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Re: Your questions - comments

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  • mark r. johnson
    ... jump ... Little problem here. The rates for MOST non-Reliant suppliers will be equally stable as Green Mountain Energy (GME). Commonsense in marketing is
    Message 1 of 12 , Oct 14, 2002
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      --- In hreg@y..., Ryan McMullan <mcmullan@r...> wrote:
      > ... marketing angle Green Mountain could use
      > would be to show the cost per kWh for different companies, which
      jump
      > around each month, and theirs, which stays the same.

      Little problem here. The rates for MOST non-Reliant suppliers will be
      equally stable as Green Mountain Energy (GME). Commonsense in
      marketing is one reason -- you can sell something better if it's not
      confusing.

      Reliant (oops, Centerpoint (CP)) on the other hand, has inherited a
      rate structure from the old regulated days and cannot change. It
      includes some social engineering aspects such as a lower rate for the
      1st 250kwh block, so as to provide some small subsidy for poor people
      (however for public speaking they may claim another reason). It
      includes a higher rate in summer than winter for amounts above 800kwh,
      that pretty realistically reflects the costs of generation. Plus, it
      offers some price break for those unwise customers who rely on
      electric resistance heating -- the most expensive to run and the
      cheapest to build.

      For what it's worth, the wording of Reliant's rates a few years back
      went like this:

      1) FACILITIES CHARGE -- $6.33/month
      2) ENERGY CHARGE -- $.022500 per kwh for the first 250 kwh,
      plus $.076518 per kwh for all additional kwh
      except that kwh usage in excess of 800 kwh in the billing months
      of November through April will be billed at $.044552 per kwh.
      3) FUEL CHARGE -- Amount determined by PUC and based on fuel costs,
      mainly natural gas. I looked at my bills from 1993 and 1999, the fuel
      charge hovers around $.02 per kwh. I once wrote a computer program
      that calculated the bills exactly. And yes in case you were wondering,
      I used to work in HL&P, ten years in the very department responsible
      for negotiating rates (early on I switched my supplier to New Power,
      and when that folded I went to Green Mountain Energy).

      Add them all together and you arrive at your price which is
      approximately 9-1/2 cents per kwh for most months. Remember nearly
      everyone will be paying bigger bills in the summer due to air
      conditioning, so the lower price levels (and the $6.33 customer
      charge) will get very diluted most of the time.


      > Of course, the real
      > test is going to be what the prices do over the next five years
      as...

      Very true. You did not say this, but also over that time period we
      will finally stop paying the "stranded cost" kwh charge that goes to
      pay for South Texas Nuclear and a few other high-cost plant decisions.
      It's frustrating to wait, but only then will we really know what it's
      like to live and pay under deregulation.


      > these are only estimates submitted by the companies for 1000kWh
      usage per
      > month. They are not actually a measurement of anything.

      Actually they probably chose 1000 kwh/month because the average
      Houston area usage is 12,000 kwh/year. It's not as arbitrary as it
      looks, although the average home will have summer months maybe triple
      the usage of mild months. They are trying to keep their explanation
      simple.

      > So lets get some real numbers together. My historical data from
      > Green Mountain since January is:
      > MonthkWhCostCents/kWh
      > Jan-02710 $75.34 10.6
      > Feb-02520 $56.47 10.9
      > Mar-02590 $56.84 9.6
      > Apr-02600 $57.72 9.6
      > May-021480 $135.05 9.1
      > Jun-021320 $120.99 9.2
      > Jul-021950 $176.35 9.0
      > Aug-022240 $201.83 9.0
      > Sep-022140 $193.04 9.0
      >
      > How does this compare to others with Green Mountain or other
      providers?

      Ryan, your total billing looks pretty average but I think there is
      something wrong with your reading of kwh. It just doesn't seem likely
      that you used 2520 kwh in your lowest month and then paid $57 billing.
      More probable you actually used 518 kwh, that's pretty mainstream.
      Similarly, your dollar billing suggests your peak month usage was
      about 2245 kwh. The kwh numbers you posted got changed to something
      very atypical -- like about 10X too large for the billing in the
      May-Sep months.

