A clearer picture has emerged for how many California businesses will soon have the ability to choose their electric company, and how businesses will be able to exercise this new right.

As we’ve previously noted, legislation has expanded the right of California business customers to choose their energy provider, but the law must still be implemented by state regulators.

Under a draft decision from the California Public Utilities Commission, the new expanded limits on electric choice (known as “direct access”) would be phased in over a four-year period.  While the draft must still be approved by the full Commission, it represents a consensus of all parties on the major issues related to electric choice, and is not likely to change substantially.

The draft would set the maximum amount of annual direct access load as 11,710 gigawatt-hours (GWh) at Southern California Edison, 9,520 GWh at Pacific Gas & Electric, and 3,562 GWh at San Diego Gas & Electric.  However, there are numerous California business customers already shopping for electric companies due to grandfather clauses enacted in 2001.  These customers’ load will be subtracted from the maximum caps listed above, leaving the following amounts of new direct access load available at each utility: 3,946 GWh at SCE, 3,946 GWh at PG&E, and 462 GWh at SDG&E.

Starting around this April, the utilities will commence an “open enrollment” window in which customers may declare their intent to choose their energy provider, and reserve space under these new caps.  Space will be allocated on a first come, first served basis.  Given the limited space available (especially at SDG&E), making a quick decision will be crucial for businesses wishing to choose their energy supplier.

Under the phase-in process, only 50% of the total available space will be made available for new direct access customers in 2010, and a “gold rush” has been predicted as business customers are eager to leave high utility electric rates in favor of cheaper electric prices available through choice.

Being among the first businesses to send a Notice of Intent to shop for your electric supply will be paramount in ensuring you will have the right to save money on your energy bill.  At the same time, making a quick decision can be difficult for many businesses who have never chosen their electric company before, as choice has been suspended in California for a decade.  That’s where SaveOnEnergy.com can provide invaluable help to California businesses.  For no charge or fee, SaveOnEnergy.com can help you find the right energy supplier before the open enrollment period begins and the floodgates open.  Only SaveOnEnergy.com can use its one-of-a-kind retail exchange portal to pit up to eight energy providers against each other in direct competition for your business, getting you the lowest electric rate and maximizing your savings.  And SaveOnEnergy.com also screens all its energy suppliers against a rigorous criteria and only recommends reputable providers, so you don’t need to worry about enrolling with a fly-by-night operation, or taking months to research all the electric companies yourself and possibly missing the enrollment window.

Competition in the Texas electric market means that energy providers have created a wealth of new products and services designed to meet customers’ individual needs and lower their electric bills.  Such new products include fixed priced plans which give customers budget certainty, time-of-use plans that let customers take advantage of lower rates during off-peak times, seasonal rates designed for customers with electric heat, prepaid products for customers looking to avoid costly deposits, and many more.  Soon, Texas electric companies will be offering electric plans designed specifically for customers with plug-in electric vehicles.

One of the newest products introduced last year by several Texas energy companies is a program where customers with distributed generation — like rooftop solar panels — may sell their excess generation back to their energy supplier.  Not only do these customers save money by generating their own power, they receive a credit when they generate more power than they need, further reducing their monthly electric bill.

However, such product innovation is typically only available in parts of the state where customers can choose their electric company.  While about 85% of Texas’ electric customers have such choice, several areas, such as El Paso and San Antonio, do not have electric competition, and customers cannot choose their energy supplier.  That means customers are stuck with whatever their monopoly utility offers them, and there is no product innovation or money-saving alternatives aside from what the utility decides to do. 

For example, El Paso residents with rooftop solar systems can’t contract with an energy provider to buy back their excess solar generation, like customers in Houston, Dallas and Corpus Christi can do under electric competition.  State Sen. Eliot Shapleigh noted that in Houston, thanks to the solar buyback program available under electric choice, some customers’ monthly electric bills were actually credits of $20 — that is, they had zero electricity charges, and were being paid $20 per month to credit their solar generation.  Customers with electric choice can make providers compete for their excess solar power, and be paid a price anywhere from 7.5¢ per kilowatt-hour to 10¢ per kilowatt-hour for their extra energy.

