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Retail energy suppliers barred from selling to low-income New Yorkers

New York regulators barred retail energy suppliers from selling to low-income New Yorkers after continued findings of price gouging by some vendors.

The New York State Public Service Commission voted 3-1 on Dec. 15 to ban energy service companies, or ESCOs, from renewing or entering into new contracts with subsidized, low-income customers until new regulations are in place to prevent overcharging and deceptive practices in the retail energy market. The permanent ban effectively replaces an indefinite moratorium from July that the commission is currently defending in court after a judge vacated new regulations from February that sought to stop unwarranted door-to-door solicitations by ESCOs and revoke their right to conduct business within the state if found to be violating state regulations.

The prohibition, which is effective 60 days after its order, impacts roughly 200 companies and denies them market access of nearly a third of the state's energy customers. In total, ESCOs currently supply energy efficiency and energy management services to more than 20% of residential and small commercial customers. According to a commission staff investigation of a 30-month period leading up to July, residential and commercial utility customers had paid approximately $817 million more for energy than if they had gone with their local utility, with low-income New Yorkers alone having paid an excess of almost $96 million.

Commission Chair Audrey Zibelman said during the vote that it makes "no sense for low-income customers, who are already receiving a subsidy in a form of a federal program or a subsidy in terms of a state program through a rate discount, to have experienced higher bills than necessary as a result of taking service from an ESCO."

Zibelman said the permanent ban is a "very sensible approach" to protect taxpayers and low-income consumers until ongoing proceedings can produce desired market changes, such as fixed rates and guarantees of savings or value-added services. In the meantime, Zibelman said ESCOs have the limited opportunity to continue doing business if they can guarantee savings.

Commissioner Diane Burman, who was the lone dissenting vote on the ban, expressed concerns on collectively punishing the ESCO industry for the actions of a few. She also told her fellow commissioners of the need to "carefully take stock" of their own possible failings in enforcing market regulations and reminded them of the positive engagement by ESCOs earlier in the year to reach an agreement.

Bryan Lee, a spokesman for the Retail Energy Supply Association, said in a news release the group, which represents ESCOs, was disappointed by the commission's decision but remains committed to keeping competitive energy markets open to all consumers. "The PSC has ample oversight authority to exercise without taking an overly broad approach that denies the benefits of the competitive market to an entire class of customers," Lee said.

Lee also noted the poor timing of the commission's decision to limit low-income customers "to variably priced utility service that exposes them to price risk in the market" as "yet another polar vortex bears down on New York." Lee warned the severe winter weather expected Dec. 15-16 could be a repeat of the 2013-2014 polar vortex, which incurred millions of unanticipated dollars for utilities' default service customers and required extraordinary remedial action from regulators.

In a news release, the commission described the order as being in line with Gov. Andrew Cuomo's energy affordability policy that was approved in May. As part of the Cuomo administration's Reforming the Energy Vision transition strategy, energy costs for low-income New Yorkers are to constitute on average no more than 6% of household income. (PSC Docket No. 12-M-0476)