United States: New York Public Service Commission Issues Rules For Distributed Energy Resource Suppliers

Tiana Stephens is an Associate for Holland & Knight's Boston office.

The New York Public Service Commission (PSC) recently issued Uniform Business Practices for distributed energy resource (DER) providers (or suppliers), similar to the consumer protection standards that are already in place for energy services companies (ESCOs). The requirements apply to both community distributed generation projects and on-site mass market distributed generation providers – including companies providing rooftop solar systems, on-site generating systems for small businesses, large community-solar projects or other community distributed generation.

The purpose of these new marketing and contracting rules is to ensure that "customers are protected from confusion, fraud, and abusive marketing." The PSC noted that the rules would be applicable to wide-ranging systems of different sizes and markets – residential, commercial and industrial and accordingly, the rules were drafted with those differences in mind including making some requirements applicable only to some categories of DER providers.

The PSC said that the rules are part of a framework of regulation and pre-approved agreements, including interconnection agreements and tariffs, that will govern the integration of DERs into New York's electric system. The DER rules establish registration requirements, rules for handling customer inquiries and complaints, a standard disclosure statement, detailed marketing requirements and penalties for any violations. Under the new requirements, DER providers must provide information upon request regarding customer complaints, including with respect to specific transactions and information related to a DER provider's business operations and financials; PSC staff may conduct audits or similar reviews of DER providers and PSC staff must have access to the books, accounts, contracts, records and other documents of the DER provider as necessary. Applicants wishing to become a DER provider must disclose any criminal or regulatory sanctions against the DER provider, senior officers or any entities holding ownership interests of 10 percent or more in the DER provider. Additionally, contracts must be written in plain language and in the same language the DER provider used while marketing its products to the customer. ESCOs are already required to provide such information and have similar rules and the PSC stated that "[s]taff reviewed the UBP applicable to ESCOs to determine the extent to which those requirements should be applicable to DER suppliers."

In explaining why these rules were necessary, the PSC referenced its experience regulating ESCOs and said that the rules are "to prevent false promises, exploitative pricing, and other deceptive or intentionally confusing behavior in marketing to residential customers and small businesses." The PSC noted that "[a]s markets continue to evolve, these requirements will require and receive ongoing review and modifications to ensure that customers are appropriately protected and that DER markets are able to thrive." Notwithstanding the PSC's emphasis on consumer protections due to its apparent negative regulatory experience with some ESCOs, the PSC encouragingly highlighted that it is "mindful of the need to avoid unnecessary or overly burdensome obligations, particularly with respect to small DER suppliers...[and that] [t]he success of the Reforming the Energy Vision initiative depends on innovative individuals and businesses exploring and deploying new products and services."

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