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Energy Strategy: Flat Bills, Peak Satisfaction?

 

Why a risk-hedging product for small customers isn’t the gamble you may think.

Fortnightly's Energy Customer Management - Jan-Feb 2002

have paid under the tariff-based, volumetric-pricing plan. Increasing the amount of the risk adder increases the likelihood that in any given year, the revenue outcome for the company will be a gain. Of course, the larger the risk adder, the smaller the participation rate.

In an industry built on the bricks and mortar of unit price efficiency, some will continue to scoff at this pricing innovation, dismissing flat bills because of the perceived inefficiency. We suggest those skeptics carefully examine the many industries offering flat bills. Consider the Internet service providers offering unlimited use for $19.95 per month; the telecommunications firms hawking unlimited use at $60 a month; and auto rental companies with unlimited miles for $40 per day. 

There is a market niche yearning for such a product, and it can be constructed safely and profitably. It simply requires that you clearly define the norm and logically address it. If you don’t, someone else will. 

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