United States: New York Significantly Restricts Competitive Retail Electricity Supply

In an order issued February 23 (the Order),1 the New York Public Service Commission (PSC) took the surprising step of effectively and prospectively shutting down the competitive retail electricity market in the state for the majority of residential and small commercial (mass market) customers. The Order would limit energy service companies (ESCOs) to serving mass market customers under contracts that either (i) guarantee customer cost savings in comparison to utility rates or (ii) guarantee that the energy delivered to mass market customers consists of at least 30 percent renewable energy. This limit would apply not only to new customers but also to contract renewals, and it purports to become effective on March 4, 10 calendar days from issuance of the Order. This Order would immediately and directly affect more than 100 competitive retail suppliers operating in the state and more than one million mass market customers. 

Background

The Order is the latest in a series of state regulatory actions triggered by consumer complaints. When retail electricity markets began opening up to competition nearly two decades ago, participation was largely limited to large industrial customers. As mass market participation increased in recent years, and particularly in the wake of price spikes in the Northeast during the winter months a couple of years ago, many customers receiving competitive supply realized they were paying rates higher than the utility rate and began to complain. State regulatory commissions and, in some cases, legislatures reacted to those complaints by launching investigations, penalizing some suppliers, issuing new regulations and amending laws. Competitive retail suppliers have been working to comply with new state requirements, which can include increased customer notice requirements, limits on variable rate contracts and additional regulatory filing requirements. New York's response, however, is a unique one.

New York's Action

This action by the New York PSC stems from efforts to revisit ESCO eligibility criteria and modify the consumer protections applicable to the ESCOs, known as the Uniform Business Practices (UBPs), to address ongoing concerns about the ability of the competitive retail markets to provide sufficient competition or innovation to mass market consumers. Following a Technical Conference last spring, the PSC Staff issued a proposal (Staff Proposal) on July 28, 2015. This Staff Proposal called for the retail electric supply industry to develop clear and common standards for core issues of importance to consumers, including the ESCOs' ability to provide high-quality and responsive customer service; manage risk associated with offering fixed-price products; use common, easy-to-understand contracts and/or contract language; use appropriate marketing practices; and demonstrate they are performing well, as part of a review to be conducted every two years. However, the Staff Proposal did not go nearly as far as the Order in terms of eliminating the majority of the mass market in the state. The PSC issued a Notice of Proposed Rulemaking on August 12, 2015, and held a Technical Conference in response to the Staff Proposal on August 20, 2015. The PSC accepted comments on the Notice of Proposed Rulemaking through September 28, 2015. 

In issuing the Order, the PSC went well beyond the Staff Proposal and indicated that it was doing so in response to comments received by parties in order to "ensure sufficient protection of the public interest and that the prices that customers pay for those services are just and reasonable." Citing the fact that the New York Department of Public Service in 2015 received more than 5,000 initial complaints and more than 1,000 escalated complaints, the PSC concludes in the Order that "[a]n immediate transition away from a retail market focused on a commodity resale, to a market in which competitive energy service providers provide guaranteed savings to consumers or further clean energy goals, is warranted."

As noted above, the primary change instituted by the Order is the elimination of competitive retail supply service for mass market customers other than in two very limited circumstances. The only products permitted going forward for new and renewed mass market customers will be contracts that guarantee savings versus utility rates on an annual basis and contracts that provide for at least 30 percent renewable energy, made up of biomass, biogas, hydropower, solar energy and wind energy. Mass market customers served under variable rate contracts will be required to be enrolled in a compliant program (guaranteed savings or renewable) by the end of the current billing cycle, or the customer must be returned to utility service. It is interesting to note that ESCO service offered as part of a Community Choice Aggregation is exempt from these limitations. 

The Order also provides for enhancement of PSC enforcement of its rule regarding violations of the UBPs, consumer complaints and violations of sales or marketing regulations. With respect to violations of the UBPs, the PSC announced that in addition to eliminating the notice and cure period process currently in place when an ESCO violates the UBPs, it will issue an Order to Show Cause to demand an ESCO present a case to maintain its eligibility for any single violation of the UBPs. For consumer complaints, the UBPs will be revised to explicitly detail PSC's authority to impose consequences on ESCOs where there is a material pattern of consumer complaints on matters under an ESCO's control, such as marketing practices, even when those complaints do not reveal any violation of the UBPs. Regarding violations of other rules, the Order modifies the UBPs to explicitly state that the PSC may impose consequences on ESCOs that violate any state, federal, or local law, rule, or regulation, and further impose a "do not knock" rule, which applies to ESCOs that proceed with door-to-door marketing to a customer who has posted a nonsolicitation sign.

Finally, the Order provides that the PSC will consider what long-term conditions should be imposed on ESCO eligibility in the 60-day period following its issuance. This consideration will include the conditions under which ESCOs may enroll mass market customers on a going-forward basis, whether the existing three-day rescission right should be extended or modified, whether ESCOs should be required to post performance bonds, and what penalties may apply to ESCOs that violate the UBPs. The PSC will issue a notice soliciting comments on these issues and potentially others.

What Now?

The PSC in the Order appears to have anticipated some of the multitude of arguments it will face from retail suppliers in the wake of this extreme action. For example, the Order asserts that authorizations to provide retail supply in the state are not "licenses" under New York law but rather are "tariffs" governing ESCO access to utility distribution systems, and accordingly the PSC's actions do not constitute a taking in violation of due process. In addition, the PSC explains that the Order only requires changes to ESCO contracting processes prospectively and therefore is not interfering with existing contracts. Notwithstanding these justifications and arguments, there is a high likelihood of a strong reaction by retail suppliers to the shutting down of such a significant market. If the Order remains as issued and goes into effect, it remains to be seen what its broader-reaching implications may be. 

Footnotes

1 Order Resetting Retail Energy Markets Establishing Further Process, Cases 15-M-0127, 12-M-0476, 98-M-1343 (February 23, 2016).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Florence K.S. Davis
David T. Doot
Kate McGinnes
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions