Knowing your car’s fuel economy and the price of gas changes decisions you make.  You learned that ‘petal to the metal’ uses up more gas than cruise control.  You skip the small remote gas station so you can save at the gas stations where there is competitive pricing.  You look at the government gas ratings when you select your next vehicle.

The same is true for pre-paid phones.  Pre-paid phone and text users talk/text less than ‘unlimited package’ users.  Knowing evenings are cheaper (usually free) changes when you talk to your friend across the country.

So what is today’s price for electricity?  How much does it really cost to run your electric dryer in the day versus at night?  The more awareness and visibility you have of your usage patterns and the cost of the commodity, the more responsible your use.

Pre-paid energy plans give consumers visibility into their use and the cost of the commodity, much like our current car/gas consumption.  While many relate ‘pre-paid energy’ to poor credit customers, it really should be for everyone.  The days where the local utility hides your true energy costs and hides your usage patterns should be terminated.  You want to run that dryer when wholesale markets are at $130/MWh?  Watch that pre-paid amount spin down.  You need that house cooled to 68 degrees during peak periods of the day when most of you are in school or the office?  More spin down.  You have no clue what happens when your hot tub heats your water to 102 degrees every 2 hours?  You’ll find out!

When you attach dollars to each decision a consumer is making, then you will see progress on the ‘carbon footprint’/'need more power plants’ challenges of today.  Smart meters are happening across the nation.  The utilities that control their deployment often offer mediocre incremental schemes to take advantage of the information:  turning off your AC mid day, etc.

Innovation is where the entrepreneurs of the deregulated energy industry set the pace.  Open up the doors to companies offering pre-paid products to customers, and watch that carbon footprint shrink.  And the need for more power plants shrink.  And many more benefits!

Call your legislator now, and demand pre-paid energy products!

And call ESG to see how your energy company can benefit while saving the world!!

Unlike other competitive marketplaces, a ‘default’ supplier of energy is required since nearly everyone needs energy:  if all the competitive suppliers left a marketplace, who would supply energy?  It is not a question of “POLR or not”, but rather “how do we POLR?”

Several models exist:

• Legacy model.  The utility controls the bulk of energy supply so they set the price using some kind of formula.  In the old days of silo energy solutions, this usually hinged on the utility’s cost of generating power.
• ERCOT model.  In the mid 2000’s Texas broke ground with a POLR option that made competitive energy suppliers the POLR.  Using a formula that hinges price of retail POLR supply on the price of wholesale energy made it cost effective for suppliers to be POLR suppliers as well.
• NJ Auction model.  Also in the 2000’s NJ introduced their ‘BGS Auction’, which invited energy wholesale suppliers in to bid on ‘tranches’ of customer supply.  NJ developed a model where 1/3 of energy supply was purchased each year, helping to ‘levelize’ the cost of fuel.  Several other markets, including PPL, have adopted similar auctions.  PPL’s default price changes quarterly.

Competition shines light into previously hidden processes.  With wholesale markets in place, there should be little magic into how the ‘default’ price is calculated.  One even can question why the LDC should manage this process, moving closer to the ERCOT model?

Many legislatures and commissions originally hedged their competition bets by capping POLR rates.  The use of wholesale ‘auctions’ is another hedge to protect consumers.  Yet these ‘auctions’ may be sucking the life out of the competitive marketplaces, making it too difficult for suppliers to compete.

In a time where all hands are needed on deck helping consumers conserve energy, and increasing supply for ever expanding energy needs, is now the time to eliminate competitive energy suppliers:  job-creators, entrepreneurs, innovative thinkers, investors?

We think not.

First, POR represents a steady, lower-risk revenue stream for a Supplier.  They sign a customer, and N days after the Utility sends the consolidated bill to the Customer for last months energy, the Supplier gets paid by the Utility, regardless if the Customer pays or not.  The Utility now owns the Receivable, including responsibility for collections of that receivable.

Second, a Supplier usually pays a fee to the Utility for this ‘purchase’.  Most often this takes the form of a discount:  Suppliers charges are $100, discount is 1% so they get paid $99 by the Utility.

Third, POR enables Suppliers to go after customers who are not the low hanging fruit in the industry.  Residentials and small commercials are often the least served demographic in Choice markets partially because of the collections risk.

There are certainly other advantages as well as a few disadvantages (e.g. high discount percentages in some markets), but most Commission websites for POR territories show an active and growing list of Suppliers.

POR que?  Para obtener más clientes, mayores ingresos y beneficios más altos. ¡Vamos!

When Pennsylvania opened its market in 1998, legislators were not so confident in the hand they were dealt.  They left the ‘default’ commodity providers as a part of the utility, and further hedged their bets with ‘caps’ that served as an ‘emergency valve’ in case energy choice did not work as designed.  After a flicker of hope for choice, higher wholesale costs essentially shut down the PA electric marketplaces.  PA residents benefited from artificially low rates set by these caps, which expire 2010 and 2011.

As these rate caps expire, consumers are getting a taste of what wholesale-market-driven prices are like.  In theory this is not much different from gas for our cars.  The market sets a wholesale price, and retailers offer products based on primarily those wholesale costs.  When prices go really high, people buy smaller cars or hybrids, or they drive less.

The same is true with electricity:  we need to consume less.  Demand continues to grow, and adding supply options in the northeast corridor is difficult , with ‘not-in-my-backyard’ [NIMBY] issues greater due primarily to population density.  Load control and other energy-saving products will grow once customers are more aware of the dynamics of the electricity wholesale markets.

