What if they had a customer choice pilot and nobody showed up?So far, about 18 marketers have expressed interest in ConsumersEnergy’s statewide Gas Customer Choice pilot in Michigan. However,only one has said it might solicit residential customers, accordingto Consumers, and at least one other, mc2, is balking at thepilot’s requirements. Consumers certainly doesn’t expect awash-out, but whether many customers actually get a choice isextremely doubtful. Beginning April 1, up to 100,000 Consumerscustomers are to be able to choose their supplier during the firstyear of the program. Customers and suppliers may enter the programat any time during the year. The pilot is to run three years,offering choice to 100,000 per year.

“There are several key reasons” mc2 doesn’t plan toparticipate, said Michael Cox, retail market analyst with MidCon’sretail subsidiary. “Our concerns and our inability to go into thismarket are basically due to Consumers’ insistence on a performanceguarantee deposit, which represents a giant opportunity cost andloss, and things we have to build into our savings program. There’salso a billing barrier where marketers are not allowed to send onebill through our own billing process. We have to elect Consumers’billing and also have to pay 30 cents per customer [per month] forevery bill.” Further, “Consumers program is really just a smalldegree of unbundling.” He noted storage asset costs that should beunbundled.

For each residential customer, the performance guarantee depositworks out to about $106, according to mc2 and Consumers. Thedeposit is higher for larger end users. “I think it’s to prove thecredit-worthiness of the marketer,” Cox said. “But performanceguarantees of any magnitude are unusual, to say the least, and noneare required in any of the Ohio or Illinois pilot programs.”

Charley Budd, Consumers’ project manager for Gas CustomerChoice, counters the LDC had a similar deposit in its smaller BayCounty, MI, pilot last year, and while marketers had somecomplaints back then, they weren’t complaining about the depositrequirement. But why not just a credit check instead of a depositrequirement? “In our experience, credit checks are an awful lot ofwork, and then if you actually do have to collect money that’sowed, you’re into a long procedure and difficulty in actuallycollecting the money. Because this is such a large pilot – we couldlose 100,000 customers in the first year – that could add up to anawful lot of money we would have to go out and collect. We are thesupplier of last resort here.”

Consumers offers two billing options: commodity andtransportation on one bill issued by the LDC, or transportationbilled by Consumers and commodity billed by the marketer. In eithercase, Consumers wants 30 cents per customer per month for meterreading and data collection. Cox at mc2 said his company’spreference is to allow marketers to bill for both transportationand commodity. Failing that, the 30-cent fee should be eliminatedfor marketers doing their own commodity billing. And Cox saidConsumers, when it would bill for both transportation andcommodity, has been unwilling to put a marketer’s logo on the bill.Consumers’ Budd maintains the 30-cent fee is necessary in eitherbilling scenario offered as the LDC is forced to do extra work toprovide marketers with meter information. “I suppose the suppliercould go out and read their own meters, but I don’t think theycould do that for 30 cents a meter.”

Like mc2, WPS Energy Services, finds fault with the Consumerspilot; however, the marketer is still planning to serve businesscustomers and has even picked up a few residential customers whohave inquired about service, said Kyle Zimonick, WPS accountexecutive. The performance guarantee deposit is a sore spot withWPS, too. “That is a very large fee, and we cannot see anyjustification for it.” Still, WPS is in the pilot mainly to servethe smaller facilities of existing customers who have notpreviously been able to select transportation-only service from theLDC. “We don’t plan on making a lot of money at this time, but themain reason is we thought we had to serve the customers wecurrently have.” Still, there is opportunity for WPS to grow itscustomer base, Zimonick said. More onerous to WPS than the 30-centmeter and data fee is Consumers’ $200/month charge for each billingclass a marketer serves, he noted.

Consumers won’t speculate on how many marketers will actuallysolicit customers under its pilot, but Budd said the LDC recognizesthe need for a number of suppliers. “We won’t learn as much if wehave very little participation. We need participants so we can dothis.”

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