|
|
Enron Mail |
Mime-Version: 1.0
Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: "IssueAlert" <IssueAlert@scientech.com< X-To: X-cc: X-bcc: X-Folder: \Steven_Kean_June2001_4\Notes Folders\Discussion threads X-Origin: KEAN-S X-FileName: skean.nsf http://www.consultrci.com ************************************************************************ SCIENTECH's E-commerce InfoGrid uncovers the efforts of energy-related companies in the ever-growing field of electronic commerce. A sample can be viewed at: http://www.consultrci.com/web/infostore.nsf/Products/InfoGrid ************************************************************************ =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH IssueAlert, October 11, 2000 Online Niche Players Capitalize on Natural-Gas Shortage, Bypass Utilities By: Will McNamara, Director, Electric Industry Analysis =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SmartEnergy, a Con Edison competitor, is offering New York and Westchester consumers price protection with the ability to lock-in today's natural-gas rates for a period of one year. In a separate announcement, myHomeKey.com announced that it will offer energy savings packages designed to reduce energy consumption and lower rates for customers in the face of rising energy costs. ANALYSIS: As reports continue to accumulate that a natural-gas shortage will send prices skyrocketing this winter (see my IssueAlert from Oct. 9 on the subject), the most common response from electric utilities has been to warn their customers that they will see higher rates over the next few months. I can point to several examples. Minneapolis-based Xcel Energy announced a few weeks back that its natural-gas customers could face heatin= g bills that are 35 to 50 percent higher than their bills last winter. Domini= on East Ohio has warned its residential customers that they can expect to pay about $70 more per month for natural gas from November through January. And the warnings are coming not only in the Midwest and Northeast=01*where low winter temperatures drive up energy bills every year=01*but in the West as well. In California, PG&E warns that its customers can expect to see their winter bills increase by about $25, to an average bill of $75 (compar= ed to $50 last winter). These are just a few examples of utility companies across the United States playing damage control, trying to minimize the customer outrage when customers suddenly see their bills double or triple. Along with their warnings, these utilities give reasons=01*perhaps seen as excuses by the public=01*for the rising cost of energy. There is a shortage of natural gas across the country, brought about by a drop-off in productio= n. It was an unusually hot summer, which depleted supplies for energy. Demand in general has grown to surprising levels. Meanwhile, start-up online companies that many of us have not even heard of are using the rise in natural-gas prices as a golden marketing opportuni= ty, and attempting to take business away from traditional utility companies. SmartEnergy is a perfect example. In existence just since April 1999, SmartEnergy offers electricity and natural gas to residential and small business customers. According to EnergyGuide.com, for an average home in New York City, SmartEnergy's natural-gas rates typically have run about $189 per month, compared Con Edison's $140. Under its new promotion,=20 SmartEnergy's plan for natural gas guarantees that New York City and Westchester gas customers who sign on with their service now will be locked into current natural-gas rates for the next 12 months. This promotion comes at an ideal time for those who opt to switch, as natural-gas prices should begin their projected sharp increase over the next few weeks. Based on recent forecasts= , SmartEnergy is claiming that Con Edison customers who make the switch can expect to save up to 40 percent on their energy through the winter months. The start-up company also is offering 500 United Airlines Mileage Plus Reward Miles credit and $25 sign-up bonus to entice customers away from Con Edison. Based on the available information about SmartEnergy, it is unclear how the online provider will be able to guarantee the 40-percent reduction in natural-gas rates. I would presume that SmartEnergy has entered into some hedging strategies to minimize its risk in the event that natural-gas prices remain high into the next year. Any prudent provider would have a hedging strategy to protect itself, and locking itself into 12-month contracts without its own contracts for obtaining natural gas at spot marke= t prices would certainly raise questions about the future of SmartEnergy. In addition, SmartEnergy will have difficulty in recruiting customers away from Con Edison and other utility providers. Many customers still have reservations about signing on with an online company that they do not know. There will be some customers who jump at the chance to lock in current rates for 12 months, but many others will