Commonwealth Eyes Pennsylvania, Weary of CA
Tossing aside an ongoing state regulatory investigation of some
of its billing practices, California's most aggressive independent
energy service provider (ESP), Commonwealth Energy, plans to move
into Pennsylvania and New Jersey next month where it expects a more
straightforward and receptive marketplace for its residential and
small business electricity products. While signing up more than
60,000 customers in California's daunting retail mass power markets
so far, Commonwealth has been able to pass on savings of up to five
percent, emphasizing green power from environmentally benign
sources, developing prospects for new green products and shopping
for power generation operations of its own, in addition to eyeing
other states as the next stage of its two-year-old development.
"We would prefer to offer bigger savings but it is just flat out
not possible in California right now," said Commonwealth's
founder/CEO Fred Bloom, a former stock brokerage operator and
one-time marketing consultant. "Compare that to Pennsylvania where
there are five million meters in the state and 500,000 customers
already have switched in the first six months because the state set
the shopping credit at a flat price.
"This gives a clear signal to the consumer about what they'll
pay in the future if they stay with their local utility and that
allows marketers to give a clear price for what they will offer. It
is simple for the consumer to understand and there are no flaming
hoops for a marketer to cut through to calculate the bill because
you are allowed to give a flat price. You can't do that in
California because the price of power fluctuates by the hour."
Bloom said Commonwealth's first advertising is set to roll out
in mid-September in Pennsylvania, a state he sees offering consumer
savings in the range of 8 to 10 percent. "It is common knowledge in
the marketing business that five percent savings is the over-under
line for determining whether consumers will or will not get excited
about a product," Bloom noted.
The Commonwealth senior executive is outspoken in his criticism
of California's utilities and state legislative leaders,
particularly state Sen. Steve Peace, who headed the effort that
resulted in the state's 1996 state law restructuring the
Peace in turn has been critical of some of Commonwealth's
marketing and pricing practices, alleging they are predatory in
nature. "The way (mass retail electricity competition) was set up
in California, Peace and the other state legislators in their
infinite wisdom said, the 'threat' of competition will keep the
price the lowest," Bloom said. "That is the most flawed economic
concept I have ever heard of. There is no fundamental basis of fact
for that entire thought process. Real competition is the only thing
that will keep the marketplace efficient. "What California
(utility and legislative leaders) did in establishing the wholesale
pass-through with no mark-up on the PX price is eliminate
competition before it got started, except for green power because
of government incentives (1.5 cents/kwh from the state energy
commission) that end up going to green marketers such as ourselves.
What you have is cost-shifting where the (California) utilities
have taken all of the costs out of the energy commodity and lumped
that money back into the distribution charges. So there is always
going to be a monopoly. Utilities would have been fools to disagree
with that deal."
Despite his current problems with the state regulatory
investigation of some back-billing done earlier this year and what
he sees as inherent flaws in California's restructuring scheme,
Bloom emphatically said he's in the California market to stay.
"Commonwealth Energy is very happy to be doing business in
California. We enjoy the opportunity we have. We are a strong
supporter of green power and are developing new green technology
ourselves in our R and D department right now, and we have several
generation plays that are in the works that we have hopes will
hatch themselves in the next six months."
State regulators are looking into the ESP's back-billing of
about 19,000 customers without specifying the otherwise legal
practice in writing in advance to its customers. A pre-hearing
conference is scheduled for Aug. 10 by the California Public
Utilities Commission. Bloom strongly contends the whole thing is
much ado about nothing, arguing that the company has satisfied a
relative handful of complaining customers (only 159 of 19,000 who
were back-billed actually squawked about it) and the upcoming
prehearing conference will be anti-climactic.
Bloom emphasized that all of the complaints are "informal,"
meaning under CPUC rules, they were referred to the company for
resolution, which Commonwealth claims it has done. The back-bills
averaged $10 to $15 and cover the summer period a year ago when
billing software was inadequate for the state's complex hourly
pricing system. Since last October, Bloom said, Commonwealth has
resolved the administrative billing problem for the future with
updated computer software its own technicians have created.