Fixed or Flat Bills Debated in Time of Price Spikes

The amazing thing about flat bills is that they work well in closed and open markets. It doesn't matter whether your market is locked closed as in the case of Georgia Power or open and hotly contested such as the Ontario gas market. The flat bill concept is going like gangbusters in both.

(PRWEB) November 6, 2005 -- Rebecca MacDonald has an unusual way of giving customers security.
    
She founded Energy Savings Income Fund in Toronto and offers customers five-year contracts for power and gas.
    
MacDonald buys five-year blocks of power and gas in advance of marketing her product and always knows how much fuel she has to avoid selling more gas than she has.
    
That means she doesn't face risk from volatile fuel prices.
    
She was on a Restructuring Today panel devoted to exploring flat bills and long contracts.
    
Restructuring Today is the nation's leading news source focused on chronicling ongoing efforts to open competitive wholesale and retail markets with in-depth analysis on why some succeed while others fail (www.restructuringtoday.com).
        
Michael O'Sheasy, vice president of CA Consulting, developed a flat bill when he was with Georgia Power.
        
Now he helps to sell it in open and closed markets.
        
Flat bill gives customers tailored offers for yearly power use including charges for the commodity, transmission and distribution divided by 12 to get the monthly payment.
        
Customers pay equal monthly installments regardless of weather and use.
        
The product is still in its infancy, he said, but it's recorded big growth.
        
O'Sheasy reminded that it's a premium product.
        
Customers pay to put risk back on marketers and it's not something he sells to customers looking to save money.
        
He shared the range of returns firms were getting from the product -- up to 12% above market for some IOUs.
        
What do high fuel prices means for flat bills?
        
Marketers have to be careful not to oversell them, said Laura Lewis, director of sales for gas flat-bill consultant WeatherWise USA.
        
Marketers need to lock up a stable fuel supply for flat bill customers since they won't be able to pass on fuel volatility through bills, she added.
        
Do flat bills boost use?
        
They do, but not as much as you might think.
        
O'Sheasy and Lewis told about built-in mechanisms that prevent customer abuse.
        
They told how marketers develop customer offers that account for weather, expected changes in use and a targeted risk premium.
        
The panel debated whether flat bills could work in open markets or whether fixed-price commodity contracts were the way to go.
        
If you're interested in hearing the full views and comments of the panelists, including questions and answers, visit www.restructuringtoday.com/catalog/audiocds/30003301-1.html.

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