New York PSC Denies Rehearing On Broker Financial Security Instruments (Bonds), Other Issues

July 23, 2024

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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The New York PSC on July 23 issued an order denying rehearing of its April 2024 broker regulation order on rehearing and reconsideration, with the PSC again rejecting the use of surety bonds as a means for brokers to show the required financial capability

In adopting broker registration requirements, the PSC had ordered that brokers shall post a $100,000 irrevocable standby letter of credit for registration ($50,000 for consultants). The PSC declined to allow the use of surety bonds to satisfy the financial accountability requirement of PSL §66-t, with the PSC mandating that applicants provide an irrevocable standby letter of credit

As previously reported, Family Energy sought rehearing of the April 2024 order on rehearing, alleging that the April 2024 order failed to address arguments that statute requires the PSC to accept surety bonds as a means of demonstrating financial fitness for brokers

PSL §66-t(3)(a) requires brokers and consultants to demonstrate financial accountability, "as evidenced by a bond or other method of financial accountability."

Family argues that while the PSC may establish other means for a broker to demonstrate financial fitness, the PSC per this statutory language must allow the use of bonds

The PSC found Family's arguments to be, "without merit."

"Family contends that this [above-cited] language grants the Commission authority to define the other methods of financial accountability but does not allow the Commission to reject the use of a bond. The Commission does not agree with Family’s proffered interpretation," the PSC said

"PSL §66-t requires the establishment of a registration process for brokers and consultants and gives the Commission broad authority to refuse to register or revoke registrations. As such, PSL §66-t(3)(a) vests the Commission with authority to determine the proper method of financial accountability for brokers and consultants as a part of its establishment of a registration process," the PSC said

The PSC further stated, "The method of financial accountability was not an issue raised in any of the three petitions for rehearing of the June 2023 Order, and thus was not before the Commission in the April 2024 Rehearing Order. The submission of additional comments related to the method of financial accountability after the issuance of the June 2023 Order does not obligate the Commission to address the same issue again when it was not the subject of a petition for rehearing."

The PSC further found that Family Energy failed to seek timely review of the financial instrument issue as originally contained in the PSC's June 2023 broker regulation order (which was subject to rehearing and led to the April 2024 order on rehearing) and that Family is time-barred from seeking rehearing.

As previously reported, the New York Retail Choice Coalition (NYRCC or Coalition) has previously stated that it will file an appeal of the PSC's April 2024 broker regulation and registration order on rehearing, due to how the PSC implemented the financial accountability requirements for brokers and consultants. The July 23, 2024 order denying rehearing does not impact or address this NYRCC appeal

The PSC also found that Family Energy failed to raise within the required timeframe objections to other issues regarding the original June 2023 order (noted below) and denied rehearing of such claims. Nevertheless, the PSC said that it would reach the same conclusions, and would affirm its prior findings on each issue, to the extent the claims were not time-barred

Among other things, Family objected to the June 2023 order's requirements that broker applicants file, as part of their registration with the PSC, customer notices and marketing materials, with applicants also required to provide information on how brokers will respond to customer inquiries, while being subject to the same standards as ESCOs

Family argued that such measures for brokers are redundant and said the PSC's adopted broker UBP provision, "requires the submission of materials that would be exclusively within the purview of the ESCO (such as customer notices and marketing materials)."

"Broker and consultant marketing standards are set forth in Section 11.E [of the UBP]. Section 11.E. is nearly verbatim to the Section 10 Marketing Standards that apply to ESCOs and their marketing representatives, which raises the question of whether the same result could have been achieved by simply reiterating broker and consultant responsibilities (as ESCO marketing representatives) to adhere to Section 10," Family had said

However, the PSC reiterated its prior finding that the broker UBP provisions, "are meant to encompass all business models involving brokers or consultants and the many functions those entities may provide in the retail energy marketplace."

"Family Energy is incorrect when it states that customer notices and marketing materials, for example, are exclusively within the purview of the ESCO. While that may be Family Energy’s particular business model, some energy brokers and consultants may have their own marketing materials, customer notices, and customer agreements which would need to be provided as part of a registration package," the PSC said

Family had also alleged that the PSC's requirement for brokers to comply immediately with the new regulations, while simultaneously directing DPS Staff to review those same regulations for future modifications, is arbitrary and capricious

The PSC said that it previously addressed this argument in its April 2024 rehearing order, and said that Family has not presented any new circumstances to justify reconsideration

Family also argued that independent contractors of brokers and consultants should not be required to register with the PSC.

"The Commission denied rehearing of this issue in the April 2024 Rehearing Order. Again, the Commission denies a second rehearing of this issue as Family has not cited any new circumstances that justify a second rehearing," the PSC said

Case 23-M-0106 et al.

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