Hedging programs promise protection against energy-market price spikes, and they can be important to the regulatory goal of sustainable, lowest long-term service cost. But how much price...
of load data or of all information, the utility will provide marketers with the consumer's name and address, rate information, account number and load data.
While these arrangements protect consumer privacy by allowing the consumer to control whom he deals with and when, they're labor-intensive, slow and sometimes counter-productive. In some pilot programs, the utility's workload increased astronomically, and information exchange took weeks. Confused consumers lost track of the process, grew frustrated with the delay and didn't take full advantage of the benefits of the newly competitive market.
Such rules to guard privacy also are expensive. To cover their added labor costs, some utilities started charging up to $10 per year to customers who requested that their information be transferred.
The flaw in this approach to addressing the need for privacy is that it not only increases utilities' costs, but it also puts customer satisfaction on the back burner. The longer people have to wait for their quotes, the more disappointed they become. Deregulation promised them a choice, they've consented to release their utility data, so they're waiting for the information they need to choose an energy provider. If the information doesn't come promptly, their attention moves to other, more pressing issues. Consequently, they may miss the opportunity for savings and aim their resentment at the utility.
Why Not Encryption? Open, Yet Secure
Computers have penetrated every aspect of our daily lives. They threaten privacy, yet also offer a way out. Already we use cyber technology to secure credit card, e-mail and Internet transactions. Why not energy?
Here's how encryption works. The utility transfers its entire customer database to a CD-ROM. Each consumer record is divided into two parts. One, containing the consumer's name, address, telephone number and other account information, is encrypted and accessible only with a password specific to and known by only the consumer. The second, unencrypted part includes usage and possibly billing history.
The marketer evaluates the usage data for all (anonymous) consumers and creates products for a specific class of consumers or geographic area. When a consumer provides his password - the electronic form of meaningful consent - the marketer accesses the encrypted information and immediately develops a price quote. The sensitive data of consumers who don't want to participate in energy choice remains secure.
With respect to consumer privacy, encryption is at least as good as the old-fashioned "wet signature" because only the consumer knows his password, and only he can give consent. It's also faster and cheaper to implement.
Our analysis found that the encrypted CD-ROM is the most cost-effective way to transfer consumer data to energy marketers. (See table, "Cost Comparison of Data Transfer Methods.") We compared various methods for transferring consumer data, including the following:
Mail Request/Mail Delivery. The consumer requests the data transfer by mail ("wet signature"); the utility forwards the data by mail.
Phone Request/Mail Delivery. The consumer requests a copy of his data by telephone; the utility forwards his data to the marketer by mail.
Encrypted CD-ROM. The utility provides marketers with a CD-ROM with specific consumer data encrypted. When