Direct Energy Responds to State Administrative Law Judge Support for FirstEnergy, Allegheny Power Merger

Consumer research shows Pennsylvanians want more choice

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Dec 20, 2010, 07:31 ET

PITTSBURGH, Dec. 20, 2010 /PRNewswire/ -- Leading North American energy retailer Direct Energy vows to continue to fight for consumer choice and the tangible benefits electricity competition can bring to customers in the FirstEnergy and Allegheny Power service territories, the company said Monday following the release of the initial decision from a Pennsylvania administrative law judge that supports the two utilities' merger.

"We read with interest the administrative law judge's recommended decision, and respectfully disagree with their conclusions," said Ron Cerniglia, Director of National Advocacy for Direct Energy, citing consumer research that shows nine in 10 electricity customers in the FirstEnergy and Allegheny Power territories support increased electricity competition in the state. Cerniglia confirmed Direct Energy will continue to advocate for more robust consumer choice for Pennsylvanians as the Commission itself takes up the question of whether the merger of FirstEnergy and Allegheny Power should be approved, and if so, what conditions are required to protect the interests of consumers in the region.

The company, which employs over 300 people in Pennsylvania and supports over 500 additional jobs through its 29 small business affiliates and affinity group members, commissioned a survey conducted by Zogby International in late September 2010 of more than 800 electricity customers in the FirstEnergy and Allegheny Power service territories in the state to test consumer support for energy choice. The results showed overwhelming support (89 percent) for increased choice and competition among electricity suppliers.

The poll came on the heels of a proposal by Direct Energy to the state's Public Utilities Commission to broaden electricity competition by allowing competitive energy suppliers to tender offers to serve the utilities' existing customers, thereby removing the utility as the 'default' service provider. Resulting benefits for the approximately 2 million residential, commercial and small industrial customers served by Met-Ed, Penn Power, Penelec, and Allegheny Power are estimated to be as much as $150 to $500 per account through a competitive process. Three-quarters of survey respondents agreed that, in the current economic climate, a rebate check would help stimulate spending in Pennsylvania.

"Pennsylvania is positioned to become one of North America's most competitive energy markets," said Cerniglia, pointing to a recently issued report of the Annual Baseline Assessment of Choice in Canada and the United States (ABACCUS) that saw Pennsylvania better its rank among competitive energy markets in North America thanks, in part, to the commitment of its regulatory and government officials to the creation