The state Public Service Commission Tuesday issued strict new rules to crack down on alternative energy service companies after an inquiry found many were engaged in deceptive practices by overcharging customers and failing to provide promised savings.
The ruling is important for Long Island because the state is in the process of reviewing the lack of retail electric competition here in a way that could expand the presence of the so-called ESCOs. The state Department of Public Service is reviewing the matter this year and could release recommendations for LIPA’s board to approve in 2017.
Julia Bovey, director of the Long Island Department of Public Service branch, said if the agency’s review of the Long Island market leads it to recommend expanding ESCOs, “We would include the same strong anti-fraud rules the PSC issued today in our recommendation to the LIPA [board], so that all New York consumers are equally protected.”
Energy service companies have been operating in the state since New York deregulated energy markets in the late 1990s. The companies use existing energy company infrastructure — the electric and gas lines owned by big utilities — to deliver energy they supply through separate agreements.
The new statewide rules for ESCOs issued Tuesday, part of a “comprehensive action plan” announced by Gov. Andrew M. Cuomo, follows an industrywide review that found some companies overcharged for electric and gas service, while failing to deliver on “promises for savings and clean energy.”
“We have zero tolerance for these unscrupulous companies, whose business model is to prey on ratepayers with promises of lower energy costs only to deliver skyrocketing bills,” Cuomo said in a statement after the PSC approved the rules Tuesday morning. “These actions will root out these bad actors and protect New Yorkers from these unfair and dishonest tactics.”
Bryan Lee, a spokesman for the Retail Energy Supply Association, which represents ESCOs, said the group had “some concern” about the PSC actions, but said it’s “ too soon to have a position because we need to fully evaluate the order.”
He said the group “intends to work diligently” with regulators to secure the benefits of competition for New York consumers and avoid any unintended consequences.”
The PSC is 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 PSC also plans 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. The new rules also institute a “do not knock” rule that would prohibit an ESCO from soliciting customers who opt against it.
The new statewide rules are expected to be part of the foundation of any new guidelines for ESCOs on Long Island. The DPS, which is the administrative arm of the PSC, has said it would investigate the “potential benefits” of competition in the LIPA service territory and the “barriers” that have blocked energy service companies from expanding here.