Lightbulb-evolutionConsiders Full-scale Regulation, Tariffs and Voiding Existing Contracts

On December 2, 2016, the New York Public Service Commission issued a Notice of Evidentiary and Collaborative Tracks and Deadline for Initial Testimony and Exhibits, which initiates a new round in the agency’s regulatory investigation of New York’s retail energy markets. The proceeding will examine measures that may be taken to ensure customers are receiving “valuable services and paying just and reasonable rates for commodity and other services” from Energy Service Companies (ESCOs). In its notice, the Commission reiterated its determination (from 2014) that the retail markets serving mass-market customers “are not providing sufficient competition or innovation.” The Commission will consider three broad questions:

  1. Whether ESCOs should be completely prohibited from selling their current products to mass-market customers;
  2. Whether the regulatory regime, rules and Uniform Business Practices applicable to ESCOs need to be modified to implement such a prohibition, to provide additional guidance as to acceptable rates and practices of ESCOs, or to create enforcement mechanisms to deter customer abuses and overcharging, including whether ESCOs should be subject to Article 4 of the Public Service Law, and
  3. Whether new ESCO rules and products can be developed that would provide sufficient real value to mass-market customers in the future in a manner that would ensure just and reasonable rates.

“Track I” of this proceeding will consider the first two measures through an evidentiary hearing before the Commission followed by the filing of post-hearing briefs. “Track II” will consider the third measure, which will include a series of collaborative stakeholder meetings and the opportunity to comment prior to Commission action. It is expected that Commission Staff, ESCOs, regulated utilities, and consumer groups will provide testimony and exhibits throughout this process. A PSC “Statement,” issued in conjunction with the Notice, stated that the hearings “will give ESCOs the opportunity to explain their pricing practices and to hear from consumers who have been harmed by these practices.”

The Commission provided a total of twenty topics that it expects parties to address throughout their Track I testimony and exhibits. Those topics relate to the general structure of the ESCO markets, including, among others:

  • Whether the “regulatory regime of how the Commission applies the Public Service Law to ESCOs should be modified . . .?”
  • Whether and how the Commission’s key 1997 interpretation that Public Service Law (PSL) Article 4 does not apply to ESCOs should be revisited?
  • Whether penalties can be applied under its current interpretation of PSL Article 4?
  • If Article 4 regulation is necessary, what burdens would be imposed on ESCOs—such as whether stock issuances or transfers/sales would require commission approval? (These are burdensome requirements that typically apply to entities regulated by PSL Article 4, such as utilities or merchant power plants).
  • Should ESCOs be required to file tariffs?
  • Whether “the Commission should take steps to void existing ESCO contracts” if tariffs are required?
  • Whether the requirements of Public Service Law Article 6 should be applied to ESCOs? (Article 6 includes, among other things, authority for control of holding companies and transactions between affiliated transactions, as well as authority for refunds, reparations, and temporary rates) (The bulk of Article 6 is used to protect captive utility customers from financial manipulation or unwise financial decisions).
  • Whether ESCOs should be required to obtain Certificates of Public Convenience and Necessity under Public Service Law Section 68?
  • Whether door-to-door and outbound telemarketing practices should be prohibited?
  • Evidence that an ESCO has, in fact, in recent years offered or is currently offering lower prices on an annual basis compared to the incumbent utility consistently (and evidence that the price offering was profitable or resulted in a loss)
  • The Commission is also requesting extensive and detailed data for 2014, 2015 and 2016:
  • prices charged for retail electric and gas to mass-market ESCO customers (including prices for comparable default service), and prices for different product offerings (fixed vs. variable). Prices are to be provided on an annual, seasonal and monthly basis where possible, and separated by residential and small commercial;
  • number of ESCO customers served;
  • volume of sales; and
  • extensive complaint data.

The Notice states that “[a]ll parties to the proceedings may be subject to discovery regarding Track I issues.”

The Commission, apparently, intends this process to provide the administrative record that the New York Supreme Court found lacking in the Reset Order litigation earlier this year. As indicated by its Statement, the Commission believes that doing so will lead to a retail market that provides “useful, value-added, economical services to New York consumers particularly as part of [its] efforts under Reforming the Energy Vision.”

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, contact: Thomas F. Puchner, Partner, (518) 472-1224 Ext. 1245,