Energy Service Companies Banned from Selling to Low Income New Yorkers

Under the golden glow of deregulation, the promise of Energy Service Companies was to promote energy efficiency and save consumers money.

But the New York State Public Service Commission announced Thursday that it will prohibit ESCOs from selling electricity and natural gas to low-income customers in New York.

PSC staff recently compiled data that indicates that for the 30 months ended June 30, 2016, New York State general residential and small commercial utility customers who took service from an ESCO paid about $817 million more than if they had continued to take commodity supply from their local utility.

NY low-income customers who chose to take service from an ESCO paid almost $96 million more than residential customers who elected to take commodity supply from their utility for the same period.

Low-income households represent about 30 percent of all electric and gas customers in New York State. It is estimated that there are about 173,000 low-income ESCO residential electric customers and about 108,000 low-income ESCO residential gas customers.

Utility programs now provide low-income New Yorkers with $248 million in assistance each year for their heat and electricity — and apparently a lot of that was being siphoned off by ESCO operators through overcharges and deceptive marketing practices.

The Commission determined that a prohibition on ESCO service to low-income customers is necessary to protect taxpayers and ratepayers who fund the programs that provide subsidies, and to protect those customers who receive a subsidy on their energy bill.

“New York helps customers with their energy bills by providing subsidy support and by making their energy bills more affordable while ensuring they have this essential service," said Commission Chair Audrey Zibelman in the announcement. "We found that ESCOs were defeating the purpose of our low-income discount program by overcharging the very customers we are trying to help.”

Earlier this month, the Department launched a review into substantial overcharges and deceptive marketing practices of the ESCO industry and its ability to cost effectively serve mass-market customers, which will include holding evidentiary hearings. Through this in-depth and detailed process, the Commission will be able to determine whether the broader ESCO markets, beyond the low-income sector, should be reformed because, as recent data strongly suggests, thousands of residential customers are paying too much and getting too little from their ESCO providers.

The PSC issued a moratorium on ESCO selling to low-income New Yorkers this summer, and was immediately sued.

"While the Commission is currently defending its July action in court, and has argued the ESCO's position is without merit, today's action effectively replaces the July Order, corrects any possible flaw in procedure, and furthers the Commission's tireless efforts to protect low-income consumers and millions of dollars in public assistance funds," Zibelman said.

There are currently about 200 ESCOs eligible to provide electricity and natural gas in New York State. Approximately 13 percent of residential electric customers receive ESCO commodity service, while 16 percent of residential gas customers take ESCO service. There are about 7 million residential electric customers in New York State and roughly 4.5 million residential natural gas customers.

ESCOs were created to promote energy efficiency, and in Europe such companies often are cutting-edge. But around here, much of it is a scam, the Daily News reported in July.

The ban is effective in 60 days after the order is issued.