Executive Forum on Restructuring Held in Texas

I just attended KEMA’s 21st Executive Forum, and was impressed, like last year, with the quality of the speakers and the friendliness of the participants. DEFG’s CEO Jamie Wimberly attended as well, and he made the following observations:

KEMA’s 21st Executive Forum was held at the beautiful Four Seasons Resort & Club in Irving (Dallas) this year. What a great conference! There was more executive firepower in that room than 90 percent of other conferences I attend. After working with energy market restructuring and competitive issues for many years, it is very satisfying to see that the competitive retail marketers, suppliers, and the vendors who support them, seem to have turned a corner.  All signs point to a breakout year for the industry.

I offer two primary takeaways. First, retail marketers are finally getting serious about moving beyond commodity. Many companies laid out compelling visions and plans for value creation connected to service packages, payment and billing options, supply options, etc. You heard the word “management” a lot, as in “energy relationship management.” It does bring to mind a question though: What is the unit of currency in that type of transactional relationship? Before it was kWh, but now what? Second, and most importantly, the winners in the competitive energy retail space will be those companies that best own and manage the channels to the customer. When marketers are primarily competing on price, channels = competitive advantage. The advantage comes in the form of lower customer acquisition costs, greater stickiness, tiered selling opportunities, improved customer service, and greater customer satisfaction, to name a few.

That’s all to the good. I do believe that the industry is still finding its feet though when it talks about “innovation.” My impression was that innovation still treated as top down, engineering-driven and somewhat mechanical. For innovation to occur, it needs to be much more organic and collaborative, especially with customers. I still detect more of a desire to control than to create.

Kudos to KEMA for a great conference!

Now what? Without a doubt, the electric industry is on the move. As you nod your head in agreement, consider whether you and I are referring to the same segment of the industry! The electric industry is multi-faceted, and this complexity is sure to grow. Perhaps you work on the commodity side, and you see more transparency in the major electric regions, you like many of the ISOs’ decisions, or you are pleased with increased emphasis on demand response by the FERC. Uncertainties remain, but you like the relative stability in state, regional and federal decision making.

Or perhaps you operate mainly on the retail marketing side of the business, and you see light at the end of the tunnel. A few new markets are opening, and you hope that less intrusive default service tariffs will prevail. You also observe advanced meter deployment and your company has a vision of the smart grid that brings another layer of rationality to settlement. You see new dimensions for your retail offers and pricing.

Another group of stakeholders — new providers and technology companies — see the smart grid as the basis for transformative change: new interfaces in the home, new applications for handheld devices, new appliance controls, smart appliances, electric vehicles, new data applications, major new efforts for energy efficiency funding … the opportunities seem endless. This newest contingent of technology and service providers looks at the structure of the Texas market and sees the right mix of control and freedom. They like the market platform and appreciate the infrastructure investment (transmission and smart meters). They like the timing of the smart meter rollout, and they like the consistency (15+ years) of intrastate regulation in Texas. They see opportunities for transformation that opens doors for their products and services, and which allows customers to drive the demand for market innovation. A truly dynamic period is ahead, and many eyes are on Texas.

The newest technology and service providers also see opportunities in markets which are not open to retail competition. They look at the new meters and the opportunities to work in partnership with utilities. Some of them are pleased with the opportunities to sell directly to the utilities. These new relationships may not be ideal, but they have developed a business model which allows them to survive to the next quarter, and for many new companies that is a win.

For more information:

Electricity Restructuring: The Texas Story                                  ABACCUS

 

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