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Upstate Uproar

Retail Choice: New York utilities cry “bait and switch,” but it’s not that simple.

Fortnightly Magazine - July 2005

these plans?”

In their formal protest filed at the PSC, NYSEG and RG&E cite numerous objections. Ratepayers, they say, “may be subject to a ‘bait and switch’ type offer.” After the two months expire, they add, customers risk being “effectively slammed” if the ESCO then hikes prices without any prior affirmative consent.

And the deal, they add, isn’t worth much. In their filing, NYSEG and RG&E claim that under PowerSwitch, the average total discount (on the commodity charge) for a typical residential customer (using 600 kWh per month) who enrolled in 2004 would have been approximately $5.75 ($2.86 per month). The savings would run about 1 percent on the total annual utility bill.

Also, the utilities argue that O&R’s plan violates the PSC’s Uniform Business Rules. That’s because the utility customers who opt for the plan don’t always deal directly with the ESCO when they sign up. At the time of enrollment, customers usually do not know all the eventual terms, conditions, rates and charges that will apply after the two-month honeymoon runs out. In short, NYSEG and RG&E find no evidence that O&R’s plans have produced “sustained benefits for customers.” They want the PSC to open an immediate investigation and defer approval of similar plans by other utilities. ( See, Comments of NYSEG and RG&E, SAPA I.D. No.  PSC-08-05-00008-P, NY PSC Case 05-M-0334, filed March 23, 2005. )

Even AARP has entered the fray. Joining with PULP, the pro-consumer Public Utility Law Project, based in Albany, the American Association of Retired Persons warns that older ratepayers “are particularly vulnerable” to rapid energy price hikes, since they devote a higher percentage of spending to residential heating and cooling.
Programs like PowerSwitch, they say, demand “a close look” to assure that consumers have “the information they need to protect themselves.”

PULP Director Gerald Norlander argues that PSC approval might even raise “possible antitrust violations” by encouraging ESCOs collectively to offer the same 7 percent discount, never greater, and always to discontinue their discounts after two months, when they might have decided otherwise, absent the PSC-sponsored program.

Crocodiles and Daggers

As you might expect, the marketers have had a field day. “Crocodile tears,” writes Usher Fogel, counsel for MAPSI, the Mid-Atlantic Power Supply Association, and the Small customer Marketer Coalition. Any suggestion that the state should regulate ESCO energy prices, writes Fogel, would “strike a dagger into the heart” of retail choice. ( Comments filed Apr. 5, 2005. )

In its landmark policy statement from last year, setting a new vision for retail choice, the PSC termed O&R’s antecedent Switch-and-Save plan “the most successful model yet tried” for moving utility customers to private energy retailers. ( See, Case 00-M-0504, Aug. 25, 2004, 235 PUR4th 225, at pp. 235-36, 277. )

In another prior case, the PSC had authorized Orange & Rockland to spend ratepayer money to promote its plan. ( See Case 03-E-0797, Oct. 23, 2003. )

Rising to O&R’s defense, Jane Assaf, assistant counsel for the New York Department of Public Service (the utility commission’s legal staff), argues that PowerSwitch satisfies the PSC’s business rules