      I apologize for the complexity of what I said. It just is inherently a
      very complex subject under the old fashioned system, however a few
      simple (and sometimes subtle) principles account for most of it.

      Hope this helps -- Mark J.
    • chasmauch@aol.com
      More on Robert s comments (sorry to let it pass so long but been real busy - only 18 days until election day). I think that Green Mountain needs to find a way
      Message 2 of 12 , Oct 17, 2002
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        More on Robert's comments (sorry to let it pass so long but been real busy - only 18 days until election day).

        I think that Green Mountain needs to find a way to be price competitive with the other services.  For now, it probably makes sense for them to skim profits off the more altruistic customers like Charlie, but to capture my business, they need to be competitive.  My guess is that they don’t want to be price competitive because then they’d get more business than they have capacity for.  So if they are a reputable company here for the longhaul, they’ll be plowing the profits from Charlie et al. back into the business in the form of capital to expand their generating capacity and then lowering prices to expand market share.  If they are only interested in skimming easy money from the likes of Charlie, and not truly expanding the renewables market quickly, then I doubt we’ll see competitive pricing anytime soon.


        I detect a strong note of superiority and condescension here - that unrealistic, soft-headed tree huggers "the likes of Charlie" are willing to be ripped off by GM but hardheaded businessmen like Robert are not so easily taken in and demand the cheapest price the market can deliver. I suspect we have here a great believer in "free enterprise" and "free markets" who has faith in the ability of the invisible hand to guide us all to an unregulated nirvana. It is strange how deregulation usually seems to lead to incomprehensible situations such as the previously mentioned phone companies, cell phones, absurd pricing on airline tickets, savings and loan fiascoes, wild and senseless peaks and valleys in oil prices, and a long list of other areas where a bit of regulation lends some sanity to an otherwise incredibly complicated and often criminal situation such as Enron and its ilk. It's true some of us are willing to pay a slight premium, at least in the beginning, to encourage the startup of a renewable industry where none exists at present, but how is that different from contributing to any other worthy cause? Surely even free maketeers have some things they are willing to support even if they are not totally "competitive". If it develops that when oil prices go up GM raises its prices too and engages in an obvious rip-off then that will soon become apparent to everyone and if the free market works as some think it should, their windfall profits will soon be undercut by more reputable providers. But they are the only game in town at present, and market analysts who keep track of such things will be looking to see if the public supports the concept. If not it will be like seat belts - take years to be accepted (and may never be accepted on a straight market basis) because no one was willing to buy them and most thought they were a nuisance.


        I think it would be interesting if a renewable energy cooperative formed that would
        offer service to retail customers at pricing perhaps like GM, but with the profit being in the form of accumulated shares.  In other words, instead of Charlie’s excess profit contribution going to shareholders somewhere, it goes into an ownership share for him.  If the base price (after subtracting this capitalization charge) were competitive with the other REP’s, then I should think more customers would jump at renewables.  I would support and applaud any company that offered me competitive pricing, and at the same time had the goal of expanding renewables as rapidly as possible.  I’d be willing to help capitalize such a business through higher prices provided I became a partial owner.


        Of course it would be great if every industry would set up some kind of cooperative so that its profits were plowed back to its customers
        but I don't think that is the way most free markets work so why should this one? Who would provide the initial startup and operating capital? Sounds like we are looking for some soft-headed philanthropists here. I suspect GM is strictly in it for a profit, not because they are such good guys. But that is true of most businesses.