El Paso Electric, meanwhile, remains a, “1950s electric company,” Shapleigh writes, and does not offer the innovative, money-saving options that are available under electric choice.

The Electric Reliability Council of Texas (ERCOT), which runs about 85% of Texas’ electric transmission system, said recently that the state is projected to have enough power through 2013.  Starting in 2014, based on current projections, the state could dip below a minimum 12.5% “reserve margin,” or the amount of extra power the state requires in excess of projected demand as a safety net.  Currently, the 2014 reserve margin is forecast at 12.3%. 

The reason for the drop is the delay of a new power plant that was originally scheduled to come online in 2013, but has been pushed back due to economic considerations.  Specifically, the Cobisa Greenville Project, a 1,792-megawatt natural gas-fired plant, won’t go into service in 2013 as originally planned.

One of the main reasons for the delay in new power plants is the low energy prices currently being enjoyed by Texas electric customers.  While the economic recession and competition among electric companies have pushed rates below 10 cents in most areas, the recession has also stalled many power projects as developers wait until Texas power prices rise with the economic recovery before moving forward with their projects.

However, while the reserve margin is projected to dip below the minimum level needed for reliability after 2013, there is no cause for great alarm, because there is sufficient time for power developers to respond to market signals and build new generation in time to meet reliability needs.

In fact, it is typical for power projections five years out to show capacity below the minimum reserve margin.  For example, in 2007, ERCOT projected that for 2010, reserve margins would be only 8.3%, well below the minimum of 12.5%.  However, as 2010 grew closer, generation developers responded to market signals and built new generation to meet the projected demand.

Here is a look at how the forecast reserves for 2010 increased over time, as new power plants were built in response to the forecast demand.

Date of Forecast                         Projected 2010 Reserve Margin

May 2007                                  8.3%

Dec 2007                                   14.0%

May 2008                                  17.3%

Dec 2008                                   21.2%

May 2009                                  20.1%

Dec 2009                                   21.8%

As can be seen, while 2010 supplies were projected to be below the reserve margin three years ago, new projects came online to meet, and exceed, the forecast demand.  This market response is one of the many benefits of the competitive Texas electric market, as customers no longer pay for extra power that isn’t needed.

Under the traditional monopoly system, power plants were planned years in advance, based on forecasts of demand, which, like any forecast, were simply educated guesses.  That often meant more power plants were built than were actually needed.  But customers still had to pay to build those power plants because monopoly utilities were guaranteed a regulated rate of return.  Another problem often encountered was known as the “gold plating” of the electric system — or building many more power plants than needed to serve customers to increase a utility’s regulated rate base, on which it made profits.  With competition, generation developers do not earn a guaranteed rate of return, which means customers only pay for plants that are actually used, saving them millions of dollars annually.

As we’ve noted the past two weeks, soon a lot more California businesses will be able to choose their electricity company under a process known as “direct access,” which allows new energy providers to compete for customers’ business.  That competition drives down power prices, and can save California businesses thousands of dollars, if not millions, on their energy costs.

In fact, many California businesses are already enjoying the savings possible from shopping for electricity, under a policy that grandfathered them and has allowed them to choose a competing energy company since the late 1990s, while other customers have been denied this right during a suspension of direct access.

Take, for example, the California State University (CSU) system.  Len Pettis, Chief of Plant Energy and Utilities for California State University, has said that, “[d]irect access has afforded CSU a portfolio of energy supply options and cost certainty not available from the utilities.”

In fact, CSU has saved over $30 million from shopping for electricity for nearly a decade — savings that have been used to help meet enrollment targets, save jobs, and reinvest in energy efficiency measures on campuses.

Bill Dombrowski, President of the California Retailers’ Association, added that, “California’s retail business owners overwhelmingly support a return to customer choice as a means to energy management.”

