By the OGJ Online Staff
HOUSTON, Feb. 21�National surveys of commercial and industrial customers found electricity deregulation caused �significant� difficulties for these customers and heightened interest in self-generation. One survey also found that the internet was not �reinventing� the energy marketplace.
Deregulation which transformed the stable and predictable nature of the electric industry into an exercise in risk management caught most industrial and commercial customers off guard. Deregulation helped only 10-20% of the few customers that did switch suppliers, according to a survey of customer experience with electricity deregulation conducted by Booz-Allen & Hamilton.
In a separate survey of energy intensive customers, RKS Research & Consulting found deregulation created uncertainty about the reliability of power and increased interest of energy intensive companies in generating their own electricity to replace or supplement supply.
Reliability concerns have increased so much with deregulation that companies are spending more money to protect themselves against power interruptions.
About 30% of the firms surveyed by RKS have bought insurance to protect themselves against business interruptions related to power outages. And 34% of the businesses claim they have suffered losses because of power problems.
Half the companies surveyed already have backup generation and about one-fourth of those companies are considering expanding standby power.
More than half the companies surveyed prefer to fix the reliability problem through self-generation and do not favor further conservation measures or new power plant construction to solve the problem.
�From the findings it�s clear that electricity�its availability, quality, and cost�is a growing source of concern for businesses as they struggle with expenses and their competitive position,� RKS Pres. David Reichman said in a statement.
Some industries such as communications, pharmaceutical manufacturing, and financial services said energy use has increased over the past 5 years and their needs continue to grow, said Reichman.
Green interest surprising
A surprising result of the survey is the interest of the companies in �green� technologies to self-generate. Three-fourths of the business customers surveyed which include environmental stewardship in their mission statements expressed a preference for electricity generated from renewable resources.
The Booz-Hamilton survey results revealed only 20% of commercial and industrial businesses switched providers, and of that group only 10% actually lowered energy costs. The survey also found 10% of the customers that switched experienced higher energy costs or no savings at all.
�Energy deregulation has not been the boon many companies thought it would be,� said Booz-Allen Vice-Pres. Kyle Datta in a statement. They did find regulatory rules for wholesale and retail power affected prices.
In Pennsylvania, PJM market rules provide for higher reserve margins and wholesale price stability, allowing new entrants to offer some savings and still make a profit. Retailing in Pennsylvania still remains a �risky business model.�
California, on the other hand, required utilities to offer rate reductions to business customers. The wholesale market rules provided for no reserve margins, leading to very high retail rates during periods of scarcity.
Suppliers could not create any savings for customers. The frozen retail prices squeezed retailer margins and lowered the potential savings from switching to alternative providers, the survey found. All retailers were forced to leave the market.
Companies use the internet to gather information on energy prices, competitive offers, and technical information. But they don�t place energy orders over the internet. Customers still want to speak with a sales person.
The internet is not a major new channel for customer acquisition and has not served to lower customer acquisition costs as early champions expected. Customers do look for pricing information on the internet but can�t find what they need, the survey found. Few suppliers offer prices for forward power contracts, and the spread between prices bid and asked for forward contracts was high.