        Just my 1 cent change from Robert's 2 cents worth.
        Charlie
      • Robert Johnston
        Sorry, Charlie.I wasn t at all trying to sound superior or condescending; I certainly wasn t feeling that way. It was actually a complement to your adherence
        Message 3 of 12 , Oct 18, 2002
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          Sorry, Charlie…I wasn’t at all trying to sound superior or condescending; I certainly wasn’t feeling that way.  It was actually a complement to your adherence to your principles and vision.  We both are interested in renewable energy or we wouldn’t belong to HREG.  I think our political philosophies, particularly as they relate to large corporations, differ significantly.  But I respect you for following through on your principles.  The fact that you are willing to spend a small premium to support renewable energy is laudable, and I didn’t mean to imply that you were a sucker, but rather that you were true to your principles and were willing to be generous in that regard.  In my case, even though I would favor wind energy, I am not as committed to it as you are, at least to the extent of spending extra money for it.  So, if anything, I think my post on this forum was likely to be taken as a complement to you and a putdown for me.  At least that’s how I thought it would be perceived, but I guess I didn’t think right.  Wouldn’t be the first time, and won’t be the last…

           

          Robert

           

           

          -----Original Message-----
          From: chasmauch@... [mailto:chasmauch@...]
          Sent: Friday, October 18, 2002 12:25 AM
          To: hreg@yahoogroups.com
          Subject: Re: [hreg] FW: Your questions - comments

           

          More on Robert's comments (sorry to let it pass so long but been real busy - only 18 days until election day).

          I think that Green Mountain needs to find a way to be price competitive with the other services.  For now, it probably makes sense for them to skim profits off the more altruistic customers like Charlie, but to capture my business, they need to be competitive.  My guess is that they don’t want to be price competitive because then they’d get more business than they have capacity for.  So if they are a reputable company here for the longhaul, they’ll be plowing the profits from Charlie et al. back into the business in the form of capital to expand their generating capacity and then lowering prices to expand market share.  If they are only interested in skimming easy money from the likes of Charlie, and not truly expanding the renewables market quickly, then I doubt we’ll see competitive pricing anytime soon.


          I detect a strong note of superiority and condescension here - that unrealistic, soft-headed tree huggers "the likes of Charlie" are willing to be ripped off by GM but hardheaded businessmen like Robert are not so easily taken in and demand the cheapest price the market can deliver. I suspect we have here a great believer in "free enterprise" and "free markets" who has faith in the ability of the invisible hand to guide us all to an unregulated nirvana. It is strange how deregulation usually seems to lead to incomprehensible situations such as the previously mentioned phone companies, cell phones, absurd pricing on airline tickets, savings and loan fiascoes, wild and senseless peaks and valleys in oil prices, and a long list of other areas where a bit of regulation lends some sanity to an otherwise incredibly complicated and often criminal situation such as Enron and its ilk. It's true some of us are willing to pay a slight premium, at least in the beginning, to encourage the startup of a renewable industry where none exists at present, but how is that different from contributing to any other worthy cause? Surely even free maketeers have some things they are willing to support even if they are not totally "competitive". If it develops that when oil prices go up GM raises its prices too and engages in an obvious rip-off then that will soon become apparent to everyone and if the free market works as some think it should, their windfall profits will soon be undercut by more reputable providers. But they are the only game in town at present, and market analysts who keep track of such things will be looking to see if the public supports the concept. If not it will be like seat belts - take years to be accepted (and may never be accepted on a straight market basis) because no one was willing to buy them and most thought they were a nuisance.


          I think it would be interesting if a renewable energy cooperative formed that would

          offer service to retail customers at pricing perhaps like GM, but with the profit being in the form of accumulated shares.  In other words, instead of Charlie’s excess profit contribution going to shareholders somewhere, it goes into an ownership share for him.  If the base price (after subtracting this capitalization charge) were competitive with the other REP’s, then I should think more customers would jump at renewables.  I would support and applaud any company that offered me competitive pricing, and at the same time had the goal of expanding renewables as rapidly as possible.  I’d be willing to help capitalize such a business through higher prices provided I became a partial owner.


          Of course it would be great if every industry would set up some kind of cooperative so that its profits were plowed back to its customers
          but I don't think that is the way most free markets work so why should this one? Who would provide the initial startup and operating capital? Sounds like we are looking for some soft-headed philanthropists here. I suspect GM is strictly in it for a profit, not because they are such good guys. But that is true of most businesses.

          Just my 1 cent change from Robert's 2 cents worth.
          Charlie



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