Wait for the "second wave," when new products help suppliers escape the trench warfare of pricing.
Ever since electric customers were given choice of provider in the United States, much has been written about how few customers have switched providers. More volumes have been written about how risky and unprofitable is the business of electric retailing as compared to generating and wholesaling electricity.1 Taken together, these two developments might constitute an obituary for energy retailing. Perhaps because they share these sentiments, some vertically integrated utilities have exited the retailing business, and become pure distribution companies.
This article is intended both to dispel these myths and encourage fresh thinking about energy retailing. Far from converting electricity into a commodity business riven by price wars that destroy shareholder value, customer choice offers energy service providers (ESPs) the opportunity to innovate their products and better serve customers. The fact that ESPs to date have failed to implement new designs does not preclude tomorrow's suppliers from introducing them. If anything, it creates an opportunity for "fresh blood" to enter the market and seize its commanding heights.
Tomorrow's ESPs are likely to make a number of innovations:
- Exploiting new technology, such as digital controls and optical networking (photonics), in developing new products and services that add value to commodity energy;
- Using new communications channels, such as the Internet, for reaching customers and enhancing physical distribution;
- Segmenting and targeting end-users more creatively than has been done traditionally through rate classes such as "large, medium, and small light and power."
The experience of other industries that have been deregulated during the past two decades, in the United States and abroad, suggests that competition always has brought price reductions and significant innovations in products and services.2 Electricity retailing will follow this rule before long, and suppliers that lead in these areas can profit.
First, however, companies in the competitive business of retailing energy need to rethink their opportunities. One can only reorganize a company so many times. Management fads such as downsizing, business process reengineering, and omnibus corporate repositioning are just the latest trends aimed at cost cutting. As one consulting firm aptly notes in its ads, "You cannot shrink your way to greatness."
As utility franchise areas throughout the nation gradually open to competition, incumbent monopolies will lose market share to new entrants. They need to think about what share they want to lose, and engage in strategic listening. Among other things, that involves abandoning customer segmentation by rate class for segmenting by actionable clusters. For example, they may want to group their customers along two axes: (1) the risk that the customer will switch to a new entrant, and (2) the profitability of that customer. That will allow them to concentrate on keeping customers that are both highly profitable and highly risky. Energy companies need to let go of the customers that are risky yet not profitable.
In order to keep the profitable and risky customers, they need to move beyond being sellers of commodity energy. The key to success is product differentiation. At the most basic level, they can provide a menu of pricing products that allows customers to match their risk preferences with the likely price volatility of different products. At the next level, they can move beyond risk management by bundling energy with some combination of service and related features. They may even offer value-added products with their core energy products.
Most importantly, companies need to move from cost-based pricing to market-based pricing. But rather than competing in price wars, that move requires marketing imagination, innovative product design, and an understanding of the company's financial and philosophical approach to market strategy. Energy companies need to determine the value that customers place on various product features, and the level of interest customers have in various service and corporate attributes. To be successful in the emerging energy markets, ESPs need to understand unarticulated customer needs and develop products and services for meeting those needs.3
Deregulation Abroad: Still Reaching Its Potential
Overseas markets that have deregulated offer important lessons for electric retailers in the United States. This discussion follows the chronological sequence of events in Australia, Britain, Germany, and Norway.
Great Britain - Expect More Switching. In the 1980s, Prime Minister Margaret Thatcher embarked on an ambitious program of privatization and liberalization. The objective was to improve economic performance by "reversing the corrosive and corrupting effects of socialism." Shares in a range of nationalized industries, including the electric utility business, were sold to the public.4
According to the British Office of Electricity Regulation (OFFER), the Electricity Act 1989 provided the framework for the introduction of competition. The OFFER reported last June that the monopoly held by each of the 14 public electricity suppliers (PESs) to engage in electricity retailing was "withdrawn in stages. In 1990 customers with a maximum demand above 1 megawatt (MW) were able to choose their supplier. ... [T]his was extended in [April] 1994 to all customers with a maximum demand over 100 kilowatts (kW). The monopoly over customers below 100 kW has been removed in stages with competition being phased in [for some 26 million customers] between 14 September 1998 and 24 May 1999."
