ESCO (Energy Service Company)

Deregulation allows you the choice of continuing to purchase the commodity of gas or electric from your utility (LDC - Local Distribution Company) or from an independent Energy Service Company (ESCO). Regardless of your choice the delivery of that commodity will always be done by the LDC. What is not common knowledge is that even before deregulation the delivery portion was the only portion of the LDC's rates in which they made profits. The commodity was passed off one for one. The delivery charges were and continue to be regulated by the Public Service Commission to yield a specific profit for the LDC. Therefore the LDC has no interest in your choice of commodity providers. They will make the same profit whether you purchase the full service or whether you use them for delivery only.

Purchasing from an ESCO has its plus's and minus's. Knowing exactly what the LDC charges for commodity is almost impossible. Therefore it is extremely hard to compare costs. In addition our general findings is that ESCO billing becomes problematic and their customer service departments are not consumer friendly. However on the plus side in 2009 we have seen customer's save on gas by purchasing from an ESCO. Conversely customer's purchasing electricity in general have not done so well. This market has the same characteristics as the stock market. You have to be well informed and keep up on daily prices to make an educated decision. Even then there are no guarantee's that you will pay less using an ESCO.

NOTE - For the most part Urac does not recommend that the average client purchase from an ESCO. We have found that, in time, over ninety percent (90%) of ESCO billing resulted in the customer paying more for service. Buyer Beware is good to remember if you are considering this option.

LOAD BALANCING CHARGES

Many ESCO's use posted pricing by a utility to show you that its price is better. However what is not generally known or discussed with regard to natural gas, is that there are two different delivery prices by the LDC. You pay a lower cost for delivery if you also purchase the commodity from the LDC. Conversly you pay a higher cost for the LDC delivery when you purchase the commodity from an ESCO. The LDC adds on a "Load Balancing Charge" to customers who use an ESCO. In Con Edison territory this ranges from 5 to 15 cents per therm. So if the ESCO shows you that its commodity is 5 cents less than the LDC, you can still end up paying more for your total gas service.

COMBINING YOUR ESCO BILLING WITH THE LDC BILL

The PSC has established Uniform Business Practices for utility's to follow regarding payment of ESCO amounts that are billed by the local utility company. In short the PSC has declared that any amount billed by the LDC, on behalf of the ESCO, must be paid by the consumer even if the amount is being disputed. An ESCO can tell the LDC to charge whatever they want and the LDC will require that you pay that amount or your service will be turned off. Therefore the consumer must lay out the money while it is disputing the billing. This is contrary to present policy regarding full service customers. If you are full service customer (i.e. not using an ESCO), you are not required to pay any disputed bill until the complaint has been resolved. Urac recommends that if you are going to use an ESCO do not allow it to combine the billing with the LDC's bill for delivery. Make sure the ESCO bills you directly so that you can withhold payment on disputed amounts and it does not affect service to the building. Shame on the PSC and our government officials for allowing this situation to exist.

NEW SALES TAX LAW FOR NEW YORK CITY ACCOUNTS

Effective August 1, 2009 the delivery portion of accounts located within NYC is no longer sales tax exempt. Any savings you might have been realizing as a result of this tax break no longer exists. Accounts outside the city limits were not affected by this change.

PSC DOES NOT REGULATE ESCO'S

In PSC Case 09-G-0289, August 23, 2010, the PSC clearly confirms that ESCO's can charge whatever they want and are not subject to PSC supervision. It stated ".. it is well understood that we lack authority to regulate the rates that an ESCO charges any customer (residential or nonresidential). Therefore, neither an informal hearing officer nor the Commission may determine that an ESCO’s charges to its customer is improper."

HAVE YOU SAVED?

Urac can provide an independent analysis of whether or not you saved by purchasing from an ESCO if your accounts are located within Con Edison, NGRID-Brooklyn, LIPA, or NGRID-LongIsland. These reports vary in cost but on average one standard rate account for an annual period costs $125.00. Specialized or problematic accounts might require a different fee which will be discussed if you are interested. A customer must provide the billing by the LDC and the ESCO for us to do the comparison. Some information might be available on-line.