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Load Aggregation: The Wolf at the Door?

Fortnightly Magazine - January 1 1997

of energy manager, indicating fertile territory for offering energy management services where such expertise is absent. In general, most utilities have yet to look at the world through the eyes of the customer to see the value added by others. When they do, some innovative ideas should emerge.

What Customers Demand: Data

Many utility customers have grown accustomed to purchasing other commodities and services via national accounts; purchasing agents find their inability to do so with energy to be a serious handicap. Thus, the surveys deliver another consistent message from large commercial and industrial customers: Give us more data.

Customers incur significant costs simply in receiving, processing, and paying utility invoices. They need accurate and relevant information regarding their energy use and costs; the lack of it contributes to "analysis paralysis" and bad guesses. Downsizing (at the customer end) has only contributed to the problem.

Joe Megacz, energy manager for the McDonald's chain, tells utilities to "give us the data, the facts, the spreadsheets we need to make the decisions to make we're on the right rate. ... To help me do my job, do the best job you can [in supplying me with useful billing information]."

Utility Affiliates: One-Upping the Aggregators

Utilities are not powerless in these new markets. Using existing staff (and perhaps some consultants for software development), utilities may make use of unregulated affiliates to one-up aggregators through a number of options.

First, utilities are uniquely situated to offer "packages" of services that can be customized for customers, using sophisticated billing and analysis programs that can save customers money (e.g., through lowering coincident-peak demand charges, or finding billing errors). They can offer a basic billing service that combines all utility charges (em including water and telephone, not just gas and electricity.

Second, the utility affiliate can handle the customers payments, ensuring timely and accurate payments to the utility, but under terms more favorable to the utility than presently allowed for regulated utilities. Through the use of "3-dimensional" billing techniques, the subsidiary could act as its customers' "energy manager in a box," showing how energy use can be better controlled and monitored to find sources of savings, converting what is presently an expense into a potential profit center.

Moreover, when an incumbent utility can combine custom billing services with management of other infrastructure functions (such as water and waste management), the overall picture becomes much brighter for the power company that offers this service as part of its aggregating option. The utility is now providing opportunities for its customers to outsource work that is normally part of their overhead, the cost of which could be comparable to the differences between the prices offered by the utility and its aggregating competition. Since most companies pay much more for their people than for their energy, total savings from such services could greatly exceed the savings the competition is offering.

The beauty of these opportunities is that they can be initiated now, before deregulation becomes a fait accompli. A number of firms have been developing products for this market. For example Northern Indiana