Large customers responded aggressively to the opportunities to lower their costs by switching to providers other than their local, regional electricity companies (RECs). In the first year, the share of energy being sold by RECs to their native customers plunged from 98 percent to 57 percent. The major generators picked up many of the switching customers, but over time, as RECs began to compete with one another, they started picking up customers as well. The share of such "second-tier" RECs reached 26 percent in 1998.
Figure 1 shows the trend in market share in the large customer market, and Figure 2 shows trends in the medium customer market. Both figures reveal an inexorable downward sloping trend in the market share for incumbent providers.
By contrast, Britain's household market has been slow to switching providers. As of late April, about 5 million customers had switched providers, representing 20 percent of the eligible customer population.
"Face-to-face contact on the doorstep or selling over the telephone is used by most suppliers wishing to enter the designated market. It has been particularly effective in persuading domestic customers to change supplier," according to the OFFER. Price is the overriding reason named by consumers for switching gas and electricity providers. Another frequently mentioned reason is the ability to get both gas and electricity from a single energy provider.
Among this class of customers, each with demands of less than 100 kilowatts, switching rates for small business customers have been higher than those for residential customers. Some PESs have lost nearly 30 percent of their business customers in this market segment.
Clearly, only a small share of the market potential has been realized thus far, despite almost universal awareness of competition, which most customers welcomed. There are several reasons for this slow rate of switching:
- Inertia. Customers see no reason for change.
- Savings Perceived Too Small. A significant gap exists between the savings non-switchers think are available and the savings necessary for them to switch suppliers.5
- Savings Believed to be Short Term. Some customers think the promised savings are an illusion that cannot be maintained over the long haul.
- Energy Costs Relatively Small. Energy costs do not represent a substantial portion of household costs.
- Risk Aversion. Still others don't want to confront the risks that might be attendant to switching, or the hassles of shopping around.
Over the long term, however, one can expect more switching to occur in this segment. For example, more than 5 million of Britain's 20 million households have changed gas suppliers since 1998.6 Exploiting its gas industry switching experience, British Gas already has secured a market share in excess of 50 percent in electricity supply, and the company remains the most aggressive supplier in the small customer market.7 The driver for small customers to switch in Britain is savings on their gas bill, not their electricity bill.8
Australia - One-Third Switched. Choice was introduced in Australia in 1994, with a market design similar to that used in Britain. Choice was first introduced in Victoria in 1994, for customers with demands greater than 5 MW, and next in New South Wales in 1996. Today direct access is available in most states to customers with consumption of more than 160 megawatt-hours per year.
About 12,000 of the 35,000 eligible customers, or 34 percent, have switched providers. The share is roughly 40 percent for customers with demands greater than 750 MWh per year. Many large customers have signed long-term contracts for a 15 percent to 30 percent reduction in electricity prices.
Norway - 5 Percent So Far. In Norway, electricity choice was introduced simultaneously across all customer segments. There is a high level of competitive pressure in all markets, and in 1998 prices to the average end-user fell 24 percent from the year before. In addition to the effects of retail competition, some of the savings are due to the increased share of hydropower in total generation. As of late 1998, roughly 90,000 out of 2 million customers, or under 5 percent, had switched providers. Chain operations and large users were the first to switch.
