ESCO Consolidated Billing(ECB) Preliminary Issues Identified by Utilities for Discussion Purposes Only

The below comments are for discussion purposes only. The utilities have identified a number of issues that must be considered and addressed to decide the viability of ECB. Please note that National Fuel Gas Distribution offers a single retailer model which may operate similarly to ECB in some ways, and differ in other ways. Please also note that this is working list of identified issues and the utilities may identify others as discussions continue.

Utilities Response to 2012 Retail Access Order

Oct 19, 2012 – In response to the New York Public Service CommissionOrder addressing certain aspects of ResidentialSmall Commercial &Industrial markets – notice seeking comments, the Joint Utilities (minus ConEdison and O&R) submitted comments on Mar 1, 2013, including a response to question #6 regardingECB.

Joint Utilities stated in comments:

  • Contrary to discussion in the 2000 “Billing Arrangements” order, most customers had preferred that consolidated bills be prepared by utilities. The demand for ECB was so lacking that necessary EDI transactions to bill utility charges were not developed.
  • Customers benefit from Utility Consolidated Billing (UCB) because the format is familiar and unchanging - it stays consistent between a fully-bundled bill (utility supply) and consolidated (ESCo supply) bill. Through enrollment, switch, and drop transactions the customer gets the same “look & feel”.
  • Concern over Bill-Ready and Rate-Ready models. A discussion of ECB must address this issue.
  • Current model offers single and dual-bill options. Subject to conditions in the BSA, ESCO’s can choose to bill their supply separately and thus have an alternative to UCB already.
  1. OPERATIONAL/REGULATORY ISSUES (in no order of importance)
  1. ESCO Capability of Providing Billing Services

ESCOs would need to establish full service billing and customer service capabilities. The capability andintegrity of a billing servicer is critical to maintaining customer confidence in the utilities' retail access programs. ESCOs must establish stable businesses that have realisticbusiness plans, adequate financing, and capable management. There also needs to be protections against commingling of funds. In short, ESCOs must be held to the same high standards as utilities. For instance, utility customer service performance metrics that are currently established in utility rate cases and that are viewed as a measure of the utility’s customer service should be equally applicable to ESCOs providing the same service.

  1. Customers taking supply service from different ESCOs

Consideration will have to be made for which ESCO would bill a customer for supply service. For customers that currently receive a single bill for both commodities, satisfaction may be impacted when a customer has a bill for electric supply billed by one ESCO and gas supply by another ESCO. Utilities should not have to provide 2 copies of mandatory notifications, bills inserts and other messages, and consideration should be given to whether utilities should be required to send any of those notices, which should be the responsibility of the billing party, ie, the ESCO.

  1. PURCHASE OF RECEIVABLES
  1. For all the reasons utilities have moved to POR without recourse, ECB program should also require POR without recourse managed by the ESCO. The complexity of the POR program would be multiplied by running one at every ESCO. There would also be issues of ESCO’s not able to provide a POR due to the financial obligations. Processes and controls at each ESCO and utility would be multiplied to manage this “distributed POR”.
  1. Utilities should not be required to manage ECB, multiple bill model and UCB.
  1. What discount rates would be used? How would the ECB discount rate be factored into the utility’s authorized return? Will there be a true-up or surcharge mechanism to compensate for a discount rate that doesn’t equal the actual uncollectible rate.
  1. Upon initiation of new POR programs, existing utility receivables would need to be valued, and purchased by ESCOs. This process provedcontentious during the original implementation of the POR and UCB. If utilities were required to maintain UCB, while also permitting ECB, then large blocks of receivables could be exchanged back and forth, with the entry and exit of any given ESCO in the market - causing significant financial risk for utilities and ESCOs.
  1. Note that National Fuel Gas Distribution Company (NFGDC) has not moved to POR without recourse but if it had, the issues expressed above would be applicable. Additionally, NFGDC’s Single Retailer model avoids this issue by billing the ESCOs for the customer deliveries and adequately securing the billed receivables. ESCOs bear the risk of collecting what they bill to their customers.
  1. FINANCIAL SECURITY

To protect the financial integrity of utilities, utilities would require significant security or collateral from ESCOs for ECB to cover the risk of ESCO non-payment of delivery. No utility should be compelled, without adequate assurances and financial security, to entrust an ESCO (within minimal business qualification requirements) with controlover its revenue. Poor performance of ESCOs, or defaults on payments owed to utilities, could negatively impact utility credit ratings, and ultimately increase costs for ratepayers.

