Lightbulb-Dollarsign.jpgThe New York Public Service Commission (“Commission” or “PSC”) continues to push for major restructuring of New York’s retail energy market. On December 16, 2016, the PSC issued an Order Adopting a Prohibition on Service to Low-Income Customers by Energy Service Companies (“Low-Income Order”). The Low-Income Order establishes a permanent prohibition on energy service company (“ESCO”) service to customers who are participants in utility low-income assistance programs (“Assistance Program Participants” or “APPs”). The Low-Income Order comes in the wake of two recent PSC orders that sought to establish a moratorium on ESCO service to APPs—the Order Regarding the Provision of Service to Low-Income Customers by Energy Service Companies issued on July 15, 2016, and the Order on Rehearing and Providing Clarification issued on September 19, 2016—both of which are subject to a temporary restraining order issued by the Albany County Supreme Court. The court stayed the PSC from enforcement of the orders, as well as any action in furtherance thereof, and ordered the PSC to show cause why the court should not find that the orders were issued in violation of the State Administrative Procedure Act and were arbitrary and capricious. Before the court had a chance to issue a decision based on that hearing, the PSC issued the Low-Income Order, converting the moratorium to a permanent prohibition on ESCO service to APPs.

The thrust of the Low-Income Order is based on the Commission’s determination that between January 2014 and June 2016, APPs served by ESCOs allegedly paid $96 million more than they would have if they had been served by their utility company. Those numbers are disputed by industry officials who argue that direct comparisons of ESCO and utility rates are inappropriate because ESCOs often provide value-added services and other incentives, such as long-term fixed-rate contracts to ensure price stability, energy efficiency equipment that reduces consumption, renewable generation attributes, reward points, gift cards and more. ESCOs also claim that comparisons are inappropriate because utility rates are not fully unbundled and because of utilities’ ability to make after-the-fact rate adjustments, both of which have been conceded by DPS Staff in the past. The dispute over how to appropriately compare ESCO and utility rates will likely be a major component of the Commission’s retail market evidentiary hearing in April 2017.

In the meantime, before that dispute is resolved, the Low-Income Order prohibits ESCO service to APPs by requiring utilities to place a block on all APP accounts within 60 days of the order. With respect to APPs who are currently ESCO customers, the order gives each utility 60 days to communicate to each ESCO identifying which accounts the ESCO is no longer eligible to serve. Within 30 days of receiving that communication, the ESCO must then de-enroll the identified customers at the expiration of the existing agreement. According to the Low-Income Order, for month-to-month contracts, expiration of the agreement “is at the end of the current billing period.” But the order advises that de-enrollment must occur “at the end of the billing period in progress 30 days after receiving the notice from the utility.”

Although labeled as a “permanent prohibition” on ESCO service to APPs, the Low-Income Order is not necessarily permanent nor a complete prohibition. Once the broader issues with the retail market are addressed through the PSC’s retail market evidentiary hearing, the Commission noted that it may revisit the issue of ESCO service to APPs.

Optional ESCO Petitions to Waive the Prohibition

ESCOs may also petition the Commission within 30 days for a waiver of the prohibition if they can ensure (1) the ability to calculate what the customer would have paid to the utility, (2) that the customer will pay no more than what they would have paid to the utility, and (3) the ability to verify compliance with those assurances.

The Low-Income Order is the PSC’s latest attempt to restructure New York’s retail choice markets. In April 2017, the PSC will hear testimony in an evidentiary hearing as it pursues further reforms to the retail market for mass-market customers. The outcome of that hearing will shape the future of New York’s retail energy markets and could modify the way in which this low-income prohibition is implemented.

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. For more information about Phillips Lytle’s Public Service Commission practice, please contact Thomas F. Puchner, Partner, at (518) 472-1224 Ext. 1245,, or Kevin C. Blake, Associate, at (716) 847-7082,