For Taff Tschamler, the deregulation of US retail electricity markets is a huge business opportunity rivaling the surge in competition that followed the breakup of AT&T in 1982.
Shifting the power-supply business away from utilities and toward an influx of new providers like North American Power, where Tschamler is a senior vice president, creates new revenue for those companies and cuts electric bills for consumers.
With more than 20 states now allowing competition in retail markets, but some with switching rates of less than 10%, Tschamler believes there are plenty of openings for suppliers to bring competitively priced power to customers.
The opportunities are already being realized by Connecticut-based North American Power, which expects a 400% increase in revenue to about $120 million by the end of 2011 now that it serves 115,000 customers in five northeastern states, Tschamler said.
Go West, Power Provider
Next, it plans to move into Illinois and Ohio and then to Texas, the acknowledged leader of US power deregulation, where about 85% of residential and commercial customers – a far higher proportion than any other state — have switched electric suppliers at least once since the market was deregulated in 2002.
The potential of the energy-supply business is shown even more clearly by Ambit Energy, a Texas-based provider that topped Inc. Magazine’s chart for the fastest growing U.S. company of any kind in 2010.
Ambit, which buys electricity at wholesale prices and sells it to retail customers, reported three-year growth of 20,392% in 2010, according to the magazine.
Tschamler, in an interview with Breaking Energy, described Texas as “the most advanced market for competition and choice”, setting a standard that all other deregulated states are looking to.
Foremost among Texas’s imitators is Pennsylvania, which is working hard to persuade customers to switch but where only about a quarter of residential customers have so far moved away from their default utilities.
“Pennsylvania is the first one to consider the path that Texas took,” said Tschamler. “No other state has done anything close to what Pennsylvania is considering.”
Paid To Save
Pennsylvania’s Public Utility Commission is in the midst of a retail markets investigation into ways of encouraging switching by residential customers. According to surveys, nearly all customers are aware that they have a choice but many are not convinced switching will save them much money, don’t trust new suppliers to give them reliable service, or simply can’t be bothered to make the change.
Among the changes being considered by the PUC are so-called opt-in auctions under which groups of consumers would be offered cash incentives to switch suppliers who would then bid for the business.
Pennsylvania consumers now have 114 choices of new suppliers, some of which, like North American Power, offer service in more than one utility’s territory. The choice ranges from 36 suppliers in PECO’s southeastern Pennsylvania area to zero in the UGI and Wellsboro territories.
Despite savings of 5-15 percent on retail electric bills that are typically offered by suppliers like North American Power, many consumers are still reluctant to make the switch, Tschamler said, citing rates of 50 percent in Connecticut; 20 percent in New York, and even fewer in Illinois, where a survey found fewer than 10 percent were even aware they had a choice.
Tschamler attributed the low switching rate in part to opposition by some consumer groups and trade unions who fear reliability will be affected and believe that a deregulated market may hurt consumers.
“We still face a stigma there,” Tschamler said. “But we are still highly regulated.”
Photo Caption: People wait in a line at the Public Power Corporation offices in northern Greek town of Thessaloniki to pay the electricity bills which include the new property tax, on November 14, 2011.