Nat'l Energy Marketers Ass'n v. N.Y. State Pub. Serv. Comm'n
| Decision Date | 22 July 2016 |
| Court | New York Supreme Court |
| Parties | NATIONAL ENERGY MARKETERS ASSOCIATION ; Bluerock Energy, Inc.; Bounce Energy NY, LLC; Direct Energy Business Marketing, LLC ; Direct Energy Business, LLC, Direct Energy Services LC; Energetix Inc; Gateway Energy Services Corp; North American Power & Gas, LLC ; NYSEG Solutions, Inc.; Residents Energy, LLC ; and Verde Energy USA New York, LLC, Petitioners, v. NEW YORK STATE PUBLIC SERVICE COMMISSION, Respondent. Retail Energy Supply Association, Interstate Gas Supply, Inc. d/b/a IGS Energy, Accent Energy Midwest Gas LLC d/b/a IGS Energy, Petitioners, v. Public Service Commission of the State of New York, Audrey Zibelman, Patricia L. Acampora, Gregg Sayre, and Diane X. Burman, in their official capacities as Commissioners of the Public Service Commission of the State of New York, and Kathleen H. Burgess, in her official capacity as Secretary of the Public Service Commission of the State of New York, Respondents. Family Energy Inc., Major Energy Services, LLC, and Major Energy Electric, LLC, Petitioners For a Judgment Pursuant to New York CPLR Article 78 v. New York State Public Service Commission, Respondents. |
Jason C. Cryulnik, Esq., of counsel, Boies, Schiller & Flexner, LLP, Armonk, Douglas A. Floss, Esq., of counsel, Harris Beach, PLLC, Pittsford, Thomas F. Puchner, Esq., & Craig R. Bucki, Esq., of counsel, Phillips Lytle, LLP, Albany, Attorneys for Petitioners.
Kimberly A. Harriman, General Counsel, Jonathan D. Feinberg, Solicitor, Public Service Commission of State of New York, Albany, Attorneys for Respondent.
In these three Article 78 proceedings,1 petitioners seek review and vacatur of the Order Resetting Retail Energy Markets and Establishing Further Process (“Reset Order”) dated February 23, 2016. The petitions also seeks a preliminary injunction, staying the effective date of provisions “1” through “3” of the Reset Order, which was March 4, 2015. A temporary restraining order was issued by this Court (O'Connor, J) on March 8, 2016, staying implementation of the Reset Order until further order of this Court. Respondent has moved for an undertaking in connection with the stay, which is opposed by all petitioners. Leave to file briefs and participate in oral argument as Amici Curiae were filed by the Public Utility Law Project, New York State Attorney General's Utility Intervention Unit, American Association of Retired Persons, and MFY Legal Services. Oral argument was requested by all petitioners, but after a careful review of the petitions, affidavits, and documentation submitted, as well as the administrative record, the Court has determined the same to be unnecessary.2 The Court also notes that petitioners have filed for a rehearing on the Reset Order.3
The Reset Order involves a change in the way energy service companies must deal with their retail and mass market customers. Among the new requirements: “Effective ten calendar days from the date of issuance of this order, energy service companies (ESCOs) may only enroll mass market customers and renew expiring agreements with existing mass market customers based upon contracts that guarantee savings in comparison to what customer would have paid as a full service utility customer or provide at least 30% renewable electricity.”4 To understand the scope of the Reset Order, the order explicitly directs “that the transformation of the retail energy markets commence immediately.” The petitioners argue that the failure of the respondent to give any notice of the sweeping changes to the energy retailers who represent over 200 million electric and natural gas customers (or twenty percent of the energy market), the failure to solicit their input, and the failures of the order itself to describe how implementation, compliance and administration with the order are to be handled, and which will cause irreparable harm to the retail energy market, warrant the vacatur of the order. Illustrative of the deficiencies with the Reset Order, respondent issued three Guidance Documents before the implementation of the order, announced that comments regarding the Reset Order could be submitted within 60 days from its issuance, and held a “discussion” about compliance on February 29, 2016. Although the Reset Order allowed companies to request extensions of time to implement the order, none of the requests were granted. Petitioners specifically argue that the Reset Order lacks a rational basis, is not supported by substantial evidence, is arbitrary and capricious in that no notice of the same was given, and constitutes a regulatory taking without just compensation in violation of the 5th amendment of the United States Constitution and Article 1, Section 7 of the New York State Constitution. Petitioners allege violations of the 14th amendment of the U.S. Constitution and Article 1, section 7 of the state constitution. Petitioners further argue that respondent has no authority for its actions, as it cannot set rates for energy service companies, and this action is therefore ultra vires, an act beyond which it has been granted authority by the legislature. Further, in issuing the order without notice, the respondent has violated the State Actions and Procedures Law (SAPA).
