Where Are the PSC’s ESCO Marketing Rules?

Back in January, the PSC began to consider ESCO marketing abuses which were brought to its attention by the state Consumer Protection Board (“CPB”) and the New York City Department of Consumer Affairs (“DCA”). See ESCO Marketing Practices Subject of New PSC Proceeding, While the PSC Deliberates, Consumers Continue to be Hurt by ESCOs. At that time, the Commission was looking for input on an array of issues raised by CPB and DCA, such as early termination fees, the PSC complaint process, statements by ESCO representatives that the ESCO is affiliated with the utility, and misinformation about rates. Additional comments were sought in March and again in May.

It is now September and no action has been taken, but the problems have not gone away. In a recent mailing addressed to National Grid natural gas customers, IGS Energy urges people to switch from the utility to IGS and lock into its “reduced rates.” The company brags that either of its two options will save a typical National Grid gas customer on its utility bills. Option One is a one-year plan that locks in the fixed rate of $1.389 per therm through September 2009 while Option Two is a two year plan that slightly reduces the rate to $1.379 per therm for October 2009 through September 2010. By choosing Option Two, for example, IGS claims that the customer will “avoid steep increases” and “guarantee a lower price.” In National Grid’s September 2008 Monthly Cost of Gas Forecast (which covers the time period October 2008 through September 2009), the company predicts that its rates for SC1 residential customers will fluctuate between $1.017 in October 2008 and $1.17039 in February 2009. Even at its highest, National Grid forecasts rates at least 20 cents less per therm that the best rate “guaranteed” by IGS. Granted, National Grid’s SC1 rate was $1.53034 per therm in July 2008, but that was the only month in 2008 where its rates would exceed the incredible bargain being offered by IGS (in fact, for four months in 2008, the National Grid rate never exceeded a dollar per therm). IGS does admit in its letter that the July 2008 rate was up 75 percent from the beginning of the year, but it failed to inform the recipients of its mailing that the July rate had dropped to $1.11995 per therm in August and $0.95723 per therm in September (not to mention the $1.017 forecast for October, $1.08907 in November, and $1.15018 in December).

On top of this, because of the “unique program” offered by IGS, they need to charge a $150 early termination fee to those who cancel before the end of their contract period. Customers can cancel without penalty within three days of signing the contract, but won’t receive their first bill (and corresponding burst blood vessel in the temples upon reading the bill) for at least 30 days. Should someone still be willing to cancel their contract, IGS informs them that they won’t be sent back to the utility for “up to ten (10) weeks” and that the customer remains liable to IGS in the meantime. On the other hand, the boilerplate language in the contract gives IGS an easy "out" to avoid their commitment in circumstances beyond its control.

The IGS contract is just one more example why it is incumbent upon the PSC to protect consumers against deceptive practices and to issue an order in its ESCO Marketing Proceeding. For more information, see PULP's web pages on ESCO Issues and ESCO Contracts.