Few Answers At New York Broker Technical Conference -- EnergyChoiceMatters.com

Few Answers At New York Broker Technical Conference

Brokers Bemoan "Double Standard", Demand Why ESCOs Must Not Show "Outrageous" Own Margin To Customers

August 8, 2023

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Copyright 2010-23 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The technical conference held today by the New York Department of Public Service regarding implementation of the PSC's recent order on the regulation of energy brokers and consultants produced few answers or clarifications for stakeholders

See background on the broker regulation order here

Despite DPS Staff, as previously reported, requesting, in order, "to help ensure efficient use of stakeholder time," that interested entities submit questions and/or proposals for topics to be covered in advance, Staff began the conference by addressing only a few pre-filed questions submitted in advance of the conference. While Staff identified nine issues for discussion, Staff did not start the conference by giving its own opinions on each topic, nor did Staff structure the conference to address each in due course

Rather, after Staff addressed a few discrete pre-filed stakeholders questions, Staff quickly opened the technical conference to unscreened live stakeholder questions. In the conference which was only scheduled for 2 hours, that approach led to about 1.5 hours of stakeholders mostly either seeking to re-litigate the PSC's order, or asking questions unique to their specific business model that had limited broader applicability to the market as a whole. In such instances, Staff generally referred back to the order's explicit language and noted that counsels for individual entities will need to determine if such entity is covered by the order. [As an aside, we certainly do not wish to forestall any voices, but the broker law (1) went through the multi-year public legislative process, (2) went through an admittedly accelerated rulemaking process with a public comment period at the PSC (though some stakeholders have alleged an infirm SAPA with respect to discrete issues), and (3) is now subject to formal petitions for rehearing, so public forums to debate the issues have been provided. Technical conferences are intended to address nuts & bolts implementation issues and serve as a forum to seek clarity on Commission language (even if Staff can't speak for the Commission), and, as cathartic as they may be, soapbox lectures during such conferences do not serve market participants. This does not mean such stakeholders may not raise legitimate points, though most were already noted in prior debates and were considered and rejected by the PSC, as extensively covered in this space]

In response to several pre-filed questions, Staff did attempt to highlight when an entity meets the definition of "broker" (which has a higher letter of credit requirement), rather than being just a "consultant".

Staff cited the language of the broker definition which covers an entity, "that assumes the contractual and legal responsibility for the sale of electric [or gas] supply service, transmission or other services to end-use retail customers, but does not take title to any of the electricity sold..."

Staff stressed that it was not making legal determinations at the conference. However, speaking generally, Staff said that if an entity assumes the contractual and legal responsibility for the customer contract, then the entity is a broker. If an entity is being compensated by ESCOs, but not assuming the contractual and legal responsibility for the customer contract, then the entity is a consultant.

One substantive point that Staff did affirm is that ESCO service to a customer under a valid ESCO contract, which was arranged by a broker/consultant prior to the August 31 broker/consultant registration deadline, may continue beyond August 31 regardless of whether the broker/consultant elects to register with the PSC. However, the ESCO may not provide compensation to the broker/consultant for such existing contract if the broker/consultant does not register with the PSC. Staff noted that the PSC's order did not require ESCOs to "re-rate" such contracts to remove broker/consultant compensation from the rate, if the broker/consultant does not register with the PSC, in instances which the ESCO compensation payment to the broker must cease after August 31

As provided in the order, Staff also affirmed that the order does not exempt "1099" entities, who may currently serve as contractors or agents of a broker, from individually registering as a broker/consultant if the 1099 entity's activities fall within the definition of broker/consultant. Only employees of a broker/consultant are exempt from having to individually register as a broker/consultant when engaged in activities that fall within the definition of broker/consultant

As provided in the order, brokers/consultants must file a registration by August 31. Staff has until December 1 to review registrations. As provided in the order, Staff affirmed that brokers/consultants meeting the August 31 filing deadline may continue to operate in the interim until Staff rules on their registration application

Staff again said that while a broker/consultant list will eventually be posted by the PSC, for the interim period beginning after August 31, ESCOs shall review the PSC's Document and Matter Management (DMM) System, under Matter Number 23-01227 to ensure that ESCOs are only compensating brokers/consultants that have filed a registration

A further technical conference will likely be held to address further issues

During the technical conference, a speaker identifying themself as Chris Schiller of Resolution Energy criticized what Schiller termed the "double standard" of requiring that broker compensation from ESCOs be disclosed to the customer, but not requiring ESCOs to disclose their margin to customers, with Schiller further calling the treatment "discriminatory". Schiller alleged to have seen "outrageous" margins in prior ESCO contracts, by reverse engineering the ESCO's costs

Schiller's comments were supported by several broker entities in the online chat of the conference's webex.

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