Germany - Large Price Drops. Germany introduced choice simultaneously across all customer segments in 1998, and competition among the utilities is fierce. No payment was allowed for recovery of stranded costs. The presence of sizable excess capacity, and the fact that German prices were 25 percent to 35 percent higher than the average price in the European Union, has caused significant price drops. Large customers are seeing prices that are 30 percent to 60 percent lower than before the introduction of choice.9
For example, the city-owned utility of Hamburg has promised to slash the electricity bill of a sporting goods store by 40 percent. Corporate customers are getting reductions of 30 percent and more, often without even switching providers. Even domestic customers are seeing reductions of 20 percent to 25 percent.10
Deregulation at Home: Two Markets, Two Approaches
Media headlines proclaim that "99 percent of customers ignore deregulation in California."11 The statement is a half-truth based on the fact that in the first year of deregulation, only 1 percent of the residential customers switched providers. It ignores the fact that switching among large industrial customers exceeded switching rates observed by AT&T in its long-distance business in the first year of telecom deregulation. Figure 3 plots switching rates across major customer segments in California.
As of February 2000, about 20 percent of large industrial customers, accounting for more than 30 percent of industrial energy sales, had switched providers. The percentages are about double their values in June 1998, when they were 11 percent and 16 percent. As shown in the figure, large commercial customers also have switched in significant numbers. Residential and small commercial customers have switched at the lowest rates.
There are many explanations for the variance in switching behavior across these customer segments.
Will Customers Pay for Value-Added Products?
Suppliers serving U.S. markets to date have offered little in the way of products differentiated by service level, reliability, convenience, or other features. They seem to believe that customers base their energy decisions solely on price and have no interest in such innovations. A new study from EPRI finds that just the opposite is true, however.
For this study, "ShareWars," almost 5,000 customers were interviewed by telephone about their preferences for a variety of product designs offered by retailers. Using advanced modeling techniques such as conjoint analysis and mixed logic modeling, researchers found that U.S. retail customers - and in particular, mass market retail customers - are very interested in buying electricity products tailored to their needs, even when those products cost significantly more than basic electricity products.
Discounts may not be enough. In one example, this research found that a "low price" offer of electricity service from a non-traditional provider had to be discounted by at least 15 percent before it acquired a significant market share (with at least 20 percent of all customers indicating a preference for the product). Domestic customers tend to stick with their incumbent provider. As noted by authors of another study, "In the UK domestic gas market, even with discounts of 15-25 percent, just 20-25 percent of all customers have switched suppliers after a year of competition." (Keith Leslie, David Kausman, and Gustav Bard, "A New Generation in Europe," , 1999.)
Customers pay for value. Innovative electricity products tailored to customer preferences (for example, a product tailored to customers who want "to talk to a person when I have a problem or a question") can acquire 20 percent or more in market share even though they are priced at 30 percent price premiums. Of course, this fact shouldn't be surprising. Customers pay for value; the outstanding question is "What counts as value?" EPRI's latest research suggests that many value-creating opportunities exist in retail markets, and at much higher margins than retailers have seen to date.
Past EPRI research of the British market by Alex Henney found that there is "no value in value-added services," because most customers did not see a compelling reason to buy such services from their energy providers. ("Energy Marketing: Is there Value in Value Added?" , Sept. 15, 1997, p. 30.)The recent findings of "ShareWars" suggest that it might be worth revisiting this issue.
California - Savings Guaranteed. As part of California's Assembly Bill 1890, all residential and small commercial customers received a 10 percent reduction in their electricity bill, whether they switched or not. This was intended to appease opponents of deregulation who had argued that it would benefit only large power customers. It appears that no one estimated how big an obstacle to customer switching this 10 percent price cut would be. The new entrants had to come up with significant benefits for customers to overcome their natural aversion to switching. A substantial body of research indicates the first-best option for most customers is to stay with their incumbent provider, and simply get the same product at a lower price.
Enron Energy Services, one of the leading ESPs, exited the California market within two months of operation. Its value proposition for mass-market customers - two weeks of free electricity after one year of service - failed to attract even 1 percent of customers. Enron's market research studies had indicated that 10 percent of customers would switch without any price incentive, because most customers had a poor opinion of their incumbent providers. However, they had not factored in the incumbency bias that would be created by a 10 percent price cut.12
While the ESPs could provide the same 10 percent price cut to a customer, in order to get the customers to switch they had to exceed that amount to overcome the transaction costs such as time, uncertainty, and risk-aversion. This proposition proved unworkable, because the enabling legislation, AB 1890, had imposed a rate freeze, and instituted a competitive transition charge (CTC) to recover stranded costs. The CTC is estimated as a residual in the interplay between the frozen rates and the time-varying wholesale cost of power, as represented by the price on the California Power Exchange. Until it has been recovered fully, and the rate freeze lifted, full retail competition will remain a chimerical possibility.