Creativity in solving energy challenges is critical.  Imagine if Bill Gates stuck with his original statement that computers would never need more than 640kb of memory?!  Or if pre-1980 AT&T and Ma Bell’s were charged with deploying nationwide cellular coverage?  We most likely have no idea what the greatest energy saving invention will be in 10 years.   We are more likely to get that invention – and help solve our energy issues – with more cooks in the kitchen, not less.  Relying on a single regulated company – the incumbent default utility – to solve these problems is not the path with the most options.  Instead, let’s have a vibrant, alive, competitive marketplace of energy providers with access to the data and controls needed to offer products that give customers the incentives necessary to change their usage patterns.

Over the next few years we will see if PA’s hedged bet leaving the utility as the default energy provider was the right move.  The proof is in the pudding:  a wide variety of energy providers, products and services to help consumers manage their energy and energy costs, or most consumers on default service from the utility, with state- or utility-driven solutions to energy challenges?

I prefer my pudding with the flavor that comes with lots choices and options, please.

Over the next 3 years ending 2012, nearly all TX meters will replaced by smart meters – meters capable of both (a) recording data at 15-minute intervals to give a detailed picture of energy consumption, and (b) enabling Home Area Network HAN capabilities that move energy controls into the 21st Century.  HAN’s will enable load control and other features state-wide using a single standard.

As with any large deployment, features are being deployed gradually.  On 2/1, REP’s will be able to:

• Get interval data for ESIID’s that have smart meters.  This will most likely be automated through existing usage data feeds.  Contact ESG for more info.
• Establish administrative users that can go online and add ESIID’s, view ESIID usage info, request ad hoc usage information and more
• Establish and manage HAN devices, and control basic features of HAN devices

In Q4 2010, REP’s can throw away their Letter of Authorization LOA devices used to qualify new prospects, and turn on an SMT tool that will enable them to get detailed interval profiles with only the ESIID and the Meter #.

Demand-side management, time-of-use pricing and much much more are in our future, limited only by the imagination of the REP’s and energy providers.  Get out your crayons, and don’t bother staying inside the lines, because the lines are yet to be drawn!

Instead of boxes delivered, the indicator of growth for this industry could be the number of EDI transactions (and non-EDI) delivered between utilities and their retail supplier trading partners. If this is an accurate indicator (and I am certain it is), the retail energy industry has been growing at a very favorable rate. In this example, ESG resembles FedEx; and this “EDI courier” has seen significant growth, for many years, in the number of EDI transactions we manage on a monthly basis. By the end of this summer, ESG will manage data for over 4 million meters per month in the US. Our meter volumes increase nearly every month and it is not unusual to see increases of 100,000 meters or more per month. ESG is active in every deregulated, retail electric market and most deregulated gas markets. We’ve seen the greatest growth in TX, NY, CT and OH, and we are looking forward to significant growth in PA with the removal of price caps behind a few of the utilities.

Other great indicators of growth in the retail energy industry are the large number of new retail suppliers entering the industry for the first time, and  existing clients entering new markets. Here it is almost 9 years after TX first opened its doors to retail electric competition and there are still many new suppliers entering the market and adding value. NY and CT are seeing many new gas and electric suppliers entering their markets as well.

After the demise of the Virginia retail electric market, more challenges in MI, issues in MD and a few other close calls in other markets, many people active in retail energy were concerned about where the industry was heading and where we would see growth. From what we’ve seen here at ESG, growth in this industry is alive and well. So fear not, there is plenty of opportunity out there to enter new markets and grow your retail energy business.

Congratulations to all those retail suppliers out there enjoying this growth! Now, if we could only get California to open its markets. . .

Mandatory Hourly Pricing [MHP]

• MHP for accounts 1000kw – 1499kw total peak demand (not just one meter) begins Nov 2009, meters installed by Apr 2009 (300 customers)
• MHP for accounts 500kw – 999kw begins May 2011, meters installed by Apr 2010 (1400 customers)

PowerMove Expansion

• Allows Customer to choose supplier when they enroll, getting 7% savings immediately
• Expect Jun 2010 implementation pending PSC approval

Automated EDI Testing

• New automated testing process will reduce testing timeline to 10 days
• Web-based testing interface for trading partners; see progress; interact; email updates when files posted, etc.
• Implementation Jan 2010

Miscellaneous

• 600k accounts switched (3.1M total)
• 60 ESCO’s, 15 electric only, 28 gas only, 15 E&G

Summary:  FirstEnergy-UCBRR-Summary-20090917

Links:

• Website, Rate Form for Met-Ed/Penelec:  http://www.firstenergycorp.com/supplierservices/files/Supplier_Registration/Ratedesignform%20rev%206%2021%2007.xls
• Website, Rate form for Penn Power:  http://www.firstenergycorp.com/supplierservices/files/Rates_and_EDI/suprates.pdf

• PA markets Duquesne, PennElec, MetEd, Allegheny Power and Penn Power all provide Rate Ready already.
• Most expect the new RR solution to look alot like the existing RR solutions already in place in PA
• PPL and PECO started with Bill-Ready in 1999
• To join the fray, contact Bruce Bolbat at PPL
• A report is due to the PA PUC by 11/9/09
• ESG is helping to coordinate Suppliers in this effort.  If interested, contact George Behr at ESG

PJM IG’s 2009-08-08