“Choice, or direct access as it is referred to, provides innovation and management opportunities that will translate into lower costs for goods,” Dombrowski explained, pointing to a problem under the current suspension of direct access.

“The problem today is that some retailers have it, but because of the suspension, others who want to exercise choice can’t have access to the same benefits.  Allowing all retailers to have the same low cost electricity options is a matter of commercial fairness,” Dombrowski noted.

Unfortunately, the bill expanding direct access (SB 695) does not extend the ability to shop for a lower electric rate to all non-residential customers, and only expands the amount of customers eligible to shop subject to a cap.  That makes it crucial for California businesses to be ready to shop for a new electric service provider in about March or April, when the California Public Utilities Commission will likely take the first step in allowing new customers to shop for electricity.  Working with SaveOnEnergy.com to monitor the re-opening of direct access and find the right supplier can ensure customers that they are able to switch to a lower electric rate immediately when the cap opens, ensuring they are not left out.

Still, even though it is limited, “[t]he passage of SB 695 enables California businesses to gain greater control over one of our largest costs – energy – allowing us to place greater focus on building our businesses and creating more California-based jobs,” said Glenn Barrett of SUPERVALU, Inc.

More California businesses will soon have an opportunity to save money on their electric bills by shopping for an alternative energy provider, thanks to legislation passed in the last session.

Since 2001, only a limited amount of California businesses and residents have had the ability to buy electricity from a competitive electric service company and save money on their power bill.  Due to the energy crisis, “direct access,” or the ability to shop for your energy supplier, was suspended for new customers.  Customers who were buying electricity from a competitive supplier at that time were grandfathered, and have had the ability to shop for a lower electric rate since that time.  That has given some businesses a competitive advantage, because they could lower one of their largest costs, energy, by having different electric companies compete for their business.

More businesses will soon have this ability to lower their costs by shopping for their electricity supply thanks to SB 695, passed during the most recent legislative session.  The bill requires the California Public Utilities Commission (PUC) to expand the number of business customers who are eligible to shop for an alternative power provider, subject to a cap.  Under the new law, the PUC must phase-in new, higher caps on the number of customers who may shop for electricity, with the caps specific to each utility service territory.  The cap of kilowatt-hours served by competitive electric companies shall be equal to the maximum total kilowatt-hours supplied by competitive providers in a utility service area during any sequential 12-month period between April 1, 1998, and the effective date of SB 695.  The phase-in will occur over a period of three to five years. 

The PUC has not yet started a proceeding to implement the expanded electric choice for business customers.  However, if experience in other states in any indication, business customers will want to be ready to strike once the PUC sets out a process for new shoppers, to avoid being shut out of shopping for electricity due to the cap.  In Michigan, a 10% cap on electricity shopping was instituted in 2008.  At Consumers Energy, the cap was hit in just seven months, leaving all remaining customers paying higher utility electric rates, instead of shopping for a lower rate from a competing energy provider.  With California’s high energy prices, businesses will have to act fast to ensure they don’t get shut out of their opportunity to shop for a lower electric rate.

Time is running out for Pennsylvania businesses in the Lehigh Valley to avoid rate hikes of up to 36% at PPL Electric Utilities starting January 1, 2010, as the decade-old rate caps expire.  Customers can avoid these rate shocks and save 10-20% on their electric bills by shopping for a new energy provider, but they have to act fast for the change to take effect in time to avoid the higher prices at PPL.

Pennsylvania businesses may choose to buy their electric supply from an alternative energy generation supplier to save money on their electric bills.  However, once the customer chooses their new electric company, the switching process can take up to 45-60 days depending on the customer’s billing cycle and when the switch is submitted.  Switches are typically performed when a customer’s meter is read, so that the change to a new supplier coincides with a new billing cycle.  Billing cycles can vary from 28 days to up to 35 days depending on where weekends and holidays fall during the month. 