Other ESPs such as PG&E Energy Services and New Energy Ventures never even put the residential and small commercial market on their radar screens. That was partly because of the steep incumbency bias mentioned, and partly because of the high marketing costs associated with this market segment. The only providers that had some modest success in this market were providers of green power. Customers in California have signed up for green power at prices 10 percent to 20 percent above CalPX prices. That may not occur in other parts of the country, however. Even in California, the provision of green power has been subsidized by the state. It remains to be seen how many customers will pay more for green power when these subsidies go away.
A significant barrier to providing the benefits of competition in mass markets has been the inability to provide such customers "virtual direct access." This phrase, coined by Daniel Fessler, who presided over the California Public Utilities Commission at the time of deregulation, would give small customers access to the wholesale spot market through real-time pricing. Such access has been hampered by the lack of interval metering. Most customers are billed monthly, and some are even billed every other month. They don't see the time-varying nature of electricity costs, and have no incentives to modify their usage patterns.13 In this regard the electricity industry in mass markets significantly trails the telecom industry, where each call and its time are metered in real time.
Another barrier to switching has been the general lack of awareness among residential customers about the existence of customer choice. A final barrier is the small share of electricity costs in the household budget. The typical electric bill for residential customers in California is $65 per month.
More recently, new providers such as Utility.Com are pursuing the mass market using Internet-enabled capabilities such as real-time metering and billing, as well as by providing value-added services such as price-sensitive thermostats. This development represents a major innovation, and will be discussed further.
AB 1890 made no provision for an automatic price cut to medium and large commercial and industrial customers. These customers were interested in saving money, and ESPs courted them with various packages and offers. One ESP, Montana Power Group, signed up the California Manufacturers Association by offering the association a price that was 8 percent below the wholesale price. It is estimated that the typical ESP offered customers a price cut of 3 to 8 percentage points. Often, energy efficiency services were bundled with the price cuts. In response, medium and large customers switched in significant numbers.
Lessons from Gas, Telecom: Competition Doesn't Happen Overnight
Electric service providers can learn plenty from the experience of other U.S. industries that have been opened to competition. Although widespread switching by mass-market customers took over a decade in both the natural gas and telecommunications industries, competition has brought profits for suppliers and savings for customers. But, at least in telecom, the greatest benefits of robust competition may be innovative products and services - and the higher margins they represent for service providers.
Natural Gas - Half Switch in Georgia. Industrial customers in the United States became eligible to choose their natural gas providers in 1978, following the passage of the Natural Gas Policy Act. Extensive switching occurred, and, according to the American Gas Association, 89 percent of total gas consumed by industrials was purchased from alternative providers by 1997.
Choice recently was introduced at the household level in some U.S. states. In Georgia, where all customers obtained the right to switch to competitive gas suppliers in October 1998, almost 50 percent of households switched providers during the first year of retail choice. Marketing was heavy during that year, and one provider, SCANA, even erected kiosks in shopping malls to facilitate face-to-face contact. This heavy marketing was driven in part by the mandatory nature of switching in Georgia. The regulatory rules state that if a customer has not switched after the first year, they would be allocated randomly to a competitive provider. Each competitive provider would get a percentage of customers from the pool of unswitched customers, with the percentage based on their market shares in the first year. (See "Lessons From Georgia: The Benefits of Retail Gas Choice," , May 15, 2000, p. 32.)
Telecom - Many Have Switched Twice. The telephone industry was deregulated in 1984, as part of a consent decree by Judge Harold H. Greene that broke AT&T into a competitive provider of long-distance telephony and several monopoly providers of local telephony. The long-distance company inherited the AT&T name. The local providers were given a monopoly in their franchise areas and became known as the regional Bell operating companies (RBOCs).
