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New York dismisses retail providers' objections to hearings on overcharging

New York regulators dismissed a request by energy service companies, or ESCOs, to stop the upcoming hearings into alleged overbilling and other abuses in the retail energy market. Efforts by the ESCOs to curb the scope of the investigation by excluding issues related to commercial and industrial customers and ESCO profits were also rejected.

The New York State Public Service Commission on Aug. 2 rejected an April 12 request by the Retail Energy Supply Association, or RESA, and an earlier request by Direct Energy Services, an ESCO, to halt the pending evidentiary hearing phase of the commission's investigation into overcharging by ESCOs. The hearings are scheduled to begin in October. However, the regulatory body also ruled that during the upcoming proceedings, the ESCOs would not have to disclose any personal information that could identify customers.

The action follows a June 30 ruling by a state Supreme Court judge in Albany County that the state's efforts could protect low-income households from paying higher energy bills through ESCOs and a July 27 upholding of the ruling by the Appellate Division that regulators have the authority to cap prices of ESCOs at utility rates, even though the commission does not have ratemaking jurisdiction over the third-party energy sellers.

"The record is clear that certain ESCO customers have paid much more for their energy than necessary, and instead exposes them to the risks of overcharging," said Commission Chair John Rhodes. "This action signals the end of an ESCO market that provides no value to customers, and instead exposes them to the risks of overcharging."

An investigation of a 30-month period leading up to July 2016 by commission staff found that ESCOs had charged residential and commercial utility customers about $817 million more than if they had gone with their local utility. Low-income New Yorkers alone had paid an excess of almost $96 million.

In December 2016, the commission cut off market access to New York's roughly 200 ESCOs for nearly a third of the state's energy customers by banning the retail energy suppliers from renewing or entering into new contracts with subsidized, low-income customers until new regulations are implemented to combat overcharging and other deceptive practices. The regulators voted 3-1 for the ban to replace an indefinite moratorium that was challenged in court by RESA after a judge vacated new rules from February 2016 that prohibited unwanted door-to-door soliciting by ESCOs and revoked their right to conduct business within the state if found to be violating state regulations.

"I've been observing the ESCOs using every legal and procedural that I can imagine — and I am a regulatory attorney of some years standing — to slow down and limit this proceeding," Commissioner Gregg Sayre said during the meeting. "I look forward to having an opportunity to make some decisions regarding what appears to be a troubled market."

Commissioner Diane Burman was the lone dissenting vote on denying the appeal and affirming the authorization of the hearings. She objected over concerns of procedural "missteps" and the PSC secretary's December 2016 notice for wrongly setting policy.

Chairman Rhodes said the next step will explore "whether and how ESCOs can truly provide energy services and value to New Yorkers" in support of Governor Andrew Cuomo's Reforming the Energy Vision policy to modernize and transform the statewide grid and energy markets.

Bryan Lee, a spokesman with RESA, said the ESCO trade group is disappointed with the commission for rejecting efforts to collaborate in addressing concerns raised in the proceedings.

"An adversarial approach is less likely to address these matters in a manner that will best serve the interests of consumers and the state's economy," said Lee. Despite this, RESA is committed to working "collaboratively and in the best interests of consumers and the continued success of New York's competitive energy markets," said Lee. (Case Number 15-M-0127)