Pennsylvania is getting help in its campaign to persuade more retail electric customers to switch away from their local utilities to lower-cost suppliers.
AlphaBuyer, a Paoli, PA-based startup, is bundling customers and negotiating deals with power distributors that result in cost savings to households and new clients for suppliers who probably wouldn’t have got the additional business through their own marketing efforts.
Ten months after starting its operation, AlphaBuyer, which offers the same service for natural gas users, says its customers are “approaching 10,000″ in Pennsylvania and New Jersey.
That’s a drop in the bucket in Pennsylvania which at the end of 2010 had 4.97 million residential electric customers of regulated utilities, according to the state’s Public Utility Commission.
Ballard & Spahr lawyer and former Federal Energy Regulatory Commission chief of staff Howard Shafferman discussed the challenges of bundling retail consumers in his interview with Breaking Energy in October. Click here to learn more.
Slow Progress On Retail Choice
But the program is a step in the right direction for a state that has been deregulating its electricity market since 2009, and this year completed the process by removing rate caps in eastern Pennsylvania.
Despite the PUC’s best efforts, only 23.2% of residential customers statewide had switched away from their default utility by early November, with local switching rates varying widely from 69% to less than 1%. The statewide rate is much lower than in Texas which is held up by PUC Chairman Robert Powelson as a model for possible further liberalization of the Pennsylvania market.
AlphaBuyer, whose service is unique in Pennsylvania, according to the PUC, reaches prospective customers through social media and directs them to its website where they can check out details of rates negotiated with local suppliers.
For example, 161 PECO customers in the Philadelphia area saved almost 20% on their electric bills by signing on to AlphaBuyer’s deal with AMERIgreen Energy, a Lancaster-based supplier.
In a 12-month deal that closed on Oct. 31, participants agreed to pay 8.97 cents per kilowatt hour for AMERIgreen power compared with the 11.14 cents they would have been paying with PECO, AlphaBuyer’s website says.
Despite the cost savings, many customers are reluctant make the switch for the generation portion of their bills even if they know the opportunity exists, said John Raisch, AlphaBuyer’s co-founder and chief marketing officer.
The company released a survey in July showing 90% of Pennsylvania residents were aware of energy deregulation but only 20% had switched suppliers. Among those still with their local utility, 40% said they believed the savings would not be big enough to justify switching; 24% said they were confused or overwhelmed by the number of alternative suppliers, and another 15% were concerned about the potential risks of signing up with another supplier.
Raisch said the PUC, through its papowerswitch.com web site, has done a good job of encouraging people to shop for new suppliers, but that more needs to be done to incentivize people to shop not only once, but regularly, for new suppliers.
“If you educate consumers, they are going to look into this once a year,” he said.
At AMERIgreen, AlphaBuyer has brought about 10% of the supplier’s approximately 2,000 customers during the first month of their relationship, said Jon Loercher, its director of electricity and natural gas.
“Ten percent is a pretty big number,” said Loercher, who said he would not have won the new business independently. “They have the ability to bring in thousands of customers.”
At Rhoads Energy, another Lancaster-based supplier that contracts with AlphaBuyer, natural gas customers who currently buy their fuel from the UGI utility can save by switching.
Rhoads’s Vice President of Operations Scott Burky attributed AlphaBuyer’s success to its use of social media, which can rapidly spread the word of cost savings. He declined to disclose fees paid to Alphabuyer for gathering the new customers.
“When they find something that’s a good deal, they tend to want to share it,” he said.
Photo Caption: Sean Curran of Doylestown, Pennsylvania shovels snow and ice outside his home after a winter storm October 30, 2011 in Doylestown, Pennsylvania. Thousands in Pennsylvania and Delaware were left without power from the early winter storm that left up to 10 inches of snow in parts of the states.