State pushes ahead with ESCO crackdown


New York officials are pushing ahead with their crackdown on energy service companies despite legal headwinds. Their latest gambit: barring ESCOs from doing business with low-income people.

A recap: ESCOs are the companies that send salespeople knocking on your door offering you a break on Con Edison’s rates.

Trouble is, they have a long track record of failing to deliver on that promise. Study after study has found that ESCO prices are much higher than the rates charged by Con Edison and other utility companies. On top of that, ESCOs are accused of all kinds of shady sales practices. And for years, energy service companies ignored Public Service Commission efforts to make them more transparent about their pricing.

The Public Service Commission finally got fed up. In February, the commission banned energy service companies from signing up new customers unless they guarantee their prices are equal to or lower than utilities’ full-service plans. The commission made an exception for ESCOs offering “green” electricity produced by wind, solar or other renewable sources. But effectively, the February order would shut down the entire industry.

ESCOs fought back in court, and won a stay of the PSC order that is still in effect. The Retail Energy Supply Association complained that the PSC’s order would have “unintended adverse consequences for the competitive energy market and consumers including loss of jobs, marketplace confusion, uncertainty for customers, and loss of investment by companies integral to increasing customer choice and expanding value-added services for New York energy consumers.”

The PSC seemed happy to push these companies out of the marketplace. State law requires the commission to assure “just and reasonable” utility rates. The PSC found that some ESCOs charge eight times what utility companies charge. “We can’t tolerate that kind of behavior,” PSC chair Audrey Zibelman said at the commission’s February meeting.

A little more on the state’s views of ESCOs’ business practices, from an AARP/Public Utilities Law Project news release:

Last year, 5,044 New Yorkers lodged complaints against ESCOs with the PSC; there were 1,076 “escalated” complaints – complaints not initially resolved by the ESCO. Of those, 30% involved questionable marketing practices, 25% involved dissatisfaction with prices charged – or no savings realized, and 22% involved “slamming” – enrollment of customers without their authorization.

But since the ESCOs persuaded a judge to stay the commission’s order, they’ve pretty much operated as usual.

That brings us to the Commission’s July 15 decision to bar ESCOs from doing business with low-income customers. The commission said ESCOs can not take part in programs run by Con Edison and other utilities that discount service to low-income families. One definition of such customers would be a family of four with income at 60 percent of the state median income, or $51,792 a year.

In meetings with the PSC, the ESCOs admitted “that they were not likely to provide a guaranteed savings to low-income customers,” said Michael Corso, the PSC’s consumer advocate.

If they can’t cut your power bill, what good are they?

Vincent Palmieri, CEO of Bronx-based East Coast Power & Gas, has one answer: Just as folks with money can buy a “Cadillac” health insurance plan, some people want to buy Cadillac energy plans.

“East Coast’s customers seek East Coast out for the premium level, value-added services received in addition to base electric or natural gas supply,” Palmieri wrote in a filing before the commission dated July 13.

“East Coast’s customers are educated and understand that East Coast may be more expensive than the utility’s price,” Palmieri says. In return, he says, East Coast’s customers get quick service when their heat and hot water fail in winter.

In other words, this company promises to get a plumber or electrician to your house sooner when something goes wrong.

Maybe that’s a valid selling point if you’ve got cash to burn and don’t want to call an electrician or plumber yourself. What about the other companies in this business? Are their high-priced electrons and gas molecules better than the cheaper ones sold by Con Ed?


About Bill Sanderson

I'm a New York-based journalist, and a former reporter at the Concord Monitor in New Hampshire, the Bergen Record in New Jersey, and the New York Post. My work has appeared in The Wall Street Journal, and Politico New York. Twitter: @wpsanderson.
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