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On June 25th, the Albany County Supreme Court (the Court) issued its decision in the case related to energy brokers and consultants. As you may recall, several parties argued that the New York Public Service Commission (PSC) overstepped its authority by prohibiting the use of security bonds to meet financial security obligations required by Section 66-t of the Public Service Law (PSL) related to energy broker and consultant registration, and that the PSC drew an improper distinction between employees and contractors and violated the State Administrative Procedure Act.

The Court determined that energy brokers and consultants should be permitted to file bonds rather than being required to maintain letters of credit but otherwise upheld the remaining portions of the PSC energy broker and consultant order.

This means that energy brokers and consultants that previously filed letters of credit can seek to withdraw those obligations with their financial institutions. This will require confirmation from the Department of Public Service (DPS) Staff.

It is anticipated that the PSC will issue another decision setting forward a new timeframe to demonstrate the financial security obligation has been met through proof of a security bond. Entities may want to consider contacting your financial institution to start that process in order to be prepared to meet any future deadlines. It is anticipated that the PSC issues further guidance. Please stay tuned!

All other remaining aspects of the PSC’s previous order remain valid. This means that 1099 employees need to be registered still, though their financial security obligation will be reduced through a bond instead of a letter of credit. If there are any contractors that will struggle with the security bond requirement, there are several options for complying with the PSC’s order: (1) the contractor can receive monetary assistance from another entity to obtain the bond (this would need to be disclosed to customers as part of the compensation disclosure notice); or (2) the entity could petition the PSC for confirmation that the contractor should be considered an employee.

As mentioned previously, it is anticipated that the PSC will have to issue new guidance on timing for submission of that requirement because it was stayed by the court and now the requirement will have to change to allow bonds. It is anticipated that a PSC filing in the next few months indicating that bonds will now be accepted and setting a time frame for when those need to be in place.

Excerpts from the Order:

“PSC overstepped its authority by prohibiting the use of bonds to demonstrate financial accountability and acted arbitrarily and capriciously in doing so[.]”
“In this matter, PSC § 66-T*2 specifically states that a bond is an acceptable method to demonstrate financial accountability. By the inclusion of this specific method, it is presumed that the legislature means what it says, and therefore the intent is clear that the legislature wanted to allow bonds as an acceptable method of showing financial accountability.”

As reported previously separate appeals (since consolidated by the Court) had been brought by Citizens Choice Energy, LLC and Diversegy, LLC; and also the New York Retail Choice Coalition (NYRCC) and M&R Energy Resources Corp. The Court’s order addresses both of these appeals on a consolidated basis.

Index No: 907356-24