NY judge temporarily blocks new rules for energy service companies

A state Supreme Court justice on Friday agreed to temporarily block a recent Public Service Commission order that placed strict new rules on companies that offer energy services to compete with established utilities.

State Supreme Court Justice Kimberly O’Conner in Albany granted a temporary restraining order requested by energy service companies that argued the PSC overstepped its authority in issuing the rules, according to both sides in the dispute.

Gov. Andrew M. Cuomo said the new rules were needed to stop illegal business practices by many of the so-called ESCOs, which are accused of overcharging customers for gas and electric service, failing to provide promised savings and switching unwitting customers to their services without their knowledge.

In their court filing this week asking for the restraining order, industry groups representing the service companies argued that the new PSC rules led to “chaos” in the market. They charged the PSC “overstepped” its role and lacked the authority to tell the alternative energy companies how to set their market prices.

The State Legislature has “never granted it [the PSC] the power to regulate prices offered by private competitors in a free retail market,” the service companies said. “In fact, the commission itself has admitted on many occasions that ‘ESCOs are exempt’ from price regulation . . . ”

PSC spokesman James Denn called the judge’s ruling “preliminary” and “merely procedural,” asserting that it “does not address the merits” of the PSC’s order.

“The PSC has the absolute authority to regulate the industry and root out deceptive business practices,” he said. “We are confident we will prevail in our effort to safeguard consumers against unscrupulous consumer practices, which have cost consumers millions of dollars in overcharges.”

In its order last month, the PSC said it was conducting an “immediate” audit of the companies and is barring any new contracts with home and small-business customers unless the ESCOs can provide “guaranteed” cost savings, or show that at least 30 percent of their energy comes from renewable sources.

The plan also included rules to strengthen the process for revoking an ESCO’s eligibility to do business in the state if it is found to have violated the law. A new “do not knock” rule would prohibit an ESCO from soliciting customers who opt against it. The restraining order doesn’t apply to the do-not-knock rule, PSC said.

Bryan Lee, a spokesman for the Retail Energy Supply Association, an industry group that was among those that filed suit to block the rules, said it was “gratified that the court has ordered a temporary stay of PSC rules that effectively eliminated the right of residential and small commercial customers in New York to choose among competitive energy offerings.”

The groups said that the PSC order was issued despite the fact that only a “small percentage” of ESCOs have been accused of engaging in illegal practices.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.