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Proposed Changes Would "Devastate" State's Retail Energy Market, Retail Suppliers Say
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Changes proposed by Staff of the New York Department of Public Service to implement revisions to General Business Law (GBL) §349-d, concerning a prohibition on material changes to ESCO contracts, would, "remove all customer choice," and, "devastate the competitive retail energy market," the Retail Energy Supply Association (RESA) said in comments to the New York PSC
Under the revised General Business Law (GBL) §349-d, which became effective March 18, 2024, energy services companies (ESCOs) are prohibited from making any change to a contract price, or from changing to or from fixed or variable pricing, without the express consent of the customer
§349-d specifically states, "No material change shall be made in the terms or duration of any contract for the provision of energy services by an ESCO without the express consent of the customer. A change in price or a change to or from fixed or variable pricing shall be deemed to be material."
This provision of §349-d is specifically limited to residential service or service sold or offered through door-to-door sales (regardless of customer class).
See background on the new law here
Among other things, RESA said that Staff's proposal to implement §349-d does not limit the express consent requirements to the subset of customers specifically identified in the law -- namely, residential customers, and door-to-door customers (of any customer class)
"DPS Staff seeks to modify the UBP to extend the requirements of GBL 349-d(6) and (7) to all customers -- no matter their size, sophistication or solicitation method," RESA said
RESA noted that large customers routinely seek and enter into arrangements that frequently include, "complex pricing that can and, often, does vary regularly pursuant to the contractual terms to which the customer agreed."
"[I]f ESCOs are unable to change a customer’s price pursuant to the specific terms of their agreements with customers without obtaining consent to every price change, they will not be able to offer the more complex pricing arrangements that commercial and industrial customers have come to expect and want," RESA said
"Consequently, all customers will only have two options available -- a fixed price arrangement or utility default service. Such limitations are anathema to a competitive market structure. Further, although these limited choices may be acceptable to residential customers, these arrangements do not satisfy the more complex needs of commercial and industrial customers," RESA said
RESA also objected to Staff's proposed definition of "material change" to be, "Any change that affects the rates, terms, and conditions of service contained in the customer agreement."
Aside from prohibiting a "material change" absent consent, GBL 349-d provides that, "[a] change in price or a change to or from fixed or variable pricing shall be deemed to be material."
RESA said that, "a definition that includes 'any' change would render the legislature’s use of the word 'material' superfluous in direct contravention of the principles of statutory construction."
RESA further said that Staff's definition would lead to higher prices for customers
"[S]uch a broad definition would require ESCOs to receive consent for changes to terms that have no substantive impact on the customer (e.g., ESCO contact information)," RESA explained
"[I]f the customer is unwilling to consent to such a change, the customer would then be able to terminate the agreement without incurring an early termination fee. As a result, an ESCO could be exposed to substantial losses simply because it made a non-material change, like changing its telephone number. Such a result is simply untenable and will result in ESCOs attempting to protect against such risk by increasing the prices they charge customers," RESA said
RESA also said that the PSC should "clarify" that, if a customer has already consented in their contract to a potential price adjustment should a change of law occur, further consent will not be required in order for an ESCO to change the price in accordance with such a provision.
RESA objected to the requirement for ESCOs to obtain express consent of the customer for monthly variable rate changes, as proposed by Staff
RESA also objected to Staff's proposed requirement that ESCOs shall send renewal notices each month to customers on "month-to-month agreements, which expire and are renewed each month."
RESA also sought confirmation that the proposed changes to the UBPs will not be applied retroactively (i.e., to pre-existing agreements)
NRG Energy and Constellation NewEnergy, each in separately filed comments, raised similar concerns to those of RESA
NRG alleged, "Whether by design or error, the Staff Proposal and the proposed restructured amendments
to the UBP far exceed the bounds of GBL § 349-d and will interfere with all ESCO contracts, even
those executed by sophisticated business customers who were never intended by the legislature to
be impacted by this statute. The end result of this continued distortion of GBL § 349-d is a Staff
Proposal that is outside the scope of the legislation, inconsistent with prior Commission precedent,
and improperly noticed under the State Administrative Procedures Act ('SAPA')."
Constellation said in its comments that, "[T]he new
changes do not allow ESCOs to effectuate price decreases without customer consent, and do not
allow flexibility to change prices in interaction with other legal requirements and existing mass
market products. This will lead to higher prices to prepare against those risks."
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June 17, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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