  1. PUBLIC SERVICE LAW

PSL: ESCOs would need to be considered “utilities” for sections 32, 33, 34, 35, 36, 37, 38, 40, 41, 42, 43, 44, 52, 65(2), (3), (7), (10), (12), (13), and possibly others.

  1. HEFPA REGULATIONS

ECB would likely require changes to HEFPA. In addition, in an ECB model, many HEFPA requirements would shift to the ESCO and would have to be agreed to in new BSA’s:

  • Pro-ration of payments
  • Estimated bills
  • Cancel/rebills
  • Who will have the authority to cancel and rebill charges?
  • If utilities need to cancel and rebill, how will ESCOs open up bill windows?
  • Budget Billing – both the utility and the ESCo are required to offer Budget Billing services. If both offered it separately, coordination of the two plans would be very difficult.
  • Deposits
  • Deferred Payment Agreements (DPA)
  • Shared meter conditions
  • Backbilling
  • No-access rules – charges
  • Gas and Electric Emergency – will ESCOs have an active 24/7 Hotline directing customers to the utility gas and electric emergency numbers?
  • Customer noticing and protections
  • ESCOs would need to take over responsibility for required notices to customers. Would O&E plans need to be on file?
  • See attached list of required customer notices.
  • See attached list of notices/policies/procedures to be on file with commission.
  • ESCO required to make sure 11.16 (Contents of bills) is satisfied.
  • NFGDC’s Single Retailer model avoids this issue because the ESCO has paid the customer’s delivery charges. Rather than terminating the customer, the ESCO drops the customer back to utility full service. The ESCO is responsible for pursuing its receivable.
  1. Termination/Suspension of Service Issues
  1. Right to request suspension of service – ESCOs operating an ECB program would enforce their right to request suspension of service. A process for ESCOs to cause a suspension of service would have to be developed. This right to suspension was waived by ESCOs in the POR without recourse Billing Services Agreement (BSA). Utilities through the same agreement accepted responsibility for HEFPA noticing and protections. This service would require significant new coordination (transaction) requirements between each ESCo and the utilities including:
  • Submitting requests
  • Acknowledging requests
  • Confirming HEFPA protection compliance
  • Accepting or denying requests
  • Satisfying requests
  1. This service would also require a potentially very difficult coordination of an ESCo disconnect and utility disconnect (either one or both would issue a disconnect notice). Reconnect protocols and timing would also need to be carefully reviewed.
  • Would the ESCo that requested the disconnect be required to reconnect?
  • What if another ESCo took over service?
  • Can a previous ESCO request termination of service of an active account with a customer who has moved to a new ESCO?
  • ESCO would be charged by utility for terminations and reconnection (see PSL 32(5)(c)
  • What if an ESCo requested suspension to a two-family or multi-dwelling building?
  • Would the ESCo be required to notify and post these buildings before requesting the suspension? They would also need to notify health officials and others as required by PSL 33(1)(c)
  • What if an ESCo requested suspension to a shared or mixed meter?
  • What is the required and/or allowable timing for ESCo “drop”, “suspension”, and “termination”?
  • What supply procurement issues can interfere with these?
  • Need to consider impacts on Cold weather rules, cold weather interviews, LSE customers
  • Coordination for last minute payments prior to shut-off
  • How will funds collected in the field be transferred?
  • Will field collection personnel have the power to set customers up on payment agreements/installment plans?
  1. Customer Protections
  2. Should the utility be responsible to validate all ESCo requests to suspend service?
  3. If the utility did not validate an ESCO’s request, what party would be liable for improper disconnect that threatened the customer’s well-being (or contributed to injury or death)?
  4. Would customer protections be captured and managed both by the utility and the ESCO? If not, what should be the obligation to exchange such information?
  5. Disputed amounts - How should the distribution utility and ESCO communicate charges that are in dispute so that collection actions (including termination and suspension) do not include these amounts?
  1. Other laws & programs:
  • Utilities would no longer be able to comply with Orders related to outage credit policy proceeding.
  • Shared meter law
  • Cahill law stating call centers cannot be outsourced could affect ESCO ability to locate, staff and operate call centers.
  • CEO Certification
  • Sarbanes-Oxley Compliance
  1. ESCO Ability to Administer Complex Rates and Economic Development Programs

