Imminent Audits in New York Due to PSC: What to Do


Last February, the New York Public Service Commission (PSC) took the energy industry by surprise in issuing its ‘Reset Order,’ mandating stringent new requirements for ESCOs, including guaranteed savings for customers and affirmative consent from mass market customers. Five months later material aspects of the PSC’s Reset Order were vacated under a ruling issued by New York Supreme Court Judge Zwack on July 22, finding that the PSC’s actions were ‘arbitrary and capricious’ as they did not give market participants sufficient notice or opportunity to respond, vacating Ordering Paragraphs 1-3.


Procedurally speaking the PSC may be back to square one, but an undeniable shot was heard around the world – the PSC will be taking a much closer look at ESCOs’ marketing to residential and small commercial customers and increasing its enforcement in cases of non-compliance. Even with material portions of the Reset Order vacated, important parts of the Reset Order remain in effect—and make it clear that PSC staff have the authority to conduct audits to ensure ESCOs are adhering to state regulations and continuing to engage in ‘good business practices’. Further, Ordering Paragraph 4, otherwise known as the ‘One-Strike Rule,’ significantly increases the scope of enforceable offenses and the PSC’s ability to swiftly respond to entities violating standards set forth in the UBP (NY Uniform Business Practices).

The Reset Order and related, ongoing proceedings, signal a stricter regulatory landscape for ESCOs in New York and will require ESCOs to adjust or implement new business practices and compliance protocols to surpass baseline requirements set forth in the UBP. Industry expert and managing partner, Natara Feller, Esq. of Feller Energy Law Group PLLC, outlines below the steps your company can take to ensure it is prepared for any possible PSC investigation, as well as business practices for staying off the PSC’s radar initially:

  • Keep records of all customer agreements – These records should include the prices charged, service type and customer class for each customer. The overall number of customers served, service types and exact prices need to be recorded as well. All records should be maintained for at least two years or the length of time that the customer remains with the company—whichever is the greater length of time.
  • Retain all affirmative consent notices from customers – These affirmative consents include third party verifications (TPV), written contracts, etc. All records of non-affirmative consents sent to customers should also be saved. However, because Ordering Paragraphs 1-3 were vacated, compliance with product offerings and associated affirmative consent requirements for renewals are not presently required.
  • Maintain a price reliability plan – This may include modified hedging and procurement policies to ensure compliance with the PSC’s Reset Order restrictions on product offerings. Even though Provision 1 requirements were vacated, the PSC still has authority over rates and is likely to issues new orders in the future. Even though part of the Reset Order was vacated, the PSC still has authority to examine all of an ESCOs business practices and business records.
  • Ensure all marketing materials and marketing practices comply with PSC objectives – These audits can still cover marketing material, Uniform Business Practices (UBP), customer enrollment and more, so all TPV scripts, telemarketing scripts, door-to-door (D2D) marketing scripts and training materials need to be retained in case of audits.
  • Pay special attention to the UBP’s rules on marketing (UBP) Section 2.D. – The PSC amended this section to heighten what it can enforce, and what measures it can use. The PSC has indicated it will have zero-tolerance for door-to-door marketing violations, so pay particular attention to related policies and consider enhanced screening for brokers engaged in door-to-door activities.
  • Avoid the Top Third The PSC’s Department of Public Service branch tracks consumer complaints, and posts monthly updates on its website. A good rule of thumb is to never be in the top third of this list – particularly in the ‘Deceptive Marketing Practices’ category.

With the PSC back in session after its summer break, expect the PSC to continue with (or start new) proceedings in line with its original intentions under the initial Reset Order. In point of fact, the PSC has taken action with its July 15 moratorium on the provision of service to low-income customers by ESCOs. Under the Order, utilities will place a ‘block’ on all low-income accounts, and any enrollment attempts for this customer type will be rejected. Current fixed rate contracts will be allowed to continue to the end of their terms, but variable rate month-to-month and new enrollments of low-income customers will end on September 15, 2016.

ESCOs can protect their businesses best by taking stock of their internal and external marketing practices and compliance procedures and taking proactive steps to stay ahead of required compliance. For example, updating marketing training materials to match state requirements for marketer conduct, and maintaining customer records for a minimum of 2 years. It is best to be proactive and prepare your business via your own actions or through assistance from other service provider companies. Complacency will garner no favors as further changes remold the industry.

Content and Industry Insight for the article was provided by:

Feller Law Group, PLLC, originally founded as a full service energy law firm by managing member Natara G. Feller, Esq., has grown its practice to serve corporate clients across highly regulated industries with offices in Brooklyn, Philadelphia, and Princeton. Our attorneys are highly skilled in navigating the intricacies of government to provide guidance within Feller’s core practice areas, which include Federal and State Energy Law, Retail Energy Supply, Sustainable Energy and Emerging Technologies, Administrative and Regulatory Law, Commercial Transactions and Counseling, Legalized Cannabis, and Government and Regulatory Affairs.