stick with the company that they know even if their rates increase. I did a quick search around Con Edison's Website to see if it might be offering an alternative offer to retain its customers, but could find nothi= ng that the utility is doing to specifically address the projected increase in natural-gas prices this winter. Con Edison does offer a level billing program in which customers receive a consistent bill amount each month, alleviating fluctuation in their bills. Yet, as a utility company, Con Edison has a standard offer of service that regulators closely monitor. It is possible that Con Edison could request changes to the standard offer service, which would likely need to be approved by the New York Public Service Commission. The PSC could agree, or determine that the competitive offers by providers such as Smart Energy are a positive result of=20 deregulation. In addition, Con Edison could be hampered by fuel contracts that may not allow it much flexibility with regard to lowering its rates. Overall, Con Edison probably does not have a lot of flexibility regarding the rates it can charge customers, thereby making this offer from SmartEnergy difficu= lt to beat. The other online start-up taking advantage of natural-gas prices is=20 myHomeKey.com, which made a recent promise to reduce home heating, oil, natural-gas, and electricity rates. The marketing route that this online start-up is taking is energy efficiency=01*teaching households how to more effectively use the= ir energy and, hopefully, save money as a result. Energy is not the only servi= ce of the myHomeKey.com; it is also involved in home maintenance and repair, appliances, home monitoring and moving services. Yet, I learned that=20 myHomeKey.com just recently launched co-branded sites with KeySpan Corp. and TXU Energy Services to "provide millions of local customers" with the ability to check energy efficiency in their homes. What's important to note about these two developments is the advantage that online energy providers have over traditional utilities. As utilities try to disengage themselves from regulatory-bound rate structures, online companies have the freedom and flexibility to offer attractive products and billing options to customers in deregulated states. There are the onlin= e providers that we know about, such as Utility.com and Essential.com.=20 Utility.com has not yet started to sell natural gas, although it has established a partnership with Sempra Energy in which Sempra Energy Trading will sell natural gas in deregulated markets via the Utility.com Web site. Utility.co= m plans to start selling natural gas by the end of this year, but it has not developed any marketing campaign in this regard. Essential.com continue= s to open up its service across the Mid-Atlantic and Northeast regions. Yet, on a weekly basis, new start-up online energy providers surface, eager to grab their own share of the retail market. I also wonder where The New Power Company is in all of this rush to capital= ize on the marketing opportunities surrounding the rise in natural-gas prices. It would seem like a natural for TNPC to make a big splash with its own marketing efforts, as it already promises lower prices for both natural gas and electricity. In any event, as the natural-gas shortage may become a public relations nightmare for utility companies across the country, it conversely could work to the advantage of the more agile online provider= s =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Read about SCIENTECH's new PowerHitter interview with Jeff Sterba, Chairman and CEO of the Public Service Company of New Mexico at: http://www.consultrci.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let us know if we can help you with in-depth analyses or any other SCIENTECH information products including e-commerce and telecom in the electric utili= ty industry. If you would like to refer a colleague to receive our free, daily IssueAlerts, please reply to this email and include their full name and email address or register directly at: http://www.consultrci.com/web/infostore.nsf/Products/IssueAlert Sincerely, Will McNamara Director, Electric Industry Analysis wmcnamara@scientech.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Feedback regarding SCIENTECH's IssueAlert should be sent to=20 wmcnamara@scientech.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH's IssueAlerts are compiled based on independent analysis by=20 SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts are not intended to predict financial performance of companies discussed or to be the basis for investment decisions of any kind. SCIENTECH's sole purpos= e in publishing its IssueAlerts is to offer an independent perspective regard= ing the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy and telecommunications issues. Copyright 2000. SCIENTECH, Inc. If you do not wish to receive any further IssueAlerts from SCIENTECH, pleas= e reply to this message and in the body of the email type "remove."
|