generation (“CDG”) and on-site mass market distributed generation (“DG”) providers to file a completed registration package in conformance with the Uniform Business Practices for Distributed Energy Suppliers (“UBP-DERS”). The Commission extended the deadline to allow Department of Public Service Staff to modify the Standard Customer Disclosure Statements based on feedback received from stakeholders. With this extension, CDG and on-site DG providers are required to submit their registration package by May 1, 2018. For more information regarding the registration process, please see our most recent Client Alert.