The new AT&T eventually began losing share in the long-distance market to MCI and other competitors. By 1998, its share of long-distance revenues was down to less than 50 percent. customer churn became a well-known phenomenon as customers began to "enjoy" the shopping experience. One study conducted about a decade after markets had been opened found that 44 percent of the customers had switched at least twice.
To acquire and retain customers, phone companies offered various new products and services, including call waiting, call forwarding, and voice mail. More recently, wireless service, Internet access, and cable TV have been added to the list of offerings.
Pennsylvania: Shopping Credits Galore. The state of Pennsylvania designed its pricing rules differently from California. It gave customers a "shopping credit" to facilitate switching. The amount of the credit depended on the incumbent utility's generation costs. The customer could then buy electricity from an alternative ESP at a price lower than the shopping credit, and keep the difference. This approach rewarded the customer for switching, as opposed to the California approach, which rewarded them with a 10 percent cut whether they switched or not.
Paul Joskow, Anne Selting, and other economists have argued that the "shopping credit" concept is fraught with cross-subsidies and assumes high switching rates mean progress.14 That important issue is beyond the scope of this paper. What is unassailable is that electricity retailing is no exception to a universal principal of economics: Customers respond to price incentives, and demand curves slope downward.15
Another reason switching rates vary among the states concerns the amount of education provided to customers. Pennsylvania carried out a much more effective education campaign than did California, which squandered almost $100 million on a generic advertising and direct mail campaign. That campaign touted "Knowledge is Power," but did little to increase the average Californian's knowledge about the power of their electric choices. In Pennsylvania, where the education campaign encouraged customers to shop for electricity, a state-run poll last fall indicated that 94 percent of the population had seen, read, or heard something recently about being able to choose their electric provider.16
Finally, Pennsylvania made it easy for retailers to recruit customers by providing them with a statewide list of all customers who had expressed an interest in switching.
Figure 4 shows first-year switching rates for Pennsylvania, as of Jan. 1. As in California, the share of switchers increases with customer size. But the major difference is that switching rates exceed California's two-year switching rates for all market segments. The difference is most noticeable for residential customers, who have switched at 10 times the rate seen in California.
Price-Only Strategies: Murder on Bottom Line
What is particularly striking about both the California and the Pennsylvania markets is the relative dearth of alternative products offered to retail - and in particular, mass market - customers. In both markets, electricity products are differentiated to some degree by price and contractual arrangements, and to some degree by the relative "greenness" of their supply. But there is little variability in the electricity product features that could significantly differentiate the product of one company from that of another. Where are products differentiated by, for example, the following features:
- Promised customer service levels?
- Level of reliability offered or level of local investment promised by providers?
- Billing and convenience features that might particularly interest certain market segments?
Where, in other words, is the variability in product features that so typifies other markets from coffee to banking to automobiles? Perhaps the ESPs have concluded that customers will not buy on the basis of these features. Is it possible that electricity is so unique that product differentiation will not differentially attract different market segments? While that is possible, customer research suggests just the opposite (see sidebar, "Will Customers Pay for Value-Added Products?").
At this point, one thing is clear: Customers have not had the chance to demonstrate whether they will buy electricity products differentiated by product features or service. Innovation in this area may well be the keystone to greater profitability in retail energy markets. The strategy just has not had a chance to be proven.
The major conclusion that emerges from a review of the U.S. experience is that customers respond to price incentives, and they may well respond to other product differentiators as well. New product features, bundled in innovative ways and sold to customers through creative marketing efforts and new channels, offer real opportunities for aggressive energy marketers. Given the proper environment and options, customers do switch in large numbers. Absent the right environment and attractive offers, they switch in very small numbers. That is the untold story behind the headlines.