That means a customer who switches to a new energy supplier may have to wait 35 days for it to take effect, in cases where they submit a switch just after their last meter read.  Furthermore, there are another dozen or so days built into the switching process for the new energy company and PPL to communicate data back and forth and confirm the switch.  That means a switch may be delayed by about 45 days from the time the customer chooses a new energy provider.

In other words, in order to ensure that a switch occurs before the expiration of rate caps on January 1, 2010, switches need to be submitted prior to about November 15, 2009, meaning customers have precious little time to shop if they still haven’t chosen a new electric company yet.

Fortunately, SaveOnEnergy.com can expedite the process of finding a new energy supplier for Pennsylvania businesses, all while ensuring customers still get the lowest rate possible, and find a financially sound electric provider.  SaveOnEnergy.com’s exclusive retail exchange portal allows Pennsylvania businesses to have up to eight electric companies competing head-to-head for their business, so customers get the lowest rate.  All customers have to do is take a few minutes to submit some information on their business and electric usage on SaveOnEnergy.com’s exchange portal, and the information is instantly transmitted to up to eight competing electric companies.  Energy suppliers then directly respond to the customer with their best rates, streamlining the process and ensuring that customers can still shop around for the lowest rate while making a decision in time to take effect prior to January 1, 2010. 

Getting eight competing quotes from electric companies without SaveOnEnergy.com may takes days, and customers would then have to take additional time to research each supplier to ensure that they were looking at a reputable company and not a fly-by-night operator.  Such research could take weeks for business owners who are busy serving their customers, delaying a switch beyond the January 1, 2010 rate hike.  Because SaveOnEnergy.com screens all of its energy providers against rigorous criteria, customers can be assured that they find a stable, competent energy supplier, but in a fraction of the time it would take to navigate the market on their own.

Whether you’re a business owner or a homeowner shopping for electricity, looking at price is just the beginning.  With over one hundred energy providers competing for your business, it’s hard to separate the good values from the fly-by-night operations.  And the wrong choice can have big consequences.  Not only could you lose the low rate you thought you were getting, but you could end up on the highest priced electricity plan in the market, known as the Provider of Last Resort. 

This very nightmare happened to thousands of Texans in 2008 as several electric companies were mismanaged, leaving customers stranded.  Some of these providers were typically among the lowest priced companies in the market, but the cheap electricity rate was merely a mirage which soon disappeared, leaving customers paying rates that were 8, 9, and even 10 cents per kilowatt-hour above what they thought they were getting.

That’s why when you shop for electricity, you need an expert to help guide you and weed out the pretenders from the contenders.  That’s where SaveOnEnergy.com comes in.  Not only does SaveOnEnergy.com allow you to shop for a low electric rate any time day or night, it also rigorously screens competing energy suppliers so that only reputable electric companies compete for your business.

And SaveOnEnergy.com just strengthened its already robust screening process and supplier criteria, to give you even more peace of mind.  The energy experts at SaveOnEnergy.com, with decades of experience in the industry, vet potential energy companies against a wealth of benchmarks and industry standards for financial fitness, managerial experience, technical ability, product innovation, and customer service. 

For Business Customers:

Of course, the bottom line that customers care about is price, and SaveOnEnergy.com only recommends suppliers with competitive pricing that offers consistent savings, whether the product is fixed, variable, or a blend in between the two.  But before a supplier can even quote a price through SaveOnEnergy.com, it must prove its competence so you are assured a positive customer experience.

As noted, the financial stability and technical fitness of a supplier’s management is paramount to ensuring that the low price you are quoted is honored for the life of your contract.  SaveOnEnergy.com’s experts scrutinize suppliers and only recommend those with an established and trustworthy management team with significant industry experience.  Suppliers must prove their financial strength and wherewithal before they can compete for your business.

