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In response to a DPS Staff white paper on home warranty products (HWP) and the Commission’s request for comments several parties filed comments.

As previously reported, Staff’s whitepaper, among other things recommended

• Subjecting HWP products to the existing ESCO price caps for mass market customers
• Banning the use of third-party HWP providers by ESCOs, with ESCO “employees” required to perform any HWP service
• Requiring an ESCO employee to visit a HWP customer’s home within 5 days of enrollment, with the enrollment cancelled if such visit is not performed
• Mandating line-item billing for HWP products

Several ESCOs filed comments generally opposed to Staff’s whitepaper recommendations.   

Many parties argued that Staff has not developed a record supporting the recommendations, and/or the proposals are unduly burdensome, and/or the matters should be addressed in the Track II value-add collaborative.

Excerpts from Agway Comments:

{***} Some of these qualities were referenced in Staff’s White Paper, along with a history of Agway’s past participation in setting the standards for HWP offerings in New York. 4 Agway’s commitment to this issue reflects the central role EnergyGuard plays in Agway’s business model. It is not a gimmick or a teaser: EnergyGuard is the primary reason customers choose Agway. 

In the years that followed, the Commission approved twenty other ESCOs for the exemption, based on their representations that they would provide HWPs that provided similar coverage and service provided by EnergyGuard. Unfortunately, it is evident that many if not all have fallen far short of demonstrating the same evidence-based value of an EnergyGuard. 

Based on the information detailed in the White Paper, most of Agway’s competitors are selling third-party warranty products with no connection to the ESCOs themselves, resulting in massive numbers of customer complaints. 5 The warranties charge additional service fees as high as $200.00, and deductibles that are either undisclosed or inconsistently described.6 Other than Agway, the few ESCOs that maintained information about fulfillment of warranty claims have collectively provided under $10,000.00 in benefits. The other ESCOs do not even maintain information about fulfillment of warranty claims.7 It is unclear if there is one HWP other than Agway’s EnergyGuard that has provided the same level of value in terms of actual dollars to the customers.8 

We are therefore encouraged by the Department’s White Paper, which expresses many of the same values underlying EnergyGuard. Agway shares the Department’s concern about deductibles and fees, the apparent lack of transparency, use of third-party administrators, disregard for consumer rights, and high levels of customer complaints, which characterize other HWPs in the New York market. Any ESCO offering a valuable HWP should be able to demonstrate that value, and the White Paper reveals that a significant number of ESCOs have not been able to do so. That is an obvious problem for customers, and it is also a problem for those ESCOs like Agway who insist on higher standards and do not want to compete in a race-to-the-bottom market. 

At the same time, we urge caution. While disclosure requirements can and should be imposed immediately, some requirements should be imposed incrementally, so that both ESCOs and the Commission have time to learn about the scope and value of available HWP offerings. It is crucial that any new regulations that are intended to stop bad actors, who flout the spirit of the rules anyway, do not make business harder for good actors, like Agway, who strive to exceed customer expectations. The opposite should occur, where the upright behavior of the good actors set the bar and those who consistently fall below it should lose their privilege to offer this product.  {***}

[***] Agway supports many of the types of consumer protections recommended in the White Paper, and specifically proposed a focus on the following key protections: 

• Coverage minimums. Annual minimum coverage in the amount of $1,000 is a reasonable requirement. 
• Prohibition against deductibles and fees. Customers should not be required to pay any deductibles or service fees. 
• Pre-coverage inspections. If the terms of an ESCO’s HWP contains coverage exclusions for preexisting conditions, the ESCO should be required to perform a pre-coverage inspection and provide the customer with clear notice of any preexisting conditions not receiving coverage by the HWP. An ESCO that does not perform the inspection and provide clear notice to the customer should be required to cover all preexisting conditions. 
• Transparency. Customers should be made aware of the price they are paying for the HWP. This requirement will depend, however, on the type of service being provided and whether the utility’s bill permits the additional information. See response to #2. 
• Clear, easy-to-understand agreements. The terms and conditions for an ESCO’s HWP should be available on the ESCO’s website.9 The terms should be clear and unambiguous, specifically with respect to the scope of coverage, including a list of covered parts and labor, exclusions and limitations to coverage, and eligibility requirements. 
• No third-party warranty service providers. An absolute prohibition against third-party administrators protects customers from warranty companies that do not share the ESCO’s incentive to maintain its customers by providing quality service. • Single point of contact. Customers should be able to contact the ESCO directly for all claims and follow-up communications under the HWP. [***]

Excerpts from American Power & Gas & KIWI Energy:

