New York DPS Subpoenas Retail Energy Companies to Investigate Financial Practices

New York State’s Department of Public Service (DPS) has taken the initiative to subpoena more than 170 retail energy service companies, known as ESCOs, in order to obtain more information about the financial practices of these companies.

ESCOs came about when the electricity market was deregulated in the 1990s in order to allow competing companies to sell the supply of electricity to consumers. After the energy deregulation, retail energy companies competed with each other and utility companies in order to offer electricity to consumers.

However, these retail energy companies have been accused of engaging in fraudulent and abusive practices in their work with consumers. Of particular concern are pricing structures set by the companies which have been said to lead to consumers being seriously overcharged for their utilities, causing them to pay much more than they had with their utility company relationships.

According to an article in the Village Voice, the DPS stated, “The Department of Public Services gathering facts to be used in an evidentiary hearing to determine whether consumers are paying fair prices for ESCO products and services. Unfortunately, too many ESCOs have refused to participate in this fact-gathering process and have reportedly rebuffed Department efforts to obtain necessary information, delaying this important public investigation.”

The news outlet states that the proceedings will likely drag on at least in part because the retail energy companies have a financial incentive for the process to be lengthy, Richard Berkley, the director of Public Utility Law Project has stated, “Each month, the overcharges by the retail energy companies amount to $30 million to $40 million per month.”

“Every time they delay this month, they’re winning,” he stated.

Some of the financial practices ESCOs have been engaging in include predatory practices targeting the elderly, residents of low income communities and individuals with limited proficiency in English.

These energy companies have been accused of engaging in bait-and-switch practices designed to get customers to sign up for a low price, then increasing the price on them with rates up to four times the initial service price.

The article goes on to state that retail energy companies have in general been charging New York residents more than the utility companies. One particular lawsuit stated that New York residents who used a retail energy company paid an additional $820 million more than they would have with their local utility company during a 30 month period.

The subpoenas for the retail energy companies are demanding information on the number of customers served, audited revenue statements, and how much they charged customers for service during 2011 through 2016.

Jon Sorensen, a spokesperson for the Public Service Commission (PSC), said in a statement that learning the rates charged to consumers by retail energy companies would serve to “fully and fairly evaluate the market to make sure consumers are protected from unreasonable prices,” the Village Voice reports.

As closer auditing takes place targeting retail energy company finances, consumers and various regulatory and consumer protection agencies will be able to have hard data to evaluate to determine the true nature and impact of ESCOs.

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