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New York DPS Staff Propose That ESCO Prices Under Bundled Home Warranty Products (HWP) Be Subject To Existing Price Cap
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New York ESCOs would lose one of the avenues under which ESCOs are not required to meet a price cap for mass market customers (and for natural gas, the only avenue) under a Department of Public Service (DPS) Staff white paper which, among other things, recommends that home warranty products (HWPs) be subject to the current price caps for mass market service
Currently an ESCO, after obtaining DPS approval for its specific product, may offer a HWP without being subject to a price cap
In an HWP white paper, Staff recommends that ESCOs only be allowed to offer an HWP as a guaranteed savings product or fixed price with 5% cap product.
Additionally, Staff proposes that HWPs should not be offered in conjunction with a compliant renewable electric product, as compliant renewable products are not subject to a price cap.
Staff said that, "ESCOs are charging HWP consumers 46.5% over the average utility rate."
Staff reported that this over-charging increases to 60% when limited to natural gas customers.
Although Staff's report could have been more explicit concerning the matter, it is understood that the 46.5% over-charging versus default service refers to the period January 25, 2021, and October 31, 2022, which was the period used for Staff data requests issued to ESCOs with HWPs
Staff also recommended that the PSC ban ESCOs' use of third parties to offer and service the warranty plans under HWP
"Only ESCOs with certified maintenance personnel employed directly by the ESCO itself should be allowed to offer HWPs to consumers," Staff proposed
Staff proposed that HWPs be required to provide a guaranteed service window of three business days from the time of a customer service call. ESCOs or other entities would not be permitted to charge a service call fee to the customer if the service is not "administered" in this timeframe.
Staff further proposed that, upon a customer enrollment onto an HWP, the ESCO shall be required, within 5 business days, to visit the customer's location to review covered appliances and ensure coverage eligibility
Staff proposes that, if such site visit is not conducted, the ESCO enrollment shall be cancelled
Staff sought to require line item billing of services received under a bundled commodity and HWP plan.
If a line-item break-out is not provided, Staff recommended that the HWP cost of the plan should not be bundled with commodity charges, and instead should be billed separately by the ESCO to the consumer
Staff proposed that the PSC prohibit per-claim limits under an HWP. Customers should have the right to use the full warranty coverage amount in a given service claim, Staff said
Staff proposed that HWPs be required to include a minimum $1,000 annual service coverage. Staff said that HWPs should permit the customer to carry the unused credit forward until it can be used, unless the customer ends the contract with the ESCO.
Staff also said that HWP customer agreements should provide clarity on the costs of any service call fees or deductibles.
"Staff maintains that any continuation of ESCO HWPs must include the following clearly defined provisions: (1) a single point of contact to address issues with HWP service; (2) a clearly established process of liability in which vague language and excessive coverage limitations are not left to the consumer to navigate; and (3) a clearly established process for consumer recourse," Staff said
"Regarding the second point, Staff believes that ESCOs must take full responsibility for HWP liability to reduce the logistical burden the consumer might have to navigate should an issue arise with their home warranty," Staff said
Staff noted that customers making a claim under an HWP may be interacting with a third-party, and that such third party may further contract out any service to independent local technicians. This can prove confusing and challenging for customers, especially in disputing any findings or work under the service call, Staff said
"Instead of forcing consumers to run this frustrating gauntlet, Staff proposes that the ESCO exclusively handle all dispute resolutions to ensure the consumer is made whole. It should not be the consumer’s responsibility to navigate a burdensome process to ensure they receive quality service which they pay a premium for. By establishing ESCOs as the main point of contact to deal with consumer disputes with the home warranty service, a more user-friendly process and equitable outcome for the consumer would be achievable," Staff said
Staff's recommendations listed above are meant to address Staff's concerns, "around the lack of pricing transparency, the negative involvement of third-party home warranty service providers, and weak consumer rights."
Among other things, Staff said, "DPS Staff is concerned that there is an overly complicated process that consumers need to follow to redeem their home warranty service under the third-party ESCO HWP model, which has proliferated in a way that is disadvantageous to the consumer."
"DPS Staff is also concerned about consumer protections, in that consumers are not receiving sufficient energy related value-added benefits associated with the home warranty service, and in relation to the cost of the products," Staff said
Staff reported that 21 ESCOs have received approval to offer HWP products. Six of these ESCOs were not offering the product during the January 25, 2021 to October 31, 2022 time frame
Staff reported that 13 ESCOs rely on a third party to perform any home warranty service
Staff said that only two ESCOs stated that their employees handle the on-site labor under warranty calls
Of the 13 ESCOs relying on a third-party for warranty service, Staff said that eight ESCOs use the same third-party provider, with Staff alleging that such third-party provider has a, "litany of consumer complaints on the Better Business Bureau website."
"These complaints describe issues where consumers are faced with a convoluted service redemption process, a misrepresentation of issue resolution timeframes, and an abdication of responsibility for adequate maintenance service," Staff alleged
Staff reported that 52,838 customers were enrolled in an ESCO HWP between January 25, 2021 and October 31, 2022, which was 3.24% of all customers served by ESCOs during this period
The PSC requested comments on the Staff white paper and the specific questions below:
1. What qualitative and/or quantitative evidence can ESCOs provide that shows their HWP offerings are providing value to customers? This evidence should include, but not be limited to, data specific to the number of consumer service claims, the rate of increase in commodity costs to the consumer over the contract period, and the number of successful service claims that resolve consumer service requests.
2. What barriers, if any, prevent ESCOs from separately disclosing the cost of the service contract from the cost(s) of commodity supply, thereby increasing the transparency of bills including HWP costs?
3. What added value do consumers receive by enrolling in ESCO HWPs when they can otherwise directly sign up for home warranty services that are not tied to their energy provider?
4. What barriers, if any, prevent ESCOs from establishing their own in-house home warranty division that would free them from relying on a third-party to handle the service obligation inherent to their HWP contract?
5. How many maintenance professionals would an ESCO need to employ to ensure their HWP customer base is covered in a way that supports the recommendations in the White Paper?
6. Are there any industry standards in New York or other states regarding HWPs and consumer protections associated with such products that the Commission should consider?
7. Any [sic] there any other consumer protections related to ESCO HWPs that the Commission should consider?
Case 24-M-0324
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Staff Recommends That ESCO Use Of Third-Party Home Warranty Companies Be Banned; ESCO Employees Must Perform Service
Staff Seeks Requirement That ESCO HWP Enrollments Be Cancelled If ESCO Does Not Visit Customer's Home Within 5 Days
Staff Says HWP ESCO Customers Paying Nearly 50% More Than Average Default Service Rate
PSC Seeks Comment On Implementing Staff Proposals
July 24, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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