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PSC's Order Causes "Entire Marketing Channels" To Shut Down, Affidavit Says
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The New York PSC's broker regulation order -- and its requirement that all persons brokering on an independent contractor (non-employee) basis must be individually registered as a broker -- has caused, "entire marketing channels to shut down
completely," Diversegy, LLC and Citizens Choice Energy, LLC said in an updated court filing
As previously reported, Diversegy, LLC and Citizens Choice Energy, LLC are plaintiffs in a state court appeal seeking to, among other things, require that the PSC treat 1099 workers in the same manner as W-2 employees, and that the PSC hold that 1099 workers do not need individual broker registration and can operate under the registration of the broker or ESCO for whom they sell (as is the case for W-2 employees)
The PSC's order does not explicitly require all 1099 workers to register as a broker, but holds that any independent contractor must do so (effectively encompassing all 1099 workers, though the PSC emphasized that the degree of control that a broker has over a sales agent is the deciding factor, not their employment status vis-a-vis W-2 vs. 1099)
"[N]on-employee entities that perform work for the
registered broker or consultant must be subject to registration
requirements because of the lack of control over such entities," the PSC said in an order on rehearing
See more background on the broker regulation order here
The Supreme Court, Albany County accepted supplemental pleadings from all parties in the appeal proceeding, in which Diversegy, LLC and Citizens Choice Energy, LLC provided an update concerning the impact from the PSC's broker regulation order
Diversegy, LLC and Citizens Choice Energy, LLC describe the operations of "master brokers" who serve smaller customer accounts and use dozens of 1099 salespeople working under their umbrella
Diversegy, LLC and Citizens Choice Energy, LLC provided an affidavit from Alan Schwab, President of
Diversegy, LLC, and also President of Citizens Choice Energy, LLC, who stated, "Since the Orders became effective, the 1099 employees who serve the master
brokers have been unable to work, which has greatly harmed the 1099 employees and devastated
the business model of the master brokers, causing entire marketing channels to shut down
completely."
The Schwab affidavit further stated, "Although we do not know the exact number of individual 1099 employees
engaged by Brokers (and more specifically, by Master Brokers, as described here), it is our
understanding that virtually all such 1099 employees, together with the Master Brokers who
engage them, have stopped serving the New York market since the regulations went into effect."
Diversegy, LLC and Citizens Choice Energy, LLC also included an affidavit from John Nelson, Founder and President of Vexso Black LLC, a "master broker", in which Nelson stated, "Since the New York State Public Service Commission's
Orders became effective, the 1099 workers have been unable to work, which has greatly harmed
those workers and severely harmed my company's business model, causing entire marketing
channels to shut down completely.
Diversegy, LLC and Citizens Choice Energy, LLC said that, per the PSC's registered broker list, while several hundred companies have registered as brokers and consultants, in terms of individual persons (such as 1099's) who have registered, "only 20 individuals have registered as brokers or consultants."
The New York Retail Choice Coalition and M&R Energy Resources Corp., and separately the New York PSC, also filed supplemental pleadings, but given the procedural tenor of the case, such pleadings largely reiterated previously reported arguments
In addition to the 1099 issue, ESCOs are also seeking to require that the PSC allow brokers to use a bond as an acceptable form of security, citing statutory language which ESCOs argue require the PSC's acceptance of bonds
Index No. 907356-24
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March 3, 2025
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Copyright 2025 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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