NY Assemblyman Targets Retail Gas Marketer

New York Assemblyman Robin L. Schimminger is trying to convince the state to open an investigation into the bankruptcy of Iroquois Energy Management LLC, which left approximately 19,000 residential natural gas customers with an estimated $1.8 million out-of-pocket loss due to non-refunded pre-payments.

"It appears as though many of these individuals made their payments in August, approximately 60 days before Iroquois Energy filed its bankruptcy request," said Assemblyman Schimminger in his letter to State Attorney General Elliot Spitzer last week.

In October, National Fuel Gas Distribution Corp., the host of the choice program which serves eight counties in Western New York, announced it would take over serving Iroquois Energy Management's residential customers after the marketer reported that it would no longer serve them on the National Fuel System. Iroquois, at the time said it would continue to serve its commercial and industrial customers. On Oct. 23, National Fuel was forced to cut Iroquois from its choice program after the company had gone three days without fulfilling its commercial and industrial customers' gas supply needs. Then on Oct. 31, Hamburg, NY-based Iroquois filed for bankruptcy.

"Iroquois had structured a contractual arrangement where customers might achieve a greater level of savings if they were willing to enter into a contract where they were pre-paying on a quarterly, semiannually, and in some cases on an annual basis," said Julie Coppola Cox, spokeswoman for National Fuel Gas. "So when the accounts were finalized, there were customers that had prepaid into the time frame after they [Iroquois] had filed for bankruptcy. There are monies that are now part of this bankruptcy that are owed to customers. Strong indications now are that they probably won't see their refunds."

Schimminger said, "Newspaper accounts indicate that the company [Iroquois] has essentially ceased operations and does not have enough assets that can be converted into the cash needed to pay off more than a small portion of its debts." The assemblyman said his constituents stood to lose hundreds, and in some cases, thousands of dollars. To add insult to injury, Schimminger said these customers, which had prepaid Iroquois, still have to find a way to pay their current heating costs with their new supplier.

The assemblyman asked Spitzer to look into the timeline of Iroquois' decline. Specifically, When did Iroquois know it was in financial trouble? Was it appropriate to accept prepayments in August? And why were prepaid monies not held in escrow? Schimminger called the situation "a major setback to energy deregulation," and requested further measures going forward to ensure that the situation does not happen again.

Coppola Cox said that National Fuel Distribution had 67,637 residential customers participating in its choice program as of Oct. 1. On Nov. 1, after the Iroquois default, there were 49,931 participants, which represents a good bit of the 19,000 customers shifting back to the utility. She said numbers are already coming back up. "In December we saw a bit of an increase, we are back up to 50,354," she said.

The spokeswoman said their choice program performed as expected in case of a problem. "We were able to move these customers from the marketer to the utility without interruption in service, and give the customers the opportunity to determine what their next move would be without the concern of having gas available to them," said Coppola Cox. "Customers, without having to do anything, were notified that their gas service was still intact, and going forward they had the opportunity to choose from any other approved marketer."

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