Tossing aside an ongoing state regulatory investigation of someof its billing practices, California’s most aggressive independentenergy service provider (ESP), Commonwealth Energy, plans to moveinto Pennsylvania and New Jersey next month where it expects a morestraightforward and receptive marketplace for its residential andsmall business electricity products. While signing up more than60,000 customers in California’s daunting retail mass power marketsso far, Commonwealth has been able to pass on savings of up to fivepercent, emphasizing green power from environmentally benignsources, developing prospects for new green products and shoppingfor power generation operations of its own, in addition to eyeingother states as the next stage of its two-year-old development.

“We would prefer to offer bigger savings but it is just flat outnot possible in California right now,” said Commonwealth’sfounder/CEO Fred Bloom, a former stock brokerage operator andone-time marketing consultant. “Compare that to Pennsylvania wherethere are five million meters in the state and 500,000 customersalready have switched in the first six months because the state setthe shopping credit at a flat price.

“This gives a clear signal to the consumer about what they’llpay in the future if they stay with their local utility and thatallows marketers to give a clear price for what they will offer. Itis simple for the consumer to understand and there are no flaminghoops for a marketer to cut through to calculate the bill becauseyou are allowed to give a flat price. You can’t do that inCalifornia because the price of power fluctuates by the hour.”

Bloom said Commonwealth’s first advertising is set to roll outin mid-September in Pennsylvania, a state he sees offering consumersavings in the range of 8 to 10 percent. “It is common knowledge inthe marketing business that five percent savings is the over-underline for determining whether consumers will or will not get excitedabout a product,” Bloom noted.

The Commonwealth senior executive is outspoken in his criticismof California’s utilities and state legislative leaders,particularly state Sen. Steve Peace, who headed the effort thatresulted in the state’s 1996 state law restructuring theelectricity industry.

Peace in turn has been critical of some of Commonwealth’smarketing and pricing practices, alleging they are predatory innature. “The way (mass retail electricity competition) was set upin California, Peace and the other state legislators in theirinfinite wisdom said, the ‘threat’ of competition will keep theprice the lowest,” Bloom said. “That is the most flawed economicconcept I have ever heard of. There is no fundamental basis of factfor that entire thought process. Real competition is the only thingthat will keep the marketplace efficient. “What California(utility and legislative leaders) did in establishing the wholesalepass-through with no mark-up on the PX price is eliminatecompetition before it got started, except for green power becauseof government incentives (1.5 cents/kwh from the state energycommission) that end up going to green marketers such as ourselves.What you have is cost-shifting where the (California) utilitieshave taken all of the costs out of the energy commodity and lumpedthat money back into the distribution charges. So there is alwaysgoing to be a monopoly. Utilities would have been fools to disagreewith that deal.”

Despite his current problems with the state regulatoryinvestigation of some back-billing done earlier this year and whathe 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 inCalifornia. We enjoy the opportunity we have. We are a strongsupporter of green power and are developing new green technologyourselves in our R and D department right now, and we have severalgeneration plays that are in the works that we have hopes willhatch themselves in the next six months.”

State regulators are looking into the ESP’s back-billing ofabout 19,000 customers without specifying the otherwise legalpractice in writing in advance to its customers. A pre-hearingconference is scheduled for Aug. 10 by the California PublicUtilities Commission. Bloom strongly contends the whole thing ismuch ado about nothing, arguing that the company has satisfied arelative handful of complaining customers (only 159 of 19,000 whowere back-billed actually squawked about it) and the upcomingprehearing conference will be anti-climactic.

Bloom emphasized that all of the complaints are “informal,”meaning under CPUC rules, they were referred to the company forresolution, which Commonwealth claims it has done. The back-billsaveraged $10 to $15 and cover the summer period a year ago whenbilling software was inadequate for the state’s complex hourlypricing system. Since last October, Bloom said, Commonwealth hasresolved the administrative billing problem for the future withupdated computer software its own technicians have created.

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