Daily GPI / NGI All News Access

Commonwealth Eyes Pennsylvania, Weary of CA

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 electricity industry.

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.

©Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1231
Comments powered by Disqus