{***]. For the reasons noted below, the Companies respectfully submit these comments in response to the Staff Proposal, requesting that the Commission: (1) adopt reasonable changes to the home warranty program outlined below, including additional reporting requirements that will form the basis for further review of the home warranty program, and otherwise declining to adopt the overly burdensome and unnecessary recommendations posed in the Staff Proposal; (2) direct Staff to convene a stakeholder process to discuss potential further changes to the home warranty program upon the sixth anniversary of approval of the home warranty program (i.e., January 2027) in conjunction with review of the additional reporting noted above and herein; (3) permit ESCOs to continue utilizing third party home warranty providers; and (4) decline to extend the pricing and product restrictions in the Second Reset Order to home warranty products. {***]

Excerpts from NY Retail Choice Coalition Comments:

{***] The Coalition disagrees with the recommendation to separate HWP costs from commodity costs on customer bills. The current unified billing structure provides significant benefits in terms of operational efficiency, cost savings, and simplicity for consumers. Introducing separate billing would likely cause confusion, increase operational costs, and disrupt the cohesive value proposition that bundled services offer. The concerns raised by Staff regarding pricing transparency and the risk of overcharging customers do not, in our opinion, justify the proposed solution, as the existing framework already offers adequate safeguards. {***}

Excerpts from NRG Comments:

{***} A topic covered repeatedly in the Staff White Paper was whether home warranty products offer any true value to customers. The Staff White Paper makes assumptions that because the customers may be paying more for energy than they would have had they been a utility customer, the product must have no value. Or, perhaps the product has little to no value because the customer had to make more than one phone call or wait for a technician to respond. The Staff White Paper is missing one crucial point – value is in the eye of the beholder.

Some people would be completely satisfied with paying more for home warranty product if, shortly after they signed up, multiple covered appliances stopped working and they managed to get either new appliances or repairs made to their appliances for free or minimum cost. Others are willing to pay more for the product to get peace of mind knowing that if something does break, they have coverage to prevent them from having to pay an exuberant amount out of pocket. 

One such example is my elderly mother on Long Island who signed up for a home warranty product. Shortly after signing up, her oven broke. Mom had to make several calls but did get a technician out to repair her oven. Several weeks later, mom’s pool heater broke. She happily called me up and raved about the wonderful home warranty product she signed up for. She was thrilled that all her items were getting repaired or replaced at minimum cost. She had to wait several months for the new pool heater, but that did not matter to Mom as she was so happy she had signed up for this product in the first place. She told everyone she knew about it and recommended that everyone sign up. 

I personally did not sign up but was sorry I didn’t as several weeks later my water heater broke, followed by my refrigerator, and then my oven. Had I signed up, even though I would have potentially paid a higher rate for my energy than I would have if I was with the utility, I would have seen great value in this product as it would have saved me a lot of money in the long run (sometimes moms do know best). While DPS Staff may question the value of the product, the customers they seek to protect may feel otherwise. Staff should not insert themselves into what an individual consumer may perceive as value and should not make unilateral decisions that impact the customer’s choices. Customers should be provided with adequate tools and the knowledge to choose which products and services are valuable to them. {***}

{***} It appears that the restrictions suggested by the Staff White Paper only apply to ESCOs bundling the product with commodity. Other entities including utility or utility affiliates can offer these same products without any restrictions. It is unclear if that is because these products are billed on the utility consolidated bill and included in the commodity rate, or if ESCOs would still be restricted if they were dual billing these products and services or otherwise separating them from the commodity bundle. ESCOs should be required to follow the same rules as other third parties and should therefore not be required to provide a comparison to the standard vanilla utility rate. All companies offering these products and services should be treated equally and scrutinized in the same fashion.  {***}

Excerpts from Mpower Comments:

{***} The cost to an ESCO of an approved HWP is dynamic and changes with the increase/decrease in the scope and amount of coverage, the level of staff needed to satisfy service needs. Further, HWPs have been approved for an insufficient amount of time and, in the case of Mpower, have been temporarily ceased at Staff’s instruction, to enable determination of the cost of the HWP product. A prohibitive barrier of separate disclosure of costs of commodity vs. service contract is that ESCOs that offer an approved HWP at no additional charge to their customers would no longer be able to offer a warranty service free of charge while maintaining competitive commodity pricing. ESCOs that have chosen to offer the HWP at no additional charge while maintaining competitive commodity pricing have undertaken the risk that the cost of offering this service will exceed profitability in their commodity business. Itemization of costs in this regard will frustrate 2 that ability. Further, such itemization will serve no useful purpose in that ESCOs can adjust pricing at their discretion. 

