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NY blocks energy marketers from selling to low-income customers, citing high prices

The NY Public Service Commission issued a moratorium preventing energy service companies from signing up low-income customers. (Dick Blume)

SYRACUSE, N.Y. – To prevent low-income customers from paying higher energy prices than utility companies charge, state regulators soon will block them from buying electricity or natural gas from independent energy service companies, or ESCOs.

Under an order issued today by the state Public Service Commission, ESCOs will be prevented from signing up new low-income customers and will have to return current low-income customers to traditional utility service as their contracts expire. The order takes effect in 60 days.

The PSC determined that ESCOs typically charge higher prices than utilities, and that the extra cost typically offsets or exceeds the bill discounts available through low-income assistance programs.

"The higher prices charged by ESCOs often exceed the amount of the assistance provided . . . and thus the goal of reducing that customer's bill is undermined,'' the commission wrote in the order issued today.

Gov. Andrew Cuomo applauded the decision.

"This action will help protect low-income households from unscrupulous energy service providers and deliver much-need relief to New Yorkers across the state," he said. "By taking aggressive action to keep energy costs affordable, we are building a stronger, more sustainable New York."

Today's action could affect as many as 400,000 low-income customers across New York state. It's the latest attempt by the PSC to clamp down on independent energy marketers in response to complaints about high prices and unethical business practices.

Five months ago, the PSC issued an order prohibiting ESCOs from signing up any new customers, low-income or otherwise, unless they offered a renewable energy product or guaranteed that the customer would not pay more than the utility's price. That order was stayed after energy marketers sued in state Supreme Court, where the litigation is pending.

Prior to today's order, ESCOs argued that it was unfair for the PSC to deny low-income customers the same choice of energy supplier that other customers have. Industry representatives said they were still reviewing today's order and declined to comment on whether it might be challenged in court.

Utility discounts and assistance programs for low-income customers are paid for by all utility customers. PSC officials said they wanted to prevent that assistance from being wasted on higher-price energy.

The PSC said it concurred with comments submitted by the state attorney general's office that "publicly supported assistance funds are pocketed by ESCOs, and they frequently charge customers a premium above the utilities' rates that greatly exceeds the subsidy.''

Utility discounts for low-income customers currently total $130 million per year. Electric customers receive monthly discounts between $11 and $44, depending on income. Gas customers receive discounts between $3 and $33.

The commission called the rule against ESCO service to low-income customers a moratorium, ''which shall remain in effect until lifted by the commission.'' It was not clear from the order what conditions would cause the moratorium to be lifted.

Roughly one-quarter of all electric customers in New York state qualify for low-income programs, according to state estimates. Under today's order, utilities will be responsible for putting blocks on the accounts of customers in low-income assistance programs, to prevent them from switching to ESCOs.

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