In the nascent world of retail energy services, firms have engaged in aggressive business strategies to capture market share. Price wars are common, with most firms offering electricity at a discount off the wholesale exchange price. The only flexibility in such a pricing formula is the amount of this discount. There is neither customer segmentation nor product differentiation. The only product is commodity energy.
This strategy is murder on the bottom line. In California's first year of retail choice, one of the market leaders, New Energy Ventures, lost $22 million. PG&E Energy Services, another market leader, lost $50 million. Enron Energy Services, the national leader, lost $100 million. EPRI estimates that the whole industry lost nearly half a billion dollars. These losses continued in the second year of operations.
PG&E Energy Services recently announced a third year loss of $98 million. Bob Glynn, CEO of the parent PG&E Corp., plans to sell off the energy services subsidiary. He presented his rationale in purely financial terms: "We said from the start we would support operations in 1997, 1998, and 1999, but we needed to see it in the black" by December 1999.17
As expected, such poor financial performance by ESPs has resulted in their consolidation. California began with 300 providers and two years later was down to 10. A leading national player, Duke Solutions, plans to exit the retail business altogether.
Business failures, like military failures, are caused by one of three reasons:
- Failure to anticipate the behavior of key market participants, i.e., customers and competitors;
- Failure to adapt to change; or
- Failure to learn from mistakes.
In the emergent retail market, incumbents as well as new entrants eagerly committed all three types of failures, with attendant impacts on the wealth of their shareholders. Some suppliers were smarter than others, and cut their losses by exiting markets in which profits could not be earned, by developing new products and services, or by selling themselves off to other aspirants.
What's Next: Differentiation Will Increase Margins
As Winston Churchill noted in 1945, "The future, though imminent, is obscure." It is difficult to predict how future retail markets will evolve in the United States and elsewhere. There is insufficient history from which to derive lessons. Management authority Peter Drucker suggests that when dealing with discontinuities such as those posed by electricity deregulation, players focus on predetermining events that virtually always contain within themselves the seeds of the future.18
In the British market, now in its second decade of competition, ESPs already are using price risk management services to differentiate their product offerings to large customers. Risk management products, based on modern finance theory, shield customers from unwanted risk. Empirical research has found that in markets as far-removed as Australia, Britain, and California, the overwhelming majority of customers still prefer a fixed price for electricity, and are willing to pay a premium for being insulated from hourly price volatility.
The introduction of new pricing based on financial engineering represents a major innovation in the staid world of electric rate design. It is likely that U.S. ESPs will use price risk management to create a "second wave" of product designs, and thus extricate themselves from the "trench warfare" of pricing.
A side benefit of price risk management is that it mitigates price spikes in wholesale markets, such as those witnessed during the two past summers in the Midwest. The beneficiaries are those customers that have opted for spot pricing as well as customers that have chosen a fixed price, because lower price volatility translates into a lower "insurance premium."
Additionally, price risk management can enhance system reliability in capacity-short states such as California by introducing "demand responsiveness" in competitive electricity markets. Sen. Steve Peace has introduced a bill in the California Senate that would mandate the installation of a standard meter interface for all customers, providing access to "kyz" demand pulses. That would make it easier for marketers to offer various value-added services.19
Down the road, one can expect to see large-scale deployment of "third-wave" designs that go beyond risk management. These designs would involve sophisticated bundles of energy commodity, linked with a variety of "value-added" service attributes such as power quality, energy efficiency, consolidated billing of multiple utility services, Internet access, and facilities management.
Some companies already are testing third-wave designs in the U.S. market.20
States Joe Polaski, a former employee of Public Service Electric & Gas, "There is little money to be made in the competitive market by simply selling the commodity. Electricity providers are learning that value-added services are the key to increasing revenue."