National Energy Marketers Association (“NEMA”) alleges that the Reset order violates the State's Environmental Quality Review Act, which provides that any agency's administrative action which “may” have environmental impacts must comply with the statute. Among the justifications for this argument, NEMA notes that many ESCOs are purchasers of renewable energy, and that the market will be affected if these ESCOs are put out of business. These petitioners also seek expedited discovery in order to support the claims that the order is arbitrary, capricious, not supported by the evidence, and “ designed to favor utility companies or other preferred constituents to the detriment of Petitioners and others similarly situated.”
The Retail Energy Association (“RESA”) asserts that the PSL does apply to ESCOs, and rather, these retail energy “companies” (not corporations) voluntarily cooperate with the PSC and PSL, and entered into the Uniform Business Practices (“UBP”) to standardize key procedures between the “monopoly” providers and the ESCOs, or “utility parties” and “non-utility parties”—arguing ESCOs are therefore exempt from PSL Article 4, which regulates utility rates.
Family Energy argues that ESCOs exist by virtue of their “licensing” by the PSC, and as such, strict application of the Notice and Comment requirements of SAPA must be followed, which was not done when the Reset Order was made.
In support of their request for a preliminary injunction and vacatur of the order, all petitioners point to the total lack of guidance they have been given as to how to implement these sweeping changes, and cite to the loss of customers and customer confidence they will suffer as they struggle to comply with the Reset Order—which provides no direction as to how they are to meet the administrative challenges of implementation and compliance. For example, they argue ESCOs were given no guidance as to how to charge the same or less than the public utility prices, particularly as they have no way of knowing what those prices are, and that question remains unanswered. With all requests for additional time having been denied, petitioners have no further recourse but to seek this injunction.
For its part, the PSC has filed a Verified Answer and raised several objections in point of the law. The first objection is this is not a hybrid action, but an Article 78, and should be converted to that; petitioners have failed to exhaust administrative remedies; and petitioners have failed to establish that the Reset Order is arbitrary, capricious, an abuse of discretion, or affected by error of law.
Respondent argues that ESCOs have no vested property rights in access to utility systems arising from the Commission's exercise of discretion to create a competitive market, particularly when customers are overcharged due to the unworkability of the market. This is not a rate setting order, according to respondents. Respondent argues that it has exercised its Article 4 jurisdiction with respect to public utilities to determine what prospective contract offerings ESCOs have to offer in order to retain access to utility distribution systems. Respondent argues that the it has authority to control access to public utility pipes and wires in order to maintain a competitive ESCO marketplace.
Respondents also argue that petitioners did not exhaust their administrative remedies with respect to that portion of its February 2014 which concluded that the market was not workably competitive and mass market consumers were not generally being offered energy-related value-added services or savings. Respondent argues that because it was not raised before the commission in any of the petitions for a rehearing, petitioners may not raise it in this proceeding.5 Respondent points out, as evidence of the unworkability of the market, that ESCO cannot beat the price of the monopoly provider, even though it receives tax benefits (Tax Law 1105–C ). Respondent asserts ESCOs are charging higher prices while offering non-energy services of a very low value, like rewards programs (gift cards) rather than “innovative services of value to consumers”.
In reply, petitioners challenge the Commissions assumptions that the retail market is not competitive, and that consumer complaints have increased when in fact consumer complaints have declined products they are buying.
A bit of discussion on the genesis of the retail energy market is in order. In 1996, the PSC began unbundling electric rates in distribution and commodity components in order to permit electric competition6 —with the goal of lower utility bills and introduction of innovative products and services through...
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