Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Residential Pilot Programs: Who's Doing, Who's Dealing?

Fortnightly Magazine - January 1 1997

Mountain Energy (em were selling power at about 2.7 to 2.8¢/kWh.

"The price competition in New Hampshire got to the point of one tenth of a mill, making the difference to a residential customer, just so you know, of 60 cents a month they might save," says O'Brien. "Probably a lot lower than that, though. In fact, we had customers making decisions based on saving six cents a month."

"I think all of the customers are getting prices below what we assumed to be the market price," says George McCluskey, restructuring division director at the New Hampshire PUC. "They're getting prices below the incremental cost of supplying it. Which may or may not be true. We

understand that some suppliers were willing to take a hit just to develop market share. But until you actually know what their costs are, it's a little difficult to say that. We're not there yet.

"The market, based on prices that we heard about in the pilot program, has turned out to be considerably lower than we projected. So the savings are expected to be on the order of 15, perhaps up to 18, percent when all is said and done."

Says Murray, of PSNH: "For me personally, I don't think the fact that they're selling it at the prices they are is a violation of law. They're doing it so openly. I would just have to imagine they know what they're doing. They're selling for less than it's costing them to generate themselves or purchase it, that's true.

"Do you think those prices are really going to be there when competition is all over?" he asks. "Where's the savings going to come from when the utility isn't kicking in 10 percent?"

Murray says he's uncertain as to whether the pilot will determine who will win or lose competitive advantage.

Therrien, of XENERGY, says the pilot has revealed at what price point customers will switch suppliers.

"The minimum point that people make decisions seems to be at least 5 percent of their total bill," she says. "A 5-percent change in their bill before they'd consider changing. Although in New Hampshire, I think the situation was little bit different. You have some customers who just don't like their local utility, they don't like the prices ... and as such were willing to make a change without much savings."

McCluskey has the final word, however, noting that "the pilot, while interesting, is not the main goal at this time.

"The pilot was required because of legislation and the restructuring is required because of legislation. ... Now we'll switch our resources toward implementing the second piece of legislation, which is the restructuring legislation. When we get a little bit of downtime, we'll get back to analyzing the data from the pilot."

He says when the data is in, utilities might find that all they have at risk during a pilot is their pride. "I'm not suggesting that they're not going to retain ... their market. I think you'll find out when it's all said and done that the utilities