[BETA] Fortnightly

Let customers choose their own billing format.

The information-management and transaction-cost problems facing deregulated markets are familiar to me. They describe precisely the same barriers I was trying to overcome when I founded Utility.com Inc., an entirely Internet-based energy service provider.

The Internet offers an especially powerful tool for customer service. With deregulation, customers face an enormous learning curve. Not only can they now choose their electric company, but they also must become familiar with new terminology and concepts. In the past, consumers faced a single, vertically integrated provider. Under competition they have one supplier of energy and customer services and another for power or gas delivery. While they may have a single point of contact for billing and customer service, consumers always will have to deal directly with delivery companies during outages. All of this education can be provided at virtually no cost on the Web - not only through retailer websites, but also through excellent sites provided by various state utility commissions, the power delivery companies and government agencies. The U.S. Department of Energy provides one of my favorite sites: http://www.eia.doe.gov/cneaf/electricity/page/restructure.html.

A Ready Demand-side Response

Consumers demand the services they want in the way they want them. The Internet is well-suited to meet the resulting need for mass customization. The medium allows customers to choose where they pay their electricity and gas bills and even how those bills are formatted (within the consumer-protection regulations established by the deregulating states). Consumers can have free access to energy analyses, which may describe, for example, how much they spend for energy for each of their major appliances. Or they can compare their usage history to similarly situated customers or normalize it for changes in the weather.

Email allows no-cost, instant-outbound communications, as well. Consider how much more effective utility calls for consumer cutbacks in peak power use last summer - now communicated via traditional news channels - would have been were they sent individually with customized suggestions to each user.

In fact, the Internet finally makes economical a significant demand-side response to power price spikes in the wholesale markets. Where generators now can set peak prices - and sometimes even have earned excess profits during these times - consumers will be able to fight back by reducing demand. That will be possible because the Internet allows cost-free communication of critical peak prices to such consumers, and eases the implementation of time-of-use pricing through its powerful ability to educate them.

Data exchanges among the energy service providers and the gas and electric delivery utilities also become dramatically simpler through the Internet. Data may be entered by the customer - at no cost to the energy company - at the supplier's Web portal, and then communicated freely via the Internet wherever possible. In California, for example, all metering data is exchanged over the Web using secure servers and connections. In addition, while electronic data interchange - another great technology solution to energy market problems - now is done through more costly value-added networks, the Internet promises to displace these costs.

Are Regulators Ready?

Despite