Responding to Retail Power Marketer Growth Trends RSS Feed

Responding to Retail Power Marketer Growth Trends

Looking back at recent signs that retail switching has been leveling off; looking forward to how municipal, cooperative and investor-owned utilities will be responding to the growth of retail power marketers

Peter Arvan Manos | Jun 14, 2018

In this column back in October 2016, I highlighted how the $57 billion in annual electricity sales revenue for retail power marketers had surpassed the sales figure for municipal utilities ($56 billion). (See “How Mature Are We in Engaging Customers in New Ways?” )

How well are retail power marketers continuing to nip at the heels of the #1 position still held by investor-owned utilities?

While a June 12, 2018, analysis by the U.S. Energy Information Administration shows that some of retailers’ earlier growth trend is continuing, there are additional indications that the median level of retail switching has been leveling off despite the fact that competitive power marketers continue to increase their share of U.S. retail electricity sales in some states.

There are many questions to consider, the answers for which vary as a function of which state is under consideration, since rules in state-by-state markets vary, and retail power marketers have market share in so many states. States where power marketers have a strong presence and/or where retail choice has been offered include California, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Texas, and Wisconsin.

At the forefront of concerns to incumbent “pipes and wires” utilities is the question of what happens to the typical customer’s view of the utility that traditionally provided them transmission and distribution of electricity service, when that customer no longer has direct interactions with them except during outage-related calls.

In addition, some software solution vendors, when asked, will admit addressing the retail power marketer segment can be a challenge and/or presents less of a sales opportunity, if any.

Finally, protection of intellectual property by retail power markers is also of concern, since there is a tendency for the culture of retail power marketers (particularly those that are not a subsidiary of an IOU) to go against a tradition in the electric utility industry of shared R&D. Why? Because retail power marketers build a lot of their analytical tools to optimally address their target market segments in house, keeping these solutions “under the covers,” rather than their relying upon commercially available software from traditional software vendors. In contrast, traditional vertically integrated utilities had less to fear when sharing R&D with utilities in other states where competition (at least for residential customers) was not a concern.

Mitigating this last driver, it is important to note that retail power marketers do utilize some of the same commercially available software solutions to market to their customers, as shown by an example involving Direct Energy’s utilization of the Demand Response Management System (DRMS) from Siemens. As highlighted in the Smart Utility article “Direct Energy Orders Integrated Demand Response Solution,” Direct Energy’s utilization of the Siemens DRMS, while wide-ranging geographically, does not involve residential customers directly. Siemens Smart Grid had signed a contract with Direct Energy, one of North America’s largest energy and energy-related service providers with more than six million residential and commercial customer relationships, to install a DRMS. As a retail utility, Direct Energy will roll out the Siemens DRMS solution to manage their existing load commitments in multiple Independent System Operators (ISOs) regions, including PJM, ISO-NE, ERCOT, and NYISO. The technology will allow the ISOs to more efficiently manage power demand requirements, especially during times of peak usage.

Focusing on the residential markets, a recent paper provides the following helpful table showing levels of retail switching in competitive states.

Read full article at T&D World