New York’s Energy Service Companies (“ESCOs”) will face significant challenges in the first quarter of 2017. The Public Service Commission’s December 16, 2016 Order Adopting a Prohibition on Service to Low-Income Customers by Energy Service Companies (“Low-Income Order”) gives each utility 60 days from the date of that Low-Income Order 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. However, the Commission included an important exception to the prohibition that ESCOs may want to take advantage of – the prohibition does not apply if an ESCO receives a waiver from the Commission.

Petition Deadline of January 15, 2016

In order to retain low-income customers beyond current contracts, ESCOs must petition the Commission by January 15, 2017 (30 days from the Low-Income Order) requesting a waiver. The Commission may grant waivers for ESCOs that offer guaranteed savings programs if the ESCOs 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.

Based on the Low-Income Order, the Commission may grant ESCOs individual waivers on a case-by-case basis using the above factors, along with “other conditions it determines are necessary to protect consumers.”

Staff Guidance on Price Guarantees

Importantly, the Staff Guidance developed for the February 23, 2016 Order Resetting Retail Energy Markets and Establishing Further Process (“Reset Order” – now vacated based on litigation brought by attorneys at Phillips Lytle LLP), may be useful in making the necessary showing to obtain a Low-Income Order waiver. The Reset Order required that ESCOs could only serve mass market customers if the respective sales agreements guaranteed the customers would pay no more than if the customers remained with the utility (or, alternatively, provided an electricity product derived from at least 30% renewable resources). This is, essentially, the same guarantee as the Low-Income Order waiver, except with a broader group of customers.

The Staff Guidance suggests a number of potential compliant pathways for ESCOs to develop guaranteed savings programs. One approach is for ESCOs to create sales agreements that guarantee savings over a period of time, with customer credits to be applied to the customer’s bill at the end of the period specified in the agreement for amounts in excess of what the customer would have paid under utility service. The Staff Guidance proposed a number of methods that ESCOs could use to calculate what the customer “would have paid” under utility service:

  1. ESCOs could create systems for calculating the utility rate by using rate information from utility tariffs;
  2. ESCOs could use utility-created calculators whereby the customer can calculate what he or she would have paid under full utility service;
  3. Some utilities offer ESCOs the capability of billing the customer at the utility rate; or
  4. ESCOs could use an Electronic Data Interchange (“EDI”) transaction that provides data on what the customer would have paid under utility service.

Based on informal inquiries with Department of Public Service Staff, the first three approaches from the Staff Guidance could form the basis for a waiver request. Unfortunately, the fourth option (known as an EDI “503 Transaction”) has, somewhat ironically, not been implemented.

As noted above, the deadline for formal waiver petitions is January 15, 2017. Alternatively, ESCOs considering the waiver could request an extension of the waiver deadline, and would arguably need to do so by “one day prior to the deadline.” Granting of such extensions is within the sole discretion of the Secretary to the Public Service Commission; thus, the safest approach for interested ESCOs is to file a timely waiver petition.

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 and formal petitions to the Public Service Commission. For more information about Phillips Lytle’s Public Service Commission practice, please contact Thomas F. Puchner, Partner, at (518) 472-1224 Ext. 1245, tpuchner@phillipslytle.com, or Kevin C. Blake, Associate, at (716) 847-7082, kblake@phillipslytle.com.