July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
Oliver Richard is a gas man. His career includes a stint at the Federal Energy Regulatory Commission, as well as at Tenngasco, Northern Natural Gas Co., Enron, New Jersey Resources Corp., and The Columbia Gas System, Inc. Now he's found a new calling. He wants to be an ad man.
Several weeks ago I heard Richard describe his idea for the perfect 30-second TV spot to plug natural gas. Two utility CEOs are on the golf course. "Electricity costs too much," says one. "Some towns can't get gas service," says the other. "That stinks." The picture fades as the gas man gets the last word: "Of course it stinks. It's supposed to. It's natural gas."
Richard sees a problem with UtiliCorp's national marketing plan and its EnergyOne brand: No competition. UtiliCorp has differentiated its product all right, but from what? Richard says: "UtiliCorp probably hopes that another utility will introduce a second nationwide brand name . . . to create the sort of friendly battle that will escalate public awareness of their energy products."
In February, the Wyoming Public Service Commission (PSC) ok'd a pilot plan allowing KN Energy to offer service choices to all customers (em including residential (em in a small slice of service territory. KN would invite marketers to pitch their wares. KN customers could then sign a formal ballot to choose a service provider. PSC chairman Steve Ellenbecker describes what happened:
"Consumers couldn't understand the difference between the actual ballots and all the advertising flyers mailed out by the marketers offering weekend getaways and sweepstakes prizes." The lesson: Make sure you have an independent third party operate the balloting campaign. Ellenbecker warns, "When you're calling the residential customer, asking if you can be their new supplier, they look at you as their new utility. They want to know where the old one went."
For an East Coast view, talk to Robert Chilton, director of the electric, gas, and energy divisions at the New Jersey Board of Public Utilities. His two-year pilot plan covers commercial and industrial customers for the state's four local gas distributors (LDCs). Chilton notes a few problems, including market-share distortions.
"Even though we have 20 to 30 marketers serving each LDC territory," says Chilton. "Between 22 and 56 percent of the market share has gone to marketing affiliates of the LDCs. They got a jump on the market."
Chilton sees high rates as a key factor driving customer choice in New Jersey, but Ellenbecker offers a different twist: "Oddly enough," he says, "Wyoming has very low energy prices, but [apparently] not low enough. Wyoming customers look at prices (80¢ to 90¢) at some of the local hubs and see that gas being dumped into the California market, and then want to know why they pay $4 to $5 on their bills."
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