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"If Nothing Else," NY Retail Marketing Review Must Require Brokers To Be "Fully Regulated"; "Transparency" on Broker Fees, Bond Requirement For Brokers

March 16, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

"If nothing else," the New York PSC's examination of the retail market as a result of its "full stop" order must result in the "full" regulation of brokers, Victor Ferreira, President of ESCO Big Apple Energy, said in written comments to the PSC

"If nothing else comes out of these proceedings it should be that the broker community become fully regulated with complete transparency on fees. If this issue is not addressed then we have done a disservice to deregulation in New York State," Ferreira wrote.

"If we are to truly reform the market, the PSC must recognize the impact of brokers on the pricing dynamic. Brokers have become a fixture in certain segments of the market. They act as gatekeepers to customers and make it very difficult for ESCOs to secure mutually beneficial relationships with customers. I do not take issue with brokers themselves, it is the fact that that they operate in complete independence with no requirement that they act in the best interests of their customers," Ferreira wrote.

"Brokers take absolutely no risk in this process but in many cases make three to five times the margin that the ESCO makes, and it is the ESCO that takes all the risk. This has made it very difficult for ESCOs to make money on a significant segment of the market and as a result, when there is unavoidable risk the only option for the ESCO is to recover their exposure with the variable month to month customer. Brokers in other jurisdictions are regulated. If nothing else comes out of these proceedings it should be that the broker community become fully regulated with complete transparency on fees. If this issue is not addressed then we have done a disservice to deregulation in New York State," Ferreira wrote.

Ferreira was not alone in highlighting brokers as an issue requiring attention from the PSC.

The Impacted ESCO Coalition said that, "brokers must be held accountable and 'have some skin in the game'"

"Requiring brokers to register with the Commission, and post performance bonds will aid the Commission in reaching its mass market consumer protection goals. Plainly, Brokers’ compensation is often tied to the number of customers it enrolls, that Customer’s usage and the Customer’s rate. Brokers fruitfully gain by enrolling customers, but are not held accountable by the Commission if a Customer is subject to deceptive, aggressive or other unauthorized marketing tactics. Brokers must have direct accountability to the Commission for their actions," the Impacted ESCO Coalition said

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