New York PSC Issues Moratorium on ESCOs Selling to Low-Income Consumers

July 22, 2016— Earlier this month, the New York Public Service Commission (PSC) took its latest action against Energy Service Companies (ESCOs) when it decided they could no longer sell to low-income households. The debate over ESCO rates and low-income consumers has heated over the past year.

In February, the (PSC) addressed concerns over the higher rates charged by many ESCOs. In recent years, New York has seen a rise in instances where certain ESCOs target low-income customers by bringing them in with low introductory rates that are soon raised well above full-service utility company prices after the introductory period is over. Several of these ESCOs, according to PSC, have been overcharging customers by around $30 per month. Nearly one in five utility customers in the state of New York purchase their energy through ESCOs. Of all the utility customers in New York, nearly one-fourth, around 400,000, are considered “low-income.”

In March, the PSC issued an order requiring ESCOs to either guarantee that Assistance Program Participants (APPs) would pay no more than what they would pay as a full-service utility customer. If the ESCO could not make that guarantee, it had to provide APPs with energy-related value-added products or services. "These actions will root out these bad actors and protect New Yorkers from these unfair and dishonest tactics," Governor Andrew Cuomo stated when announcing the new rules.

During subsequent collaborative meetings, however, several ESCOs raised complaints that they would not be able to provide that guaranteed savings to low-income customers because of their higher operating costs. Additionally, some ESCOs argued that it was unfair of the PSC to deny low-income customers the ability to choose their energy supplier. These ESCOs claimed that charging a fixed rate, instead of basing rates on the month-to-month fluctuations of the utility energy market, was more beneficial to low- or fixed-incomes.

Ultimately it was the ESCO’s inability to address these higher rates—rates that often exceeded the amount of utility assistance funds awarded to low-income households—that led to the PSC’s decision to issue the moratorium in mid-July on ESCO enrollments and renewals of low-income households.

“The record is clear that low-income customers have not benefitted from electric and gas supply services from ESCOs when that’s all that’s being purchased,” PSC Chair Audrey Zibelman said in a statement on the PSC’s new order. “The Commission is taking steps to ensure energy affordability for low income customers.”

Sources: New York Public Service Commission