Let There Be Light

Why California's electricity problem may leave you in the dark.

Last year, Nstar delivered power from alternative suppliers to 5,100 of its customers, almost all of them companies that had found a better deal than Nstar’s regulated rate, known as the “standard offer.” Today, however, only about 1,400 Nstar customers actually buy their power elsewhere. “The prices we offer–by regulatory fiat–are below market,” says Tom May, who would dearly like to get out of the business of reselling power at a loss and focus on delivering it.

Large companies certainly share his pain. Ironically, the large industrial firms that lobbied hardest for deregulation are the ones most exposed to the volatility of the semicompetitive market that exists today. Although certain regions of the country may offer access to more than one supplier, the choices are “minimal,” says Marc Yacker, director of government and public affairs for the Electricity Consumers Research Council, in Washington, D.C.

With little or no choice of energy providers, companies with more moderate power needs have more in common with residential customers than with their larger industrial cousins: Their incumbent utility is the best supplier because regulated rates are currently lower and protect them from market volatility. For these companies, the only visible results of deregulation appear to be steadily rising bills and the disintegration of their once-reliable electricity supply.


Although deregulation hasn’t helped most companies lower their bills yet, many businesses are realizing that some simple measures can offer immediate savings. The first step is the most obvious: Read the bill carefully. “Quite frequently, we find utilities not billing appropriately, and in more cases than not, they are overbilling,” says Jim Negus, leader of KPMG’s Financial and Energy Risk Management Group. Even if the bill is technically correct, he says, most regulated utilities have about 30 unique rate schedules, and companies often fail to select the best rate for their consumption patterns. “On average, companies can save 3 to 5 percent of their total energy spend through rate-analysis techniques,” claims Negus. “Either we find an inaccuracy in the utility bill, or we can find a better plan for that company.”

Karen Joyner, vice president and controller of Dollar Tree Stores, in Chesapeake, Virginia, says her company just outsourced its bill payment to Spokane, Washington-based energy service firm Avista Energy, which will provide analysis and recommendations. “We are a dollar-price- point store,” explains Joyner. “We’re not doing this because of higher rates, but because our growth and inability to raise our prices means we need to continuously improve our operations and keep our expenses down.”

Indeed, despite the fact that conservation has become something of a political football in the Bush Administration, improved energy management is the next step for most companies. At this point, it is still by far the best way to save on energy costs, and there’s a thriving cottage industry of energy-management-technology providers, such as Sixth Dimension, Silicon Energy, Powerweb, Lodestar, and Power Measurement, offering to help. “If all the energy-management technologies now available were being widely used, we probably wouldn’t be having these supply-shortage problems,” says Kevin Cooney, vice president of research at energy consulting firm E Source.


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