Facilitating Customer Choice in a
Changing Environment
Institute for Regulatory Policy Studies
May 10, 2007
Mike Ratcliff
BlueStar Energy Services, Inc.
BlueStar Energy Services, Inc.
• Largest Self-funded electric retailer in the USA
• Currently, 21st Largest ARES in the USA
• Certified Electric Supplier: Illinois, Maryland,
Michigan, New York, and Washington D.C.
• Commercial and Industrial
• High level of interest in Residential
The Illinois C&I Customer
• Choice:
– Products: Fixed Price, Index Price, Blend or Combination
• Price Certainty (Risk Averse, limited load control)
• Index (Risk tolerant, load control ability)
– Transmission, Ancillary Services, and Capacity
– DST: Single or Dual bill
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Accurate, timely, and customized billing
Educated ARES Sales Representative
Responsive Customer Service
Payment Flexibility: Check, ACH, Credit card
Supply Reliability is a “given”
The Illinois Residential Customer wants many
of the same things as C & I customers:
• Choice:
– Product: Fixed Price, Real Time Pricing, Green vs Brown
• Price Certainty (Risk Averse, limited load control)
• Real Time Pricing
– Transmission, Ancillary Services, and Capacity
– DST: Single or Dual bill
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Accurate, timely, and simplified billing
Educated ARES Sales Representative
Responsive Customer Service
Payment Flexibility: Check, ACH, Credit card
Supply Reliability is a “given”
Variable by Size
Common to All
Responsive Customer Service
Accurate & Timely Billing
Industrial
Greater Billing Detail
Small Industrial
& Large Commercial
Educated Sales Reps
Payment Flexibility
More Suppliers
More Price Certainty
Small Commercial &
Large Residential
Simplified Billing
Supply Reliability
Choice
Less Risk Averse
No Choice
Mass Residential
Current residential status
“No Real CHOICE”
 No Choice: Suppliers, Fixed versus RTP,
Green power versus Brown, etc…
 Captive customer
 Poor customer service
 No Savings Opportunities
Illinois Regulatory & Legislative
Environment
• Capped Rates are NOT the answer, COMPETITION
is the only true and tested mechanism for lowering
prices.
• Current Auction Methodology NOT the answer
– Similar to the old MVEC in regard to
• One time Market “shot”
• Sometimes promotes competition, sometimes may not….
Competition
• Lower Prices over time
• Promotes Innovation
• Better Customer Service
POLR Supply
• Utility Purchased Gas Adjustment Model
– Monthly rates based upon Actual Utility (POLR) costs
through an integrated planning process
– ICC familiar with methodology and reconciliation issues
– Maintains utility economic indifference
– Promotes Competition
• Must use an ARES to fix long term supply costs
– Avoids much of the “second guessing” which the Auction
process can’t avoid since it is market based:
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What is the best time of the year to hold the auction?
How long should the term be?
Is there “gaming” going on?
How much of the price is due to migration, credit, legislative and
regulatory risk?
Barriers to Serving Residential Load
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Legislative Uncertainty
Bad Debt and Credit Risk
Billing – Economics of Scale
Utility preparedness
– DASR process
– EDI and Metering issues
• Electricity Supply and Capacity “forward” market
prices
BSE Suggestions to Promote Residential
Competition
• Illinois utilities required to have standard EDI format
• For the first 12 months utilities provide a “guaranty” of
receivables (bad debt already built into approved base rates)
– This is a compromise: Utilities don’t have to worry about Purchase
of Receivables (POR) and related administrative concerns
• Ameren joins PJM (MISO is not designed to accommodate Load
Serving Entities or LSEs)
– Serving load in Illinois should not be EXTREMELY different, from
an operations perspective, depending upon whether load is north or
south of I-80
• Fixed Distribution loss factors as opposed to hourly
• PGA Methodology for POLR
Closing Thoughts
• Competition is the answer
• Residential choice CAN work in Illinois
• Illinois Utilities must standardize:
– Regional Transmission Organizations
• At the very least RTO’s need to adopt “tried and tested”
standard operating practices
– Distribution Loss calculation methodology (Fixed vs Hourly)
– EDI Format