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RESA filed comment in response to NYPSC proposed Staff comments to implement revisions to General Business Law (GBL) §349-d, concerning a prohibition on material changes to ESCO contracts, would, “remove all customer choice,” and “devastate the competitive retail energy market,” [emphasis added] 

As previously reported, under the revised General Business Law (GBL) §349-d, which became effective March 18, 2024, energy services companies (ESCOs) are prohibited from making any change to a contract price, or from changing to or from fixed or variable pricing, without the express consent of the customer.

• 349-d specifically states, “No material change shall be made in the terms or duration of any contract for the provision of energy services by an ESCO without the express consent of the customer. A change in price or a change to or from fixed or variable pricing shall be deemed to be material.”

This provision of §349-d is specifically limited to residential service or service sold or offered through door-to-door sales (regardless of customer class).

RESA comments state that “DPS Staff seeks to modify the UBP to extend the requirements of GBL 349-d(6) and (7) to all customers — no matter their size, sophistication or solicitation method.” [emphasis added]

RESA further noted that large customers routinely seek and enter arrangements that frequently include, “complex pricing that can and, often, does vary regularly pursuant to the contractual terms to which the customer agreed.”

“[I]f ESCOs are unable to change a customer’s price pursuant to the specific terms of their agreements with customers without obtaining consent to every price change, they will not be able to offer the more complex pricing arrangements that commercial and industrial customers have come to expect and want,” 

“Consequently, all customers will only have two options available — a fixed price arrangement or utility default service. Such limitations are anathema to a competitive market structure. Further, although these limited choices may be acceptable to residential customers, these arrangements do not satisfy the more complex needs of commercial and industrial customers.” 

RESA also objected to Staff’s proposed definition of “material change” to be, “Any change that affects the rates, terms, and conditions of service contained in the customer agreement.”

Aside from prohibiting a “material change” absent consent, GBL 349-d provides that, “[a] change in price or a change to or from fixed or variable pricing shall be deemed to be material.”

RESA said that “a definition that includes ‘any’ change would render the legislature’s use of the word ‘material’ superfluous in direct contravention of the principles of statutory construction.”

RESA further said that Staff’s definition would lead to higher prices for customers.

“[S]uch a broad definition would require ESCOs to receive consent for changes to terms that have no substantive impact on the customer (e.g., ESCO contact information).” 

“[I]f the customer is unwilling to consent to such a change, the customer would then be able to terminate the agreement without incurring an early termination fee. As a result, an ESCO could be exposed to substantial losses simply because it made a non-material change, like changing its telephone number. Such a result is simply untenable and will result in ESCOs attempting to protect against such risk by increasing the prices they charge customers.” 

“American Power & Gas LLC and Kiwi Energy NY LLC (together, the Companies) respectfully submit these comments in response to the Staff Proposal, requesting that the Public Service Commission (the Commission) confirm that (1) no additional express consent is required for changes in price for which a customer has previously provided consent, (2) customers may enter into continuous variable rate contracts that do not expire or renew on a monthly basis but continue until canceled, and (3) ESCOs may modify the language in the standard renewal notice with review and approval by Staff and provide such notices to customers by electronic means.”

GBL § 349-d demonstrates that the statute allows an ESCO to renew a residential or door-to-door customer contract, or implement a material change to the contract, as long as the appropriate contract renewal or material change notice is sent to the customer. Under the statute, if the customer does not provide express consent to the material change or contract renewal, an early termination fee cannot be charged. While the statute allows the Commission to adopt additional guidelines and regulations governing the renewal process for residential and door-to-door customers, the Commission is not allowed to ignore the plain text of the statute and implement contradictory regulations. The Staff Proposal, however, seeks to do just that.

In its comments, NRG Energy and its affiliates “are concerned about two key aspects of the Staff Proposal.  First, a careful review of the language in GBL § 349-d demonstrates that the statute allows an ESCO to renew a residential or door-to-door customer contract, or implement a material change to the contract, as long as the appropriate contract renewal or material change notice is sent to the customer. Under the statute, if the customer does not provide express consent to the material change or contract renewal, an early termination fee cannot be charged. While the statute allows the Commission to adopt additional guidelines and regulations governing the renewal process for residential and door-to-door customers, the Commission is not allowed to ignore the plain text of the statute and implement contradictory regulations. The Staff Proposal, however, seeks to do just that. The second issue critical issue is that the Staff Proposal sets forth a restructured UBP that expands the applicability of GBL § 349-d to all customer classes, not just residential and door-to-door solicited customers. The proposed amendments to the UBP, coupled with the guidance contained in the Staff Proposal, require every ESCO serving a commercial customer on a product incorporating variable rate features to send a hard copy notice of material change regarding the commercial customer’s contract every month. Such an action was not contemplated by the legislature and is entirely outside the scope of the Commission’s authority.”

NRG further commented, “Whether by design or error, the Staff Proposal and the proposed restructured amendments to the UBP far exceed the bounds of GBL § 349-d and will interfere with all ESCO contracts, even those executed by sophisticated business customers who were never intended by the legislature to be impacted by this statute. The end result of this continued distortion of GBL § 349-d is a Staff Proposal that is outside the scope of the legislation, inconsistent with prior Commission precedent, and improperly noticed under the State Administrative Procedures Act (‘SAPA’).”

In its comments, Constellation argued, “[T]he new changes do not allow ESCOs to effectuate price decreases without customer consent, and do not allow flexibility to change prices in interaction with other legal requirements and existing mass market products. This will lead to higher prices to prepare against those risks.”  

See main docket link to read all comments.

Comments of Kiwi and AP&G on Staff Proposal (06/20/2024)
RESA Comments on Staff Proposal (06/17/2024)
Constellation Comments in Response to Staff Proposal  (06/17/2024)
NRG SAPA Comments – Implementation of GBL 349-d (06/17/2024)
98-M-1343
(In the Matter of Retail Access Business)