Has New York's retail energy "Market Reset Order" been successful?
We've published a report from REAL - let us know what you think.
As DER Task Force Policy gets up and running, we’ve identified a need: getting credible information out there and encouraging debate. Often, energy companies don’t put information into the public sphere – whether due to fear of annoying regulators or customers, because there are too many hoops to get company sign off, or because they don’t want to be responsible for the resulting dialogue.
We at the DER Task Force don’t have these concerns, so when the Retail Energy Advancement League (REAL) asked us if we’d be interested in a report they recently commissioned, it seemed potentially like a good role for DERTF. We have no problem ruffling feathers, provided its intellectually valuable.
So in the interest of open information access and shining the light of the best minds in our industry on a variety of perspectives, we’ve decided to publish this report by REAL, on the impacts of New York’s Market Reset Order on New York consumers.
The gist is that in 2021, New York’s “Market Reset Order” became effective, and required ESCO’s (NY's term for competitive retailers) offers meet one of three pretty restrictive criteria. One of them, for example, is requiring that a competitive retailers’ fixed-rate product price must not exceed the trailing 12-month average utility rate plus 5%. Some believe these restrictions have hurt consumers so REAL commissioned analysis to explore the consumer impact. The report argues that the Market Reset Order is hurting consumers: for example finding a ~50% decrease in the number of ESCO electricity offers while Prices-To-Compare ("PTCs") increased 104%, and that only 9% of the NY ESCO offers fall below PTCs compared to 60-99% in Connecticut, Massachusetts, and Pennsylvania.
To re-iterate, the DER Task Force did not commission this report, is not a member of REAL, and is not even philosophically “pro” retail choice. We are publishing the report in the interest of full and open access to all information, and we encourage debate or criticism. If upon reading this report you would like to publish a rebuttal, feel free to reach out. Also feel free to provide any feedback on how DERTF can best approach future posts like this.
The data is here. Give us your thoughts.
New York Public Service Commission Order Impact Assessment
An analysis of the affects the NY PSC December 12th, 2019 “Market Reset Order” has had on the New York retail energy market
Prepared on behalf of REAL
Submitted by:
Guy Sharfman
Vice President, Market Analytics
Intelometry
5373 W Alabama St., Suite 400, Houston, Texas 77056
Phone: (281) 773-9371
Email: guy.sharfman@intelometry.com
Website: www.intelometry.com
Executive Summary
The Market Reset Order must be revised to remove the harsh product restrictions impacting consumers’ ability to choose from a variety of ESCO products. Failing to revisit the Market Reset Order slows New York’s transition to green energy and harms New York consumers who are unable to choose products that meet their budget and lifestyle.
On December 12th , 2019, the New York PSC issued an Order mandating that ESCOs can only offer power and gas products to mass market customers that meet one of the following criteria:
A variable rate product must include guaranteed savings over the utility rate.
A fixed-rate product price must not exceed the trailing 12-month average utility rate plus 5%.
An electric renewable product must be sourced in or adjacent to New York.
In addition, the Order revised the definition of value-added services to be “only energy-related products and services”. The Order’s impact on the New York retail market has been nothing short devastating.
Harm to Consumers
Massive Decline in ESCO Residential Offers at a Time Where PTC Prices Have Skyrocketed
Since the Order took effect, the number of ESCO residential electric offers has decreased by 49% while the number of ESCO residential gas offers has decreased by 87%. While the number of ESCO offers to residential customers declined, utility residential PTCs, i.e., the utility prices that ESCOs compete against, skyrocketed, rising by an average of 104% for electric and 93% for gas. This means that while utility prices have increased tremendously since the Order, options available to residential customers to escape these high prices have plummeted. In turn, this limits the options available to consumers to lock in fixed rates and decarbonize their lifestyle and are therefore stuck paying high utility rates and only having limited recourse to choose alternative products.
New York Now Ranks Lowest in Terms of ESCO Residential Offers Falling Below the PTC
New York currently has the lowest rate of ESCO offers falling below their respective PTCs compared to other states. While increases in PTCs have resulted in 60% to 99% of ESCO residential offers falling below their respective PTCs in comparable competitive states such as Connecticut, Massachusetts, and Pennsylvania, only 9% of ESCO residential offers fall below their PTC in New York likely due to the requirement that renewable products be locally sourced. Local renewable RECs are much more costly than national RECs.
Anti-competitive Rules Benefit the Monopoly Utility not the Consumer
Monopoly utility cost-based prices always increase in the long run, while market-based prices do not. As such, limiting competition only benefits the utility and never the consumer. New York PTC prices increased in 2022 and 2023, just as the Order placed stiff limitations on ESCO offers that compete with the PTC. Only New York consumers have been harmed by this.
Less Green Options Available and Higher Priced Green Products
The Order’s elimination of green products sourced from national RECs combined with New York’s refusal to recognize carbon offsets as green, results in fewer green options available to consumers and more expensive green products. New York State often highlights that its policies are intended to demonstrate its national leadership in the fight to address climate change and to reduce carbon emissions that are responsible for environmental and weather-related harms in New York and beyond. However, the Order – unique to anywhere else in the nation - limits the availability of green products to New York consumers and undermines the development of renewable energy outside of New York. The Market Reset Order requires that any renewable product be locally sourced (no national RECs). Locally sourced RECs sell at a premium to national RECs causing consumers to pay a much higher price for renewable energy and discouraging the purchase of green products.
You can read the rest of the report here, and feel free to provide any feedback in the comments.
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