For rate ready billing, ESCO would need to successfully manage complex rates, including standby rates, offset tariff, net metering, time of use, reactive power, and MHP. In addition, they would need to manage the billing, which is often very complex related to economic development programs, including the Business Incentive Rate, on-bill financing, low income programs, World Trade Center Rate, Recharge NY, and Excelsior Jobs. They would also need to handle billing for NYPA, DCAS, and unmetered service such as street lighting. In many cases, this includes working with state and city agencies. They would also need to properly manage and apply state and local taxes. Given the complexity of utility delivery rates, a rate ready model may be unworkable.

  1. ESCO COMPARISON AND LESSER-THAN

Without generating the bill the utility could not produce an ESCO price comparison (today done on the web by the utility). Nor would the utility be able to provide comparison data on bills and certain notices. The ESCOwould need to build a process to display the comparison results. This would require new process for exchange of utility bill comparison data. Since it would not be conducting the billing, the utility would not be able to satisfy the obligation to reconnect a customer that has been disconnected, upon the customer’s payment of the lesser-of what is owed the ESCO or what the utility would have billed as required by HEFPA. The ESCO would need to develop functionality to permit a comparison to be performed for HEFPA compliance purposes.

  1. THIRD-PARTY BILLING ARRANGEMENTS

Third-party billing arrangements that use the utility bill such as the NYSERDA energy efficiency on-bill financing would not be possible with ECB. This is generally recognized to be applicable to electric service at this time.

  1. CUSTOMER CONFUSION

Customers going through enrollments, drops, and switches would be “moved around” to different billers. With each move, the customer would create a different bill format, receivable, remit-to party, collection agent, etc. However, the customer would have to still contact the utility for many things regarding their distribution billing charges and all physical aspects of their service (meter issues, service changes, etc.). To the customer it may feel like the ESCo is the controlling party but in reality they couldn’t handle any calls that they don’t handle today.

Customer payments would have to be sent to the ESCo that rendered the bill, and any sent to the utility (or another ESCo) would have to be returned thus causing delays in payment application. The utility could not offer any assistance to the customer for payment handling issues at the ESCo and may be taking collection actions for lack of payment.

The following arrangements / services would be disrupted at biller switch and will add to confusion.

  • PAYMENT PROGRAMS such as short-term collection arrangements, long-term payment agreements, and budget billing would be disrupted at each biller change
  • ELECTRONIC BILL DELIVERY AND PAYMENT ARRANGEMENTS - alternative electronic bill delivery (data and/or image) and payment would be disrupted by each biller change. This would affect a very significant number of customers as electronic billing and payment is used by many customers
  • BILLING OPTIONS - Services such as enlarged bills and Braille bills would need to be managed by ESCO’s or not be provided. Such options would be disrupted at each biller change. The ESCOs would need to be able to handle different types of billing as well. For example summary billing, and billing pertaining to net metered customers.
  • LOW INCOME PROGRAMS - Certain low income programs managed today at the utility would need to be managed at the ESCo and would be disrupted at each biller change. Also requires coordination and system integration with other state/city agencies.
  • Payment options currently available to customers could be disrupted including: a) the ability to pay bills at a utility walk-in office; b) the ability to pay a bill at a kiosk; c) Pay agents (such as Western Union) may no longer be an option;
  • ESCOs that provide Single Bills could be required to demonstrate the capability to produce an enlarged or Braille bill, for example, or electronic bill presentation functionality as a matter of qualifying to present bills.

Utility Programs such as medical extensions and LSA customers. Also customer funded/customer assistance specific utility programs. (IE: Central Hudson’s Good Neighbor Fund)

  1. Customer Care
  1. ESCOs will need to maintain a fully functioning call center to handle all customer inquiries and will have to record all transactions for dispute resolution purposes.
  1. ESCO would have to get buy in from the customer
  2. ESCO would have to comply with complaint rates and customer satisfaction surveys. Utility Service Quality Measures (complaint rates, customer satisfaction goals) would have to be re-evaluated since ESCOs’ billing and customer care could negatively impact utility SQMs.
  1. BACK-BILLING

Back-billing for situations such as metering issues (ex. shared & mixed metering), rate issues, and theft of service would be impracticable to coordinate between multiple billing parties. Without the ability to back-bill properly, customers, utilities and ESCO’s would all be affected. NFGDC’s single retailer model is different in that it is addressed using a billing adjustment.

