New York DPS Staff Proposes Deadline For Brokers/Consultants To Register With PSC Under New Law

Staff Proposes Broker Disclosure Requirements, Including Compensation Disclosure By ESCOs & Brokers

Proposed Registration Form; Submission Of Broker Marketing Materials To PSC; Proof Of Local Door-to-Door Law Compliance

March 14, 2023

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Reporting by Paul Ring • ring@energychoicematters.com

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Staff of the New York Department of Public Service have proposed changes to the uniform business practices to implement New York's recently passed law which imposes new regulations on brokers and consultants, including a registration requirement, financial surety requirements, and requirements concerning compensation disclosure

See background on the broker law here (PSL §66-t)

Staff noted that the provisions of PSL §66-t are to take effect 180 days after enactment, or June 21, 2023.

"To ensure that energy brokers and consultants subject to PSL §66-t are provided with sufficient time to comply with its requirements," Staff proposes that brokers and consultants be given until August 31, 2023, to become fully registered with the Department.

PSL §66-t defines "energy broker" as, "an entity that assumes the contractual and legal responsibility for the sale of electric supply service, transmission or other services to end-use retail customers, but does not take title to any of the electricity sold, or an entity that assumes the contractual and legal obligation to provide for the sale of natural gas supply service, transportation or other services to end-use retail customers, but does not take title to any of the natural gas sold."

The term "energy consultant" is similarly defined very broadly to mean any, "person, firm, association or corporation who acts as broker in soliciting, negotiating or advising any electric or natural gas contract, or acts as an agent in accepting any electric or natural gas contract on behalf of an ESCO."

Staff said, "These two definitions cover both individuals and business entities that undertake a multitude of activities related to seeking contracts for energy services, including soliciting, negotiating, advising, entering into the contract itself, assuming the legal responsibility associated with the sale of electric or gas supply service, and finally, acting as an agent regarding any and all such activities. Accordingly, consistent with the plain language of PSL §66-t(1)(c) & (d), Staff proposes that any individuals or business entities that anticipate undertaking any of these activities must register with the Department as otherwise specified in this proposal."

Staff proposes that individual employees of a broker or consultant do not need to register with the PSC. Staff does propose that CCAs be considered brokers, and subject to broker registration and other requirements

"Staff does not recommend that the individual employees of a registered energy broker or consultant must also register. In such a case, the employer’s registration would cover its individual employees, contractors, and agents," Staff said

"Additionally, the plain language of PSL §66-t(1)(c) & (d) make clear that the Legislature did not intend to cover only individuals acting on behalf of ESCOs and DER suppliers, but any entities that undertake the activities noted above. To be clear, the Department finds that the plain language of the definition of 'energy broker' also applies to Community Choice Aggregation (CCA) administrators, as these entities act as brokers in procuring energy supply for communities, and to some DER suppliers or ESCOs that also act as brokers," Staff said

Staff further said, "The definition of 'energy consultant' applies to any entities that provide consulting services to customers related to soliciting, negotiating, advising, or accepting on behalf of a customer a contract for electric or natural gas service. Depending on the service being provided, this definition potentially includes entities such as utility rate consultants, ESCOs, DER suppliers, and other entities that counsel customers regarding an electric or natural gas or distributed energy resources contract or act on a customer’s behalf in accepting any electric or natural gas contract."

Staff's proposal includes a draft registration form for brokers and consultants, which would require:

(1) contact information for the applicant;

(2) identification of any affiliates of the applicant conducting energy-related business;

(3) identification of any corporate entity with an ownership interest of 10% or more in the applicant;

(4) information on the methods by which the applicant intends to market energy products and services;

(5) identification of other states in which the applicant operates;

(6) identification of any criminal or regulatory sanctions from any jurisdiction imposed against the applicant, any senior officer of the applicant, and any corporate entity with an ownership interest of 10 percent or more in the applicant;

(7) identification of any pending regulatory actions or investigations from any jurisdiction involving the applicant;

(8) identification of any acquisitions, mergers, dissolutions, or bankruptcy involving the applicant in the previous 36 months; and

(9) security breaches associated with customer information.

Staff recommends that energy brokers and consultants be required to complete and submit a registration form each year.

