State regulators, in an attempt to keep low-income customers from paying more for their energy than their utility would charge, have barred energy marketers from selling natural gas or electricity to those consumers.
With utilities regularly charging less than marketers for energy, the state Public Service Commission has ordered that independent energy suppliers stop signing up low-income consumers and return the low-income customers that they already have to the local utility.
“The commission is taking steps to ensure energy affordability for low-income customers,” said Audrey Zibelman, the PSC chairwoman, in a statement. “The record is clear that low-income customers have not benefitted from electric and gas supply services from energy services companies when that’s all that’s being purchased.”
The order, which takes effect in mid-September, affects about 400,000 low-income consumers statewide who currently purchase their energy from a marketer. About one of every four electric service customers across the state is considered to be low-income, the PSC said.
Behind the moratorium is the PSC’s determination that energy marketers typically charge more than the local utility for basic service, which offsets the benefits of social assistance programs aimed at easing the burden of heating and electric service on low-income customers.
“The higher prices charged by energy services companies often exceed the amount of assistance provided to [the low-income customer] and thus the goal of reducing that customer’s bill is undermined,” the commission said in its order.
The moratorium extends efforts by the PSC to place restrictions on energy marketers following a rising tide of complaints that those firms have been charging more than utilities.
The commission in March issued an order that energy marketers be allowed to enroll new customers or renew existing contracts only if they offer guarantees that those consumers won’t pay any more than they would if they were a customer of their local utility. The only way marketers could charge more than the utility is for consumers who sign up for an offering for electricity where at least 30 percent comes from renewable sources. That order, however, has been put on hold by the courts.
Some marketers argued that it was unfair of the PSC to deny low-income customers the ability to choose their energy supplier, including products from some firms that offered a fixed price for energy, rather than the month-to-month fluctuations in utility energy prices.
“This is a benefit that is of particular value to consumers on fixed or limited incomes,” said Bryan Lee, a spokesman for the Retail Energy Supply Association, which represents energy marketers.
“By way of this order the commission has taken away the low-income consumer’s ability to enter into fixed rates just before the potentially volatile winter months when we know from experience that utility default rates can fluctuate widely in response to extreme weather,” Lee said.
Still, the PSC was concerned that low-income consumers were overpaying for their energy, and that those higher prices were eating into the benefits provided by utility discounts and aid programs, effectively forcing them to pay more for their energy.
More than one of every five residential and small business customers statewide currently purchases its electricity or natural gas from a marketer.
But PSC officials have said it has been difficult for energy marketers to compete with the prices charged by utilities.
That’s because energy marketers have higher operating costs than utilities in several ways. It’s more expensive for marketers to sign up customers compared with utilities, which still deliver energy to those customers regardless of where they purchase their energy. The rates that New York utilities charge their customers also require that they sell energy to their customers at cost, without any mark-up. And utilities also have the advantage of economies of scale over most marketers.