Perhaps the second biggest headache that can develop for a business owner, after losing their electric company to financial ruin, is a supplier that can’t bill the customer properly.  While business owners may not initially think about billing being a problem for energy suppliers, some suppliers cannot handle so-called “complex billing” for customers with interval or real-time metering information.  Another problem that often crops up with inexperienced providers is difficulty handling larger accounts with multiple meters (anywhere from a dozen to thousands, each with different meter reading and billing dates).  Some energy providers may be unable to offer you a summary bill of all these separate locations, or may only do so very poorly after delays and inaccuracies.

That’s why SaveOnEnergy.com grades suppliers on the quality of their billing system.  SaveOnEnergy.com only recommends suppliers that provide:

• Billing accuracy
• Easy-to-read invoices with no “small print”
• Usage and rates clearly displayed on the bill
• Online account management
• Paperless billing
• Multiple payment options such as credit card, automatic bank draft, online or payment by phone
• Bill payment assistance and payment plans

This means with a supplier from SaveOnEnergy.com, your bills will be right the first time, and you won’t have to fight suppliers just to get an accurate, easy to understand bill.

For Residential Customers:

Much of SaveOnEnergy.com’s screening process for residential suppliers mirrors that applied to commercial suppliers.  Suppliers must still be financially sound and technically competent, with proven management.  Bills must be accurate and easy to understand, with features such as budget billing, payment assistance, and convenient payment options.

However, SaveOnEnergy.com also screens residential suppliers for the value-added services associated with the mass market.  Customers shouldn’t expect to just get electricity when buying power now; they should expect a bonus or reward for their business and loyalty.  That’s why SaveOnEnergy.com ranks residential suppliers based on the innovative or value-added services they offer, including:

• Airline miles and companion tickets
• Gift card offers
• Magazine subscriptions
• Bill credits
• Eco-friendly and renewable options

That way, customers get more bang for their energy buck, thanks to SaveOnEnergy.com. 

SaveOnEnergy.com also screens residential providers to ensure that there are no hidden fees; that all charges are listed clearly; and that signing up is simple and convenient (such as through online enrollment).

As noted a few weeks ago, one of the benefits of competition in the Texas electric industry is that customers don’t have to pay for wrong decisions or bad investments made by electric companies.  Since customers can choose their energy provider, they can switch to a new energy supplier if their current provider tries to pass on extra costs from a bad investment to customers, instead of making shareholders bear the cost of a mistake.

Unfortunately, not all areas of Texas are open to competition.  In these areas, including at municipal and cooperative utilities, customers are still on the hook for paying for any unwise decisions made by their monopoly utility.

That appears to be happening at city-owned Austin Energy, where all customers may soon be forced to pay for the city’s renewable energy program, whose costs until now have been paid only by customers opting into the program.

Austin Energy’s latest green energy product, for which it has already bought supplies, isn’t selling as well as expected.  The latest “GreenChoice” offering has been on the market seven months, but only about 1 percent of it has sold.

“If the latest GreenChoice offerings do not sell, their cost will eventually show up in the bills of all Austin Energy customers anyway, officials say,” the Austin American-Statesman reported.  Austin Energy’s rates for city residents are not regulated by the Public Utility Commission, and can rise as high as the utility and city desire.

According to the Statesman, “Some critics say Austin is overcharging for its wind, thereby undercutting GreenChoice.  Mike Sloan, president of local renewable energy consulting firm Virtus Energy, says the city has overestimated various costs and packed in hidden fees.”

Customers, however, are left at the mercy of Austin Energy, and the city council.  Austin residents do not have a choice in their electricity company, and can’t vote with their feet if dissatisfied with how Austin Energy is running things.  Customers who don’t want to pay for Austin Energy’s lagging green power sales can’t avoid paying for the utility buying too much green power, if the utility and city council decide to put those costs into everyone’s rates.  Customers who think the cost of Austin Energy’s GreenChoice product is too high and packed with hidden charges can’t pick an alternative renewable energy plan that’s cheaper.

Texans in parts of the state open to competition are protected from paying higher bills due to a company buying too much green power, while competition keeps renewable power rates low, and free from hidden or inflated charges.

