A power shift on energy prices
You pinch pennies, wait for sales, and compare prices. But have you ever gone shopping to lower your utility bills? A handful of Internet companies are hoping you will in the next few years.
The fledgling companies already are saving money for consumers in the handful of states that have deregulated electric power and natural gas. They expect a flood of interest as more states deregulate. In the meantime, they're luring new customers with cut-rate deals on other services from long-distance telephone service to satellite television and even gasoline.
Their formula: Lure hundreds of thousands of bill-payers to a single Web site where they can find great deals.
"It is the Web that has made it possible for consumers to come together nationwide," says Sanjay Chopra, chairman and chief executive of OnlineChoice.com, a Pittsburgh-based Internet service. "The power has shifted - and we're enabling that process - from the producers to consumers."
"Every month you have these bills. They're unavoidable," adds Matt Coffin, chief executive and founder of LowerMyBills.com, based in Los Angeles. "Who wants to pay more than they need to for monthly bills?"
The message is catching on. In a year, LowerMyBills has grown from nothing to a marketplace of more than 250,000 people who are looking to cut costs. The site bills itself as a marketplace for utility-type services. Online users can select among three long-distance services that charge anywhere from 4.9 cents to 6.9 cents a minute. If they sign up, LowerMyBills gets a commission.
The company also offers Internet access and low-interest credit cards, as well as electric power and natural gas in some deregulated states. If homeowners signed up for all of the services the company offered, they would save an average $3,000 a year apiece, Mr. Coffin claims.
"It's not just cost or price that attracts customers to our marketplace," says Paul Lewis, president of Essential.com, an online energy and communications marketplace. "They're also looking for convenience." The Burlington, Mass. company sends customers their bills online and charges their credit-card accounts, saving them time but also reducing the company's costs.
Sometimes the companies are independent, such as OnlineChoice, LowerMyBills, and Essential.com, as well as Utility.com, based in Emeryville, Calif.; and GreenMountain.com, a South Burlington, Vt. provider of environmentally cleaner energy. Sometimes, they're tied to big energy companies. In May, for example, Enron Corporation joined forces with America Online and IBM Corp. to begin selling electricity and natural gas. The company, dubbed the New Power Company, is marketing its services via the Internet to customers in Pennsylvania and New Jersey.
OnlineChoice.com uses a slightly different strategy. It pools together potential customers and then goes out and negotiates the best possible deal for them. For example, 70,000 consumers agreed to register (with no obligation) for long-distance telephone service. That customer base was enough to convince GTC Telecom to offer members a price break: 4.7 cents a minute with no monthly fees or minimums.
The company has also attracted a buying pool of 65,000 consumers for cheaper electricity. Currently, the company offers such deals in some seven states. But the pace of reform remains slow.
Even in some of the states that have deregulated, competition hasn't flourished. Pennsylvania set prices for traditional utilities so low that new companies found it difficult to compete. In Massachusetts, pricing problems also caused only a small fraction of customers - 0.4 percent last year - to switch. And most of them were large businesses.
Analysts expect more states to deregulate soon, which should open up still more business for the online discounters.
By 2005, more than a quarter of online households will use the Internet to trim their energy bills, according to the Yankee Group.
"There are a number of very appealing markets that are opening up to competition," says Bob Potter, vice president of business development for energy for Essential.com. "The regulations that they're putting in place are better."
(c) Copyright 2000. The Christian Science Publishing Society