Pricing

Energy Strategy: Flat Bills, Peak Satisfaction?

 

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

Most believe flat electric bills pose tremendous risk, but the reality is that an exciting pricing opportunity exists. The energy supplier can manage uncertainty by gradually building program participation as it learns to balance risk and returns, or through a risk adder. The experience of Internet and telecom service providers suggests that safe, profitable flat fees can be constructed, and that customers will buy them.
Byline: 

 

Michael O’Sheasy and Mike Becker 

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Green Price Stability

New approaches account for the economic benefits of renewables.

Many green power customers benefit from long-term fixed prices. The most effective programs recognize the value of this price hedge—and fairly exempt customers from fuel cost adders in utility rates.

Byline: 

Lori A. Bird et al.

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The Greening of Utility Customers

A survey finds that consumers would support higher costs of “clean coal” and alternative fuels.

More than three quarters of the consumers surveyed believe that alternative energy brought benefits, and a slight majority, 54 percent, would pay an additional 5 percent on their electric bills. The survey also found that 62 percent would be willing to pay higher rates to support “clean-coal” technologies

Byline: 

Gregory E. Aliff and Branko Terzic

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Building a Risky Business

The diversity in customers’ appetites should be considered by more utilities when pricing products.

Does the volatility of the customer’s energy cost create much concern regarding the impact on the customer’s core business? One customer may be very comfortable taking on significant electricity cost risk to obtain electricity price and subsequent bill concessions. Another may be willing and anxious to pay a premium to accept less electricity cost risk than normal. Both of these customers, and all the customers in between, should be offered products that fit their needs, and these products should be priced upon sound risk fundamentals.

Byline: 

Michael T. O’Sheasy

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The Fallacy of High Prices

We are better off under restructured electric markets.

The most important action regulators can take to minimize consumer electricity costs is, and will continue to be, ensuring competitive wholesale markets, while demanding a rich mixture of products from the suppliers in these markets.

Byline: 

Howard J. Axelrod, Ph.D., David W. DeRamus, Ph.D., and Collin Cain, M.Sc.

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Power Procurement: What's in Your Mix?

Why competitive markets are scaring regulators.

If the underlying wholesale electricity markets from which supplies are procured are competitive, then the remaining concerns regarding price levels and volatility can be addressed through regulatory policies.

Byline: 

Joseph Cavicchi and Andrew Lemon

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Letters to the Editor

Robert Garvin, MAJ, TC, 3RD Corps Support Command: Serving here and seeing how poor the people of Iraq are after 30 years of a dictatorship is truly life changing. You would not believe the electricity challenges they face here. In a country of over 25 million people, Iraq has only about 5,000 MW of electricity at any given time.

Daniel Simon decided to investigate how much the extra heat of incandescent light bulbs over CFLs might cost a customer in air-conditioning cooling costs, compared to an analysis in “Squeezing BTUs From Light Bulbs.”

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The Future of Electric Competition: Concentrated Power

An analysis of competitive power markets finds that oligopolies are the end game for liberalized power markets.

The British wholesale power market is about to enter a new phase. Having enjoyed a long period of surplus capacity, the combination of the forced retirement of some nuclear plant and continued demand growth is likely to lead to a capacity shortage within the next three to four years, and it is by no means clear whether the market, as it currently operates, will be able to maintain secure supplies.
Byline: 

Dr. Anthony White, MBE

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A Better Measure for Profitability

A new way to measure what matters most: how close a unit comes to meeting its total potential profit.

Approximately 65 percent of capacity additions in the last few years have been gas-fired, combined-cycle units. Recent market conditions have been hard on these new resources, which have suffered from significantly low capacity factors. A better metric would measure a unit's ability to capture peak prices while minimizing shoulder period and off-peak losses. Furthermore, it would measure the extent to which a unit dispatches according to favorable market conditions.
Byline: 

Tom Ottem and Michael McNair

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