Competition Starts at Grass Roots in Georgia

Marketers can't yet sign up gas customers in Georgia, but one aggregator there has been deputizing agents to round up end users in anticipation of customer choice. When choice does come to Georgia in November, Grass Roots Energy hopes to have thousands of customers who will wield their collective clout to swing the best deal.

David Rich, Grass Roots president, said small gas users won't reap the benefits of deregulation unless they band together. Through a network of independent agents, Grass Roots is soliciting a one-year commitment from end users to allow the company to act as their buyer's agent. Part of the pitch is the more consumers who sign up, the better deal Grass Roots will snare for everyone. "As a buyer's agent representing thousands of consumers just like you, we will negotiate for you to receive the most dependable energy at the best rates available, then arrange to have it delivered via your existing lines. Our buying power and bargaining strength mean you'll save money," Grass Roots' brochure reads.

The brochure does not give a specific figure for expected savings but notes deregulation elsewhere has seen consumer bills cut by up to 15%. "We expect to see similar or even greater savings here." Another prediction is more cynical but likely true. "Soon, you'll be inundated with TV, radio and direct mail advertising, and more phone calls during dinner.. We'll give you the facts and eliminate all the hassles, headaches and confusion."

When the Georgia Public Service Commission became aware of Grass Roots' activities, it had three concerns, said PSC spokesman Shawn Davis. One was that Grass Roots should not receive any proceeds directly from end users signing up. The company does not take money from consumers but will take a margin once gas starts flowing. Another concern was that Grass Roots make it clear to consumers they are giving Grass Roots authority to act as their agent to Atlanta Gas Light and marketers, which the Grass Roots brochure does. A third concern over slamming, or unauthorized switching of gas supplier, was addressed by requiring Grass Roots agents to obtain copies of gas bills from customers they sign up.

Rich said Grass Roots has a little more than 1,000 customers currently signed up. The company uses no advertising but reaches prospects through independent agents. For every consumer an agent signs up, he gets $10. Agents are recruited through a network marketing scenario that includes meetings held twice weekly. Grass Roots has signed up more than 200 agents since March 3, "and it's growing literally every other day."

The rationale for consumers to sign up now with Grass Roots rather than wait to see what marketers will offer is the first group of Grass Roots customers will be available to marketers at the beginning of customer choice, meaning marketers won't have to spend their own advertising dollars to reach them. In other words, Grass Roots offers marketers one-stop shopping for customers. "We're going to talk to all of the marketers who are certified to operate in the state of Georgia, and we're going to cut the best deal we can for our constituency. It may be with a number of marketers; it may be with one marketer," Rich said.

Another thing that is thought will make the Grass Roots customer group particularly attractive to marketers is a provision of Georgia's deregulation law. It specifies once one-third of the load in each of the state's nine pools has selected marketers and there are at least five marketers besides Atlanta Gas Light's marketing affiliate operating in the pool, the remaining load is assigned to marketers on a pro-rata basis. Hence, the marketer supplying the largest load at the time of allocation stands to get more customers through allocation.

Kathleen Magruder, vice president of rates and tariffs for marketer Enron Energy Services, said she is excited by aggregation efforts and suggested affinity groups are another opportunity for aggregation. For instance, a church may solicit its members to aggregate with the stipulation realized savings go to church coffers.

While Grass Roots' focus is now only on gas and only in Georgia, Rich said electricity consumer aggregation could come later, and plans are to take the company nationwide.

Joe Fisher, Houston

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