Why a risk-hedging product for small customers isn’t the gamble you may think.
Michael O’Sheasy retired in May from his position as product design manager for Georgia Power Co. to pursue a consulting career as vice president with Christensen Associates, Madison, Wis. O’Sheasy has 20 years’ experience in the electric industry as a costing and pricing expert witness and an innovator with such pricing products as real-time pricing, multiple load management and price-protection products. Contact him at MTOsheasy@lrca.com.
Mike Becker recently left Georgia Power, where he was a senior pricing analyst, to become a pricing manager with BellSouth. Prior to his work at Georgia Power, Becker was a pricing analyst for Conrail in Philadelphia. In addition to the design of Flat Bill, Becker was instrumental in developing another innovation called the Interruptible Exchange Service. He may be reached at Mike.Becker@BellSouth.com.
Flat pricing. Many small electric service customers want it, many electric companies do not think they can provide it. That creates a market opportunity for a convenient, flat electric bill.
We are not talking about flat rates per kilowatt-hour, nor about a budget bill program. These common products help customers to levelize monthly bill variance, but do not actually protect customers from price and billing risk. To “protect” means to shelter from risk and uncertainty. The difference between levelizing and actually protecting the customer is where the gap lies—and where a company can step in and capitalize.
What many small customers really want is a pure “flat bill.” A flat bill is a fixed annual bill that provides 12 months of equal payments with no year-end settlement. It can even be one annual bill. A flat bill also offers absolute predictability because it protects against any volatility in weather, behavior and energy costs for a specified period of time. In other words, the flat bill insures customers against the risk of increases in cost and quantity purchased.