While the New York PSC is prohibiting ESCOs from serving mass market customers except under a limited number of products, including a requirement to send month-to-month variable rate customers back to SOS absent enrolling the customer on a compliant product (click here for story), such customer protections will not be applied to municipal aggregations, the PSC said in its order

It's yet another example of the preferential treatment afforded to the government-run market competitors.

Specifically, the PSC's order requiring a "full stop" to the retail market stated, "ESCO service as part of Community Choice Aggregation (CCA) programs is distinct from other forms of mass market customer service, as they evince characteristics more closely aligned with industrial and large commercial customers, and will be dealt with in the appropriate proceeding. Case 14-M-0224, Proceeding on Motion of the Commission to Enable Community Choice Aggregation Programs."

"For that reason, the Pilot CCA program undertaken by Sustainable Westchester shall be exempt from the terms of this Order," the PSC said

"In addition, government aggregation programs such as the [opt-in] Public Assistance Cooperative for Energy (PACE) program are exempt from the terms of this Order," the PSC said

Apart from the general disparate treatment of market participants, the PSC's decision is also notable because New York municipal aggregations have pushed back against any requirement that their rate be below the utility supply rate -- a customer protection New York is now requiring for non-aggregation customers

This is more notable in New York given its default service structure and monthly, after-the-fact pricing for default service. While municipal aggregations in Illinois and Massachusetts face relatively static default service rates, and can theoretically present their opt-out customers with guaranteed savings in their opt-out communications (depending obviously on the term of the aggregation contract vs. the default service pricing term), such opportunity does not present itself in New York, since future default service rates are not known, making aggregation a riskier proposition for customers who may not even see the opt-out mailing. And now the PSC is saying it won't hold the current muni aggregations to an ex-post savings standard versus default service -- even as it forces ESCOs to meet such a requirement

And while municipal aggregations attempt to tout their services beyond commodity supply, and while SW is engaged in a variety of energy initiatives, the SW pilot, although not finalized, does not look very dissimilar from commodity-only ESCO service, particularly to the individual aggregation customer (despite any broader community initiatives not bundled with the aggregation supply rate).

And while municipal aggregation proponents may argue disparate treatment may be justified under the notion that government officials will strike only deals that are in customers' best interest, evidence from states with municipal aggregations clearly show this is not always the case -- whether it is because of market changes which leave aggregation rates above default service (town leaders being no better at shopping for electricity than individual mass market customers), or because aggregation rates are inflated to fund municipal projects. And municipal aggregation already eschews one of the hallmark customer protections in the market -- affirmative consent for service.

With its order, New York is creating a system where local governments are going to be allowed to charge rates exceeding the utility default service rate, with no guarantee of savings or value-added services or renewable content, for customers who have never affirmatively chosen such service.

It's hard to take the PSC's concern for customer protection, and its justification for a "full stop" of the ESCO market, seriously under such conditions

--By Paul Ring

Tags:
New York   Municipal Aggregation  

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