Energy utilities in California will be permitted to set charges at a level high enough to earn an 11.6-percent return on equity (ROE) for 1996. Pacific Gas and Electric Co. was also awarded a...
NEV?s Mike Peevey: Meters Make the Market
AS NEW ENERGY VENTURES, LLC EXPLAINS IN ITS PROMOtional literature, it took a long time in California for electricity competition to move from the category of "wacky idea" to widespread acceptance.
But that was before the California electric market opened in April, and before NEV had formed its New Energy Buyers' Alliance, a consortium of clients for whom NEV buys wholesale energy. The alliance includes associations like the California Retailers Association, Western Growers Association and the Independent Colleges of Southern California. Among its corporate members the alliance counts AlliedSignal, Inc., Georgia-Pacific Corp., Ralphs Grocery Co., Robinsons-May and Sumitomo Life Realty.
Michael R. Peevey, president of NEV, touts his company as an electricity retailer that is free to buy wholesale wherever it can cut the best deal (em whether in an established spot market or through a bilateral contract with an individual trader or power producer. Peevey, who in a former life was president of SCEcorp and Southern California Edison Co., believes that NEV customers can beat the price of electricity otherwise available through the California Power Exchange.
But information services plays an important role as well. Peevey claims to offer billing and energy management services, using the Internet as a gateway. In almost all cases, a customer must replace its existing meter. NEV's billing and energy information system requires a meter than can track energy use hour-by-hour, and that can also communicate with a remote computer system. NEV says it is looking at an investment of $860 per meter, which it deems "small" in relation to the possible magnitude of energy savings.
A privately held company, NEV is 50-percent owned by Tucson Electric Power Co.; NEV executives hold the other 50 percent. Public Utilities Fortnightly spoke with Peevey to hear his experience in California's new electric market (em and elsewhere.
The Mood in California
Can you describe the mood in California during the first week of customer choice? What's different from what you thought it would be?
I'll have to think a little about that. I don't know about the mood, but let me put it this way: Everything is going off smoothly and without a hitch. Power Exchange prices are a little higher than a lot of people anticipated, given this time of year. And it's off to a good start.
Are there any customer accounts that you are particularly proud of reeling in?
Oh sure. There's Ralphs, a grocery chain in Southern California. Their peak usage is about 100 megawatts. That's one. And Macy's. And Robinsons-May, a department store chain, TAMCO steel, Catholic Health Care West, which is 26 hospitals and the city of San Jose, the biggest city in the Bay Area. And there are several other cities in the Bay Area that we also contract with.
You mentioned PX prices. Am I correct that you are doing your buying outside the PX or are you buying both?
We're doing both. We've bought outside the PX, locked in and resold power¼ locked in the margin, and we'll give that margin to our customers, minus our fees. Do you follow