A similar problem exists if HWP offers are limited to guaranteed savings or capped fixed rate products. No ESCO would be able to continue offering an ERVAS while fully absorbing the costs of an HWP. Staff’s recommendation would thus unnecessarily limit the flexibility and variety of offerings available to consumers. Imposing such restrictions would also reduce consumer choice and substantially limit the ability to offer renewable products as they would likely become cost prohibitive. [***]

[***] ESCOs that offer an approved HWP at no additional charge to customers would no longer be able to offer a warranty service free of charge. 

The Staff recommended site visits for eligibility verification are also an added impediment to effective HWP offerings and would greatly increase the cost of such coverage and places an undue burden on providers and consumers. Instead, Mpower suggests that – at most – a site visit might be useful only in limited circumstances, such as where a customer’s eligibility is later denied. 

Further, an absolute restriction to relying solely on in-house staff to provide HWP services would be damaging to consumers and providers. In practice, Mpower has found that many customers choose the option to retain repair personnel of their own choice at Mpower’s expense (up to the $2000 annual cap). This is of tremendous value to customers in that it avoids additional 3 staff and infrastructure costs to the ESCO and enables the ESCO to offer huge value to customers in terms of financial benefits, timing of repairs, and lack of contractual “loopholes” as an excuse to avoid coverage. Moreover, national warranty companies generally utilize a network of independent providers for repairs. There is no reason to depart from that standard to address Staff’s perceived need for additional consumer protection measures. Protective measures can be created in line with the long-established industry standard relied on by warranty companies that have indisputably services many millions of consumers despite high numbers of complaints. [***]

Excerpts from Family Energy Comments:

“[T]n November 2022, Staff issued interrogatory requests to ESCOs that were offering HWPs. Based upon the interrogatory responses, Staff drew some inferences about ESCO product offerings that ostensibly underly [sic] the White Paper. To be clear, the ESCO data responses are not publicly available, and thus not subject to outside critical review or challenge. An ESCO is only privy to the answers it directly provided to Staff. Notwithstanding this limitation, Family Energy can unequivocally state that there are generalizations made in the White Paper that do not reflect its business model. Family Energy filed its sales agreement and supporting documentation for its HWP for Staff approval and also fully responded to the interrogatory requests. Family Energy objects to the application of the broad-brush conclusions in the White Paper to its HWP. Moreover, Family Energy believes it is fundamentally unfair and unjustified to adopt the product and pricing changes, as well as the third-third party provider prohibition, that are proposed in the White Paper based on those generalizations.”

Excerpts from Joint Utility Comments:
The joint utilities filed comments that include NiMo, ConEd/O&R, Central Hudson, National Fuel Gas Distribution, and NYSEG/RGE. 

The joint New York utilities told the New York PSC that, to the extent the PSC requires the cost of an ESCO’s home warranty service to be unbundled from an ESCO’s commodity charge and billed as a line item specific to the home warranty service, then ESCOs should be required to issue a separate bill for the home warranty charge and should not bill such home warranty costs through utility consolidated billing.

The joint utilities said that if line-item billing is required, then ESCOs should be required to separately bill any non-commodity costs associated with the HWP, with unbundled HWP costs not included on utility consolidated bills.

Moreover, the utilities noted that their billing agreements with ESCOs limit UCB, and purchase of receivables, to commodity charges.  Requiring line-item HWP billing on UCB would necessitate costly updates to utility systems, and also implicates HEFPA concerns. The utilities noted that the technical barriers to line-item billing applies to utilities’ own charges as well, stating that non-commodity utility charges or credits, such as installation charges or an energy efficiency rebate, are provided under a separate issuance to customers by utilities, not on the monthly bill.

The utilities also said they oppose expanding POR to include HWP.  Given other reforms proposed by DPS Staff, the utilities questioned if the ESCO-HWP market will continue to be viable, which the utilities said favors a course which does not rely on the utilities incurring costs to implement line-item HWP billing under UCB.

“[T]he distribution utilities should not have to bear the cost of system upgrades to bill and collect ESCO charges for an insurance product that is also provided by third-party entities and DPS Staff has found to be of dubious value.” 

MPower Energy Comments  (08/28/2024)
Comments of American Power & Gas and KIWI Energy  (08/27/2024)
Agway Comments re HWP  (08/27/2024)
City of New York Corres – ESCO HWP White Paper  (08/26/2024)
NY Retail Choice Coalition HW Comments  (08/26/2024)
JU Comments on Home Warranty Products (08/26/2024)
NRG Comments on HWP (08/26/2024)
Family Energy Comments on HWP White Paper  (08/26/2024)
Notice Soliciting Comments  (07/24/2024)
Staff Home Warranty Product White Paper  (05/29/2024)
24-M-0324 
In the Matter of the Commission to Regulate Energy Services Company Home Warranty Product Offerings.