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More than Eight in 10 Pennsylvanians Support Alternative Default Service Supplier, Direct Energy Survey Finds

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October 4, 2010

Some 84% of Pennsylvania electric customers support, "allowing a company other than the utility company," to provide default electricity supply if all of the current consumer protections remain in place, according to a poll by Zogby International commissioned by Direct Energy Services and included as part of its surrebuttal testimony in the Pennsylvania PUC's review of the FirstEnergy Corp.-Allegheny Energy merger (A-2010-2176520).

Of those supporting an alternative default service provider, 46% strongly support the concept, and 38% somewhat support the concept. Only 10% of respondents opposed allowing a non-utility to provide default service.

As first reported by Matters, Direct Energy has proposed, due to competitive concerns raised by the FirstEnergy-Allegheny merger, designating an alternative default service supplier (which would provide only backstop service), and also auctioning off non-shopping customers to electric generation suppliers.

Nearly nine out of every 10 survey respondents (89%) said that they support Direct Energy's proposed plan to increase competition among electric suppliers after hearing several of its provisions, including the potential for a direct payment to retail customers resulting from revenues generated in the auction (see 8/18/10 for full description; revenues would be derived from suppliers bidding for the right to serve blocks of customers). Some 86% of respondents said that a rebate check of $150-500 (the estimated size based on projected revenues) would make a difference to their family, given the current economic climate.

Notably, 44% said that it made no difference to them that Direct's proposal would feature a process, which customers could opt-out of, in which suppliers would win the right to provide service by bidding on customers. Some 36% of customers said that this auction feature made them more likely to support Direct's proposal, meaning that eight in 10 customers either support or are indifferent to being auctioned off to a competitive supplier. Only 12% of respondents said that they were less likely to support Direct's proposal upon learning that it would feature an auction.

"I believe that these results are evidence that customers would not be 'confused,' nor contrary to [Office of Consumer Advocate witness] Ms. [Barbara] Alexander's claims, are they staying on default service out of some distrust or negative view of competitive offerings," said Direct Energy Business' Director of Products and Complex Transactions Frank Lacey, a noted expert on regulatory affairs and market development.

"[B]ased on these results, customers would have no problem with being assigned to a competitive supplier given the protections provided to them in the Direct Plan," Lacey testified.

The survey also found that 15% of respondents were unaware that they could choose an alternative electric supplier, while another 64% of respondents have never considered switching suppliers.

The survey's target sample was 802 interviews. Some 31% of respondents were customers of Penelec, with another 29% served by Allegheny Power, 18% by Met-Ed, and 5% by Penn Power. Some 15% of respondents listed "other" when asked to name their electric utility company, which included responses such as "FirstEnergy" and "GPU"," as well as customers in the counties surveyed served by a cooperative or municipal utility.

The margin of error is +/- 3.5 percentage points.

In reply to Direct's initial testimony, where Direct cited various concerns due to the sheer size of the combined utilities as well as FirstEnergy Solutions' stated retail strategy, FirstEnergy and Allegheny presented testimony from Michael Schnitzer, who said concerns over the fact that the combined utilities would cover 70% of Pennsylvania's geography, "have no substantive basis whatsoever."

In rebuttal on behalf of Direct Energy, Dr. Mathew Morey, a senior consultant at Christensen Associates, testified that, "Mr. Schnitzer should have discussed this issue first with Allegheny Energy CEO [Paul] Evanson who recently stated that the fact that the combined company would cover 70% of Pennsylvania ... would permit it to be in a 'dominant position.'"

Morey was referring to Evanson's statement at a recent investor conference, noted in Matters, 9/16/10.

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