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The NY Public Service Commission issued new rules today constraining the activities of energy service companies. 2/26/2008 photo by Dick Blume Electric meter at home of Arden Zipp and Kathy Vernay of Tully. Because of solar panels, the meter is not used electricity but that given back to the grid.

(Dick Blume)

SYRACUSE, N.Y. - The state Public Service Commission today ruled that non-utility energy marketers must guarantee cost savings or provide electricity from renewable sources if they sell energy to residential or small commercial customers.

The commission said its new rules for energy service companies, or ESCOs, stem from a broad investigation that discovered what many consumers have complained about for years: Significant over-charging is rampant among some of the marketers.

"The record is clear that residential customers have not benefitted from electric and gas supply services from ESCOs when that's all that's being purchased,'' said Audrey Zibelman, the PSC chair. "We have heard from too many consumers that they were unfairly lulled by aggressive and dishonest ESCO marketing into believing they were getting savings that they did not receive.''

More than 20 percent of residential customers in New York buy energy from independent suppliers other than their utility. Energy service companies entered the market when the PSC partially deregulated the utility industry in the late 1990s.

In a recent review of the industry, the PSC determined that some customers are getting badly fleeced. For example:

-- Several ESCOs in Upstate New York charged more than double the National Grid's electric rate.

-- A company in the Finger Lakes region charged eight times what Rochester Gas & Electric charged for electricity.

-- Four companies in the Hudson Valley charged more than double what Central Hudson charged for electricity. Another charged triple the utility rate for natural gas.

-- A New York City company charged more than triple Con Edison's rate for electricity and several companies were charging more than double the utility rate for natural gas.

Complaints about high charges from energy service companies are not new. An analysis of two years' worth of data provided during a 2012 National Grid rate case showed that the Upstate residential customers who bought energy from ESCOs had paid more than $200 a year extra for electricity and more than $100 extra for natural gas, on average, compared with what they would have paid National Grid.

The 2012 analysis by Public Utility Law Project showed that only 16 percent of electric customers who bought from energy service companies saved money. The other 84 percent paid a combined $50 million a year extra -- an average of $21 per month per customer. More than 92 percent of gas customers lost money by switching to energy service companies, the analysis showed.

As of today's PSC decision, energy service companies that market to residential customers must provide written guarantees that they will charge less than the utility. The exception is for green energy. Energy marketers can charge higher prices for electricity that is at least 30 percent derived from renewable sources. The PSC will review whether exceptions should be made for other residential services sold by energy service companies, such as energy efficiency.

The commission said it will strengthen its process for revoking the eligibility of energy service companies to do business in New York if they are found in violation of state regulations. The PSC is also reviewing other options, such as imposing stiff financial penalties on companies that violate the rules.

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