Off Peak

July 1, 2000

Managed Expectations

By Regina R. Johnson

Should PUCs teach customers that the market doesn't want them?

You know the flight of suppliers from a deregulated market is having an impact when surviving marketers issue press releases to let customers know they're still in the game.

That was the situation in the Northeast and Mid-Atlantic in mid-June, on the heals of reports that a handful of electric suppliers in Massachusetts, New Jersey, Pennsylvania, and New York were returning customers to default utilities. They blamed soaring wholesale prices caused by expected tight supply in the region this summer. Some default suppliers were in a pinch too, as their projected demand rose, leaving them to scramble for sufficient supply at the high wholesale prices.

"Prices in the wholesale market are just too high to price [electricity] lower than the price to compare and still make a profit," explained Tim Brown, a spokesman for Conectiv Energy Services. In early June, the supplier notified 35,000 residential customers in the PECO service area that they would be returned to the incumbent utility after the July 1 meter reading.

Although little could be done to ease tight electric supply this season, regulators in the Northeast and Mid-Atlantic said they were doing what they could to expedite the installment of new generating capacity. Supply and demand in the wholesale electric markets is expected to come into balance within the next year or two, as slated generating capacity comes online.

But New York regulators were also looking beyond supply-side answers. According to David C. Flanagan, external affairs officer at the New York Public Service Commission, the agency was educating consumers about the tight supply situation as part of its ongoing program to inform them about electric competition.

Said Flanagan, "That's something that we have already been trying to do in terms of this summer, to get the word out that No. 1, supplies will be tight, not just in New York, but in the Northeast and other parts of the country. And that that pressure on supply and demand can lead to increased wholesale prices."

The message was being disseminated through press releases to the media. Other state agencies, including the Long Island Power Authority, were publicizing the tight supply, and urging customers to conserve energy. The New York PSC also was working to publicize the need for additional capacity in the state, Flanagan added.

Is public education about system limitations the key to managing customer expectations?

Some market participants think so. Said Brown, "The reality is that people have a gold standard [in terms of service expectations]. So there's a tremendous need for education on how the system works and how they can help contain demand through conservation [and other measures]." He added that such education efforts are the responsibility of market participants, as well as regulators.

"I think [regulators] have a tremendous obligation to do it, and they're doing it practically not at all," said Neil Chayet, counsel to the Massachusetts Energy Buyers Coalition. "I know it sounds a little of trite-an informed public-but