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Legislative Memo

BILL:

A.7428(Tonko) /S.5240 (Wright)

Support

SUBJECT:

Slamming

 

DATE:

February 24, 2006

 

This bill would add a new subdivision 5 to Section 44 of the Public Service Law in an effort to
prevent “slamming”, or the switching of a customer account to another company without such
customer's consent.

The bill states that “a customer account shall not be switched to a different energy provider
without the express consent of such customer.” The term “express consent” is vague and needs to
be defined. The bill does not specify if written confirmation is required or if a “voice-log” from a
customer call constitutes consent. A voice-log is when a customer calls a company and affirms to
take service from another provider, which is recorded and stored for a limited time on a database.

Line 4 of the bill states that “The terms and conditions of service for a customer shall not be
changed without the express consent of such customer, except changes applicable to all
customers of a service classification, ....” Beyond gaining consent for customers that choose to
switch from an incumbent utility to an ESCo(Energy Service Company), this language would also
apply to customers that wish to switch from an ESCo back to an incumbent utility. And in this
case, if a customer finds a lower rate from another provider but misplaces or fails to return a
written consent form, they will continue to be subject to higher payments from the current
provider.

Currently, it is common practice for customers to be given a mutually agreed upon contract
stating the price, terms and conditions of service when establishing service with an ESCo. That
letter requires a customer's signature verifying that they wish to take service from an ESCo.
These ESCos must abide by the same consumer protection rules as all other energy providers as
required through the Uniform Business Practices order adopted by the PSC. It is important to
note that a customer can terminate service with an ESCo at any time and default to the
incumbent utility or contract with another ESCo of their choice at any time. Typically, the ESCo
sends an annual renewal letter to the customer two and a half months in advance of the end of
their contract for service. Those renewal letters restate the agreement and the price, any change
in terms and conditions of service, and a date by which the customer can opt out. The letter does
not require a customer's signature as with the initial letter that established the terms of service.
A.7428/S.5240 should be amended to make it clear that renewals do not require “express
consent”. Under the language of the bill currently, if customers fail to respond to annual renewal
letters, they will automatically be defaulted to the incumbent utility, even if they do not wish to do
so. At the same time, incumbent utilities are not required to gain annual consent from their
customers. Subjecting ESCos to such a requirement would add significant costs and establish
uncertainty that will adversely impact retail access and overall customer choice.

For the foregoing reasons, The Business Council opposes the bill and requests that it not be
approved.