  1. BILL PREP & DELIVERY
  1. BILL DISPLAY - Requirements in NYS regulations and in each utility’s tariffs would have to be satisfied in the ESCo bill or waived as not required with the alternate billing party. Billing detail would have to be the same as on the utility bill. Additionally, UBP Section 9: Billing and Payment Processing does not establish requirements for billing and payment processing in the single retailer model. Whether or not the Commission wishes to retain the status quo for some or all customers will probably need to be addressed.
  1. BILL MESSAGES AND INSERTS - Utility delivered messages and inserts would either need to be coordinated with each ESCo (very difficult) or no longer done – however that would violate regulations and tariff requirements.
  1. BILL DELIVERY DISCOUNTS - USPS volume discounts and discounts for Intelligent Mail Barcoding (IMB) and electronic filing through PostalOne may not be met by ESCo’s and thus create additional mailing cost. ESCo’s would also have to enact postal requirements of:
  • Change of Address (COA)
  • Coding Accuracy Support System (CASS)
  • Delivery Point Validation (DPV)
  • Pre-sort Accuracy Validation and Evaluation (PAVE)
  • Returned mail management
  1. COST

Developing an ECB function would be duplicative, very difficult and costly. An entirely new process flow would be created implementing a “reverse” POR and/or PAYGP models.

  • All EDI transactions would have to work differently (814, 867) or in reverse (810, 820, 824).
  • Utility bill-ready data handshake would be very different (likely happen at same time as meter data is sent)
  • Some functions may need to be built new such as ESCo-requested suspension of service (which is avoided in utility-based POR without recourse)

Each utility will still have to do its own complete billing using distribution rates yet pass all the detail to the ESCO’s (using a bill-ready model).

Costs to make these major changes to utility systems and manage a new ECB model would be in addition to current costs. Each ESCO would also be required to make significant investment into building and operating their financial systems. Ultimately, customers would end up bearing these costs.

It would not be cost effective, efficient or prudent to require utilities to manage utility and ESCO consolidated billing, as well as the two –bill model. All ESCOs would need to handle ECB.

  1. OTHER
  1. FULL BILLING RECORDS - The utility would no longer hold full billing records. ESCOs would need to follow record retention requirements for all billing records, as noted in applicable NYS regulations.
  1. SUPPLY SETTLEMENT - Utilities would still hold responsibility for electric & gas supply settlement
  1. TAXES - Utilities are required to collect and remit indirect taxes. This would still have to take place in an ECB program at the utility. For tax-exempt customers both parties would need to manage exempt certificates and billing setup.
  1. Utilities could consider enhancing the current utility consolidated bill. This may be more cost effective and would leverage existing systems, processes, and agreements already in place.
  1. A process could be developed that would permit the utility to bill for non-utility services and products (for a fee) –
  2. Non-utility receivables need not be purchased
  3. Complicationswould need to be overcome related to non-utility charges and disconnection/impact on credit and collections.
  4. Customized info on bill
  5. Bill inserts
  6. Disputed Bills and litigation hold
  7. Bill History Retention (Central Hudson currently uses Bill PDFs housed at the bill print vendor’s facility for billing history retention)
  8. ESCO Disaster Recovery Plan
  1. BILLING SERVICES AGREEMENTS & FINANCIAL REQUIREMENTS/CREDITWORTHINESS

With the ESCo controlling (and possibly purchasing) the receivable in a ECB program, it would be holding monies and liabilities to utilities. Financial and legal issues of this arrangement would have to be established in Business Service Agreements (BSA). ESCOs would need to establish certain credit instruments to guarantee coverage of electric and gas supply costs and utility distribution receivables. These credit instruments may include surety bonds, parent guarantees, liens, cash) and ESCos with liens would not be allowed to pledge their receivables to other financial institutions. ESCO’s with parent owners may have difficulties in complying with these needs. Very important issue/could impact utility credit rating and cost of capital.