In a similar vein, Joe Lanoe of Domosys Corp. says value-added services have a profit margin of 25 percent to 75 percent, as compared with the 2 percent margin in commodity sales.21
Earnings are beginning to accrue to the shareholders of ESPs that deploy such third-wave designs. Enron Energy Services, which specializes in the bundling of energy-efficiency services with commodity risk management, finally broke into the black in the last quarter of 1999, and earned $16 million in the first quarter of this year.22
In Britain, oil, gas, and water companies, encouraged by the resurgence of interest in retailing energy, have entered the business.23 Every PES has been divided into a distribution-only company and a retailing company. A total of 56 other companies, besides the 14 PESs, now market retail energy. All the major generators have acquired PESs, paying between £150 to £200 ($236 to $315 U.S.) per customer. New entrants are paying about £60 ($95 U.S.) per customer.
A similar phenomenon is being seen in the Australian market. Electricity distributor United Energy has formed a four-way joint venture with companies such as Royal Dutch/Shell to pursue the 7.4 million customers that will have electricity choice next January.24
1 However, Scott Spiewak of Metromedia Energy indicates that margins average 5 percent in retail and 1 percent in wholesale. "Not Your Father's Power Marketer," , May 1999.
2 Crandall, Robert, and Jerry Ellig, "Electric Restructuring and Consumer Interests: Lessons from Other Industries," in "Customer Choice: Finding Value in Retail Energy Markets," PUR Press, 1998.
3 Recognizing the critical importance of this issue, EPRI has initiated a "strategic science and technology" project focused on the creation of new retail product designs that represent a breakthrough from past practice.
4 In her memoirs, Lady Thatcher states that "the most technically and politically difficult privatizationand the one which went furthest in combining transfer of a public utility to the private sector with radical restructuringwas that of the Electricity Supply Industry." "The Downing Street Years," Margaret Thatcher, Harper Collins, 1993.
5 Ofgem, "Electricity and Gas Competition Review," September/October 1999.
6 "British Gas Heats Up," , May 23, 1998.
7 Wilcox, Jeremy, "Playing the Retail Market," , Nov. 9, 1999.
8 Personal correspondence with Alex Henney, April 6, 2000.
9 Waffle, Heinz Dieter, "Power Markets and Risk ManagementWhere is the Market Going?" Presentation at EPRI International Advisory Council Meeting, Madrid, Spain, June 8, 1999.
10 "Cheaper Power to the People," Business Day, , Oct. 28, 1999.
11 Easterbrook, Gregg, "Power Surge," , May 10, 1999.
12 Lay, Kenneth, "Give all Customers the Right to Choose, Immediately" in "Customer Choice", op. cit.
13 Lack of real-time pricing has been shown to result in price spikes in wholesale markets, and adversely affect all customers, including those on fixed prices. See Doug Caves, Kelly Eakin, and Ahmad Faruqui, "Mitigating Wholesale Price Volatility with Market-Based Pricing in Retail Markets," , April 2000.
14 Joskow, Paul L., "Why do we need electricity retailers? You can get it cheaper wholesale," Unpublished MIT Discussion paper, Sept. 28, 1999, and Anne Selting, personal correspondence, April 6, 2000.
15 Of course, measuring the slope of this demand curve is more difficult. This issue is being debated in Ohio, where the staff at the Ohio Public Utilities Commission contend that shopping credits are needed to ensure that at least 20 percent of the customers switch by the third year, and utilities argue that this percentage will be achieved without any such credits. , April 3, 2000.
16 Haggerty, Maryann, "A Few Keystone State Lessons," Oct. 17, 1999.
17 , March 3, 2000.
18 "Planning Under Uncertainty," , July 22, 1992.
19 Personal communication with Steve Roscow, April 25, 2000.
20 EPRI's ESP Gateway, a CD-ROM, contains a taxonomy of several hundred products and services, and Internet links to the websites of more than 100 ESPs.
21 Quoted in "The Rebirth of DSM," , Pennwell, 1999.
22 California Energy Markets, April 14, 2000.
23 Bunn, Derek, "Synergies and Separation in the Electricity Value Chain: Distribution and Retail Supply in Great Britain," memorandum prepared for EPRI, February 2000.
24 , March 13, 2000.
Articles found on this page are available to Internet subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.