Dayton Power & Light Affiliates See Decline in Retention of Migrated Load as Smaller Customers Shop

The reduction in Dayton Power & Light's (DP&L) gross margin in the first quarter as a result of customer switching was approximately $27 million, up $18 million from the first quarter of 2011, AES reported during an earnings call.

AES said that migration to competitive supply at DP&L was in line with expectations, with 53% of total retail load competitively served as of the end of March (an incremental gain of 3% during the quarter).

DP&L's competitive retail arm was able to capture 78% of the switched load, executives said, down slightly from the fourth quarter, due to increased competition for smaller volume customers.

Still, about 87% of load is affiliated with the DP&L brand (supplied by either the utility or an affiliate), "which is critically important because having that brand affiliation will help us with being able to place that generation going forward," said Andrew Vesey, AES Chief Operating Officer of Global Utilities.

Executives noted that the large customer market is saturated and isn't seeing much incremental migration, with the mass market driving incremental switching.

Among small commercial customers, about 62% have switched to date.

"And really, where the action is, is really around the residential customers ... Most of the competitive battle now is really for the residential customers," Vesey said.

As of the first quarter, 21% to 22% of residential customers have switched to competitive supply, with municipal aggregation and individual shopping both driving migration.

AES said that DP&L's competitive retail arm is aggressively working to retain customers in its service territory and is also branching out to attract new customers in Illinois and other areas of Ohio, noting that MC Squared Energy Services recently won a competitive bid auction to supply several North Shore, Illinois communities with electricity for up to 3 years.