On February 23, 2016, the New York Public Service Commission (“Commission”) issued an order limiting how electric and gas marketers (known in New York as “energy service companies” or “ESCOs”) can market competitive energy supply to residential and small commercial customers (“mass market customers”). Case No. 15-M-0127, In the Matter of Eligibility Criteria for Energy Service Companies, Order Resetting Retail Energy Markets and Establishing Further Process.

The order provides that starting March 4, 2016, new and renewed ESCO contracts for mass market customers must guarantee either that the price paid by the customer is no greater than it would have paid as a full-service utility customer, or that the energy supplied comprises at least 30-percent renewable electricity. The order also provides that, within 60 days of its issuance, the Commission will consider new requirements applicable to entities providing energy to mass market customers.

The Commission based its order on its determination that ESCOs are unable to compete with prices offered for commodity services by utilities, which have the benefit of economies of scale, and that the Commission receives a large number of complaints from customers of ESCOs. It cited its broad legal authority under Articles 1 and 2 of the New York State Public Service Law as providing it with jurisdiction for its actions.

The Commission’s order appears to be creating upheaval in the New York ESCO market, and it is raising concerns that its requirements may drive some ESCOs out of business. A group of ESCOs promptly sought, and succeeded in obtaining, a temporary restraining order against the new rules pending a hearing on the merits scheduled for April 14, 2016. National Energy Marketers, et al. v. New York Public Service Commission, Index No. 868-16 (S.Ct., Albany Cty., March 4, 2016). There is more to come in this New York story, and its outcome could influence the regulation of ESCOs in other jurisdictions around the country.