It’s no coincidence that the greatest technological advancements related to helping electric customers save money are coming in Texas, because the state’s competitive energy market drives innovation and new thinking, Earth2Tech, a green technology publication, said in reviewing advancements in electric industry.

In reviewing TXU Energy’s innovative iThermostat, one of several products in the Texas market that allows customers to better monitor their consumption and save money, Earth2Tech noted:

“But at the end of the day, TXU Energy clearly needs to innovate and deliver new products if it wants to please (and keep) its customers.”

Such is the story of the Texas competitive electric market.  Now that customers can vote with their feet and choose their own energy provider, they can pick the company that best meets their individual tastes and preferences.  If consumers are tech savvy and want the latest gadgets to aid in monitoring and reducing electric usage, they can choose such a company.  If consumers want to buy renewable and green power, they can find such a company.  If consumers want a company offering 24/7 customer service and hassle-free billing, they can find one.  If consumers want to be rewarded for their business, through things like airline miles, gift cards, and bill rebates, they have a host of electric companies to choose from offering all kinds of incentives to win customers’ business. 

All these value-added services aren’t available in most other states, where electricity is sold the same way it was 100 years ago.  A monopoly provider sells a one-size-fits-all product, and consumers have no choice but to take it, even if it doesn’t meet their needs.

In Texas, customers have a choice, and TXU’s iThermostat is only the tip of the iceberg of innovations coming down the pike.  CPL Retail Energy (Direct Energy) recently launched a pilot offering a programmable thermostat capable of receiving communication, combined with energy efficiency improvements.

About a month ago, Oncor announced it had installed over a quarter of a million advanced meters in its service area (mainly Dallas/Fort Worth).  These smart meters are critical to unlocking even greater innovation in the electric industry.  With a critical mass starting to be reached, electric companies are preparing to roll out a host of new and innovative services to change the way customers buy electricity for the better, giving customers more options, more flexibility, and more importantly, more ways to save.

The competitive Texas electric market doesn’t just give customers more protections compared to the old monopoly system; it gives customers more protections compared to customers who live in areas where municipalities or electric cooperatives provide service.

As noted last week, competition doesn’t bind Texas electric companies to rigid tariffs, meaning they can provide higher levels of customer protection and service in order to attract business and better serve customers.  That couldn’t happen in the old monopoly system, since every action and cost was set ahead of time by administrative rule.  It means that today, competitive energy providers can offer extra levels of protection — like voluntary moratoriums on disconnection of service during the summer, even above what the Public Utility Commission rules call for.

However, nearly all Texas municipal utilities and electric cooperatives are not open to competition.  They are also not under the jurisdiction of the Public Utility Commission, meaning they do not have to follow the numerous customer protection rules applicable to the competitive electric market.

That distinction became apparent last week at the Public Utility Commission’s public meeting, in which Commissioners discussed the various protections in the competitive market helping customers avoid disconnection of service during the summer, so customers aren’t exposed to dangerous heat without electricity and air conditioning.  The Commissioners noted that the competitive market does not allow companies to use a “hard disconnect” — that is, a disconnect that stays in place until the customer pays back their past due balance in full.

Instead, under competition, customers who have been disconnected can always have service turned back on by simply choosing another electric company, without having to pay back their balance to their old energy supplier.  This means customers who are disconnected can get electric service restored faster, and have more time to pay back their past due balance while still getting their service turned back on.

However, many municipals and cooperatives do have “hard disconnects” — meaning customers whose service is disconnected cannot get service turned back on until they pay their past due bill in full.  This can leave customers without service for weeks or months as they try and scrape together money to pay their past due bill.  The Public Utility Commission noted that Austin Energy and Pedernales Electric Cooperative, which do not offer competition, both have hard disconnects.

That means in areas without competition, customers are at a greater risk of disconnection, and face a tougher time in getting service restored if they are disconnected.  With competition, electric companies have an incentive to raise their level of customer protections and service, to attract to new customers and build customer loyalty.  It means customers are better off when companies compete for their business.