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NY PSC imposes moratorium on low-income contracts with energy suppliers

The New York Public Service Commission voted 3-1 July 14 toplace an indefinite moratorium on retail energy service companies, or ESCOs,from entering into new or renewed contracts with low-income customers toprevent price gouging.

The PSC approved a staff-proposed halt on new and renewedESCO contracts with low-income New Yorkers until further notice afterstakeholders failed to come to a consensus over compliance with thecommission's May 20 directive that ESCOs must either guarantee savings tolow-income customers with their products or lower their overall bill through"value-added" services.

Gov. Andrew Cuomo welcomed the decision in a news release."This action will help protect low-income households from unscrupulousenergy service providers and deliver much-needed relief to New Yorkers acrossthe state," Cuomo said. "By taking aggressive action to keep energycosts affordable, we are building a stronger, more sustainable New York."

According to the governor's office, there are currently 200ESCOs in New York that supply more than 20% of residential and small commercialcustomers. The governor's office also estimated that there are more than400,000 low-income customers currently receiving services from ESCOs and thatlow-income customers constitute approximately 25% of all electric customers inNew York.

PSC Chair Audrey Zibelman during the commission meetingstressed that it is a temporary halt to protect consumers as the commissionconsiders reforms to "reset" the ESCO market in New York after aFebruaryinvestigation found that a number of ESCOs, which compete against utilities,had been overcharging customers for electricity and natural gas service. Thecompanies also had failed to provide financial savings and supply electricityproduced from renewables, the investigation found. The commission in Februaryalso revoked the right to work in the state for ESCOs that violated stateregulations and imposed numerous new ESCO market regulations including a"do not knock" rule for unwarranted solicitation.

"I don't see this as a harm to the market,"Zibelman said. "One of the things that make markets successful is consumerconfidence and so when … people feel like that they're being harmed, they'reless likely … to work with ESCOs."

Commissioner Diane Burman, who voted against the moratorium,said she had a number of concerns over halting the market. Overcharging forelectricity and heating "may be true for some ESCOs, but it is absolutelyincorrect to say this is for all ESCOs," she said. "We may have tolook more at our enforcement process rather than a moratorium."

"I am concerned about the path forward for us, ESCOsand utilities who want to serve low-income customers," Burman said.

Bryan Lee, a spokesman for the Retail Energy SupplyAssociation, which represents New York ESCOs, in a July 19 statement defendedthe right of all energy customers to access the competitive market and said theassociation is continuing to review the order.

"If maintained, the moratorium would prevent low-incomecustomers from accessing fixed-price energy offers that provide price certaintywhen compared to New York utilities' monthly variable rates," Lee said."This is a benefit that is of particular value to consumers on fixed orlimited incomes. By way of this order the commission has taken away thelow-income consumer's ability to enter into fixed rates just before thepotentially volatile winter months when we know from experience that utilitydefault rates can fluctuate widely in response to extreme weather."