Additionally, Staff proposes that any broker or consultant conducting door-to-door solicitation would also be required to submit, "proof of compliance with any local laws, rules, regulations, or ordinances requiring a registration, permit, license, certification, authorization, or other approval to conduct door-to-door solicitation in the area in which the broker or consultant is to conduct soliciting activities during the annual registration period."

Under Staff's proposal, any energy broker or consultant that has a sales contract with the consumer would also be required to submit a sample of its compensation disclosure statement and samples of any sales agreement. Such contracts must be reviewed and approved by Staff prior to using any contract to enroll customers.

Brokers and consultants would also be required to submit sample informational and promotional materials used for mass marketing purposes as well as procedures used to obtain customer authorization for access to a customer’s historic usage or credit information

Brokers and consultants would be required to submit, as part of the registration, an Officer Certification document sworn to by a high-level officer of the applicant, such as the Chief Executive Officer, President, or the equivalent in office, function, and ability to legally commit the entity, attesting that the information contained in the registration package is accurate and truthful.

Staff recommends that any entity that performs services that meet the definition of both "energy broker" and "energy consultant" only be required to register once as both entities and follow the process to register as an energy broker.

All brokers and consultants would be required to pay an annual registration fee of $500.

PSL §66-t(3) requires that energy brokers demonstrate financial accountability as evidenced by a bond or other method of financial accountability in an amount not less than $100,000 and that energy consultants demonstrate financial accountability as evidenced by a bond or other method of financial accountability in an amount not less than $50,000.

"To meet this statutory requirement, Staff proposes that energy brokers and consultants be required to obtain an irrevocable standby letter of credit issued for a period of at least one year with the Department as beneficiary," Staff proposes

PSL §66-t(4) requires energy brokers and energy consultants to disclose their form and amount of compensation to customers via a conspicuous statement on any contract or agreement between the energy agent, consultant, broker, or intermediary and its customer.

"Staff recommends that if an ESCO or DER supplier collects broker compensation on behalf of the broker or consultant, such compensation shall be added to the Customer Disclosure Statement in the ESCO or DER supplier’s customer agreement and reflect the amount and method. To the extent there are caps or limits on the price ESCOs or DER suppliers may charge for any certain product, Staff believes that those pricing restrictions must continue to be observed, inclusive of any and all fees, including but not limited to energy broker or consultant compensation," Staff said

"To the extent that an energy broker or consultant has a direct contractual relationship with customers, Staff proposes that energy brokers and consultants be required to set forth the form and amount of their compensation on the first page of any contract or agreement with their customers. The broker or consultant would be required to submit a sample disclosure of compensation statement as an attachment to its registration form," Staff said

Staff recommends that all such disclosures of compensation to customers include any dollar amount paid to the broker or consultant, the form in which the compensation was given to the broker or consultant, the entity that made the payment, and any broker fee or margin that was added to the energy supplier’s rate. Staff further recommends that this financial disclosure include anything of value that was given as compensation to the energy broker or consultant for its work, including commissions, bonuses, and any non-financial compensation. Additionally, Staff recommends that this statement be made in plain language and appear in 12-point font size or larger.

PSL §66-t(5) prohibits any energy broker, energy consultant, or any person acting on behalf of the broker or consultant from offering or making, directly or indirectly, any rebate of any portion of the fee, premium, or charge made, or from paying or giving to any entity acting as a representative of the energy rate payer, either directly or indirectly, any commission, any part of its fees or charges, or any other consideration or valuable thing, as an inducement or compensation for any energy supply or energy-related business.

"Staff interprets this language to include anything of value offered as an inducement or compensation for exclusive access to the rate payer or the dwelling unit or multiple-dwelling unit structure in which the rate payer resides," Staff said

Additionally, PSL §66-t(5) prohibits any entity acting as a representative of the energy rate payer or of the prospective energy rate payer or anyone having any interest in the real property from knowingly receiving, directly or indirectly, any such rebate or other consideration or valuable thing.

Staff stressed that, "Notwithstanding the changes being proposed here, ESCOs and DER suppliers would remain responsible for the actions of their agents, including any energy broker or consultant enrolling customers for the benefit of an ESCO or DER supplier."

ESCOs and DER suppliers would be required to verify that any energy broker or consultant working on its behalf is properly registered with the Commission and should perform regular reviews to ensure the registrations of such brokers or consultants remain valid. The Department would maintain a list of registered energy brokers and consultants on its website

Case 23-M-0106 et al.

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