2010-11-04 / Local & State

Energy Firms Gearing Up To Go After Customers

By Andrew Maykuth THE PHILADELPHIA INQUIRER

PHILADELPHIA (AP) – Here come the power brokers. One of them may be your neighbor.

Alternative-energy suppliers are ramping up efforts to nab Peco Energy Co.’s 1.6 million electric customers, who will be up for grabs when market rates take effect Jan. 1.

Two direct-marketing companies are aggressively organizing salespeople to sign up friends and neighbors in the same way that Amway and Avon sell household cleaners and cosmetics.

Another supplier, the nonprofit Energy Cooperative of Pennsylvania, announced Friday that it would beat Peco’s “price to compare’’ by 7 percent – and that’s a “green’’ offer that derives some of its electricity from renewable sources.

“We’re very excited about the market,’’ said Blaine Martin, the cooperative’s electricity-program manager.

Peco’s recent announcement of its long-awaited default rates for generation service is already triggering a flurry of activity.

Pennsylvania’s Public Utility Commission has licensed about 140 suppliers to market energy in the state. Though some are targeting large industrial customers, others are aiming at the mass market. Their efforts will intensify in late November so that the first customers switch by New Year’s Day.

The direct-marketing companies will rely primariattention ly on word-of-mouth campaigns, in which their mostly part-time sales forces sign up neighbors, relatives, and members of their congregations.

Stream Energy, a Dallas marketer that says its sales force of 170,000 people in Texas and Georgia sold more than $800 million worth of energy last year, announced that it is entering the market for customers of Peco and PPL Electric Utilities Corp., the Allentown utility.

Stream’s slogan is aimed at reassuring those who may balk at the novelty of shopping for power: “It’s OK to switch. Really.’’

North American Power, a Connecticut direct-market seller, is holding weekly recruitment meetings to organize its sales network, according to a Philadelphia broker. The associates are promised $15 fees for each customer they enroll, and a fraction of a cent for each kilowatt-hour the customers buy, according to the company’s website.

Stream has been active in Texas for five years, but North American Energy is new to the business. According to its PUC license, its founders are experienced energy traders.

“North American Power is a real energy company with a growing sales force,’’ the company’s website says.

Chris Sattler, North American’s chief operating officer, said in a telephone interview that the company had not yet decided how to price its offering. “We haven’t finalized that,’’ he said.

Stream and North American rely upon a pyramidal hierarchy of salespeople, who derive profits from the customers signed up by other salespeople they recruit. As with other direct-marketing networks, like Mary Kay Cosmetics, the associates pay a fee to join the sales force.

Irwin A. “Sonny’’ Popowski, Pennsylvania’s consumer advocate, declined to comment about the sales method.

“I have to say I’m not familiar with that,’’ said Popowski. “I’d have to see how it works. I’m mainly concerned about customers, and if they’re getting a fair price to compare.’’

The market’s terrain is being reshaped because of a 1996 law restructuring Pennsylvania’s electricity industry. Traditional utilities became merely regulated distributors of electricity to customers.

To provide for a transition, Peco customers had to wait until the end of 2010 before the restructuring went into full effect.

No matter which suppliers are chosen, Peco still will serve every customer because it owns the power distribution system. Peco makes money from a regulated distribution fee, not from generating the power itself, so it is encouraging customers to shop.

Customers are under no obligation to switch. The PUC requires Peco to supply power at a default rate to customers who stay with it.

Peco said the overall rate will go up about 5 percent Jan. 1 for those customers who choose to stay.

Consumer advocates say customers should pay close to the offers from alternative suppliers – to whether the rates are a direct answer to Peco’s “price to compare’’ and contain no hidden fees.

Most of the 675,000 customers in other parts of Pennsylvania who have signed up in recent years with discount suppliers accomplished the switch without trouble. But some have complained about unscrupulous sales tactics.

Licensed energy suppliers have signed pledges to follow strict PUC rules, and provided the PUC with $250,000 letters of credit to demonstrate they have some financial means.

Popowski encouraged customers to report improper activity to the PUC or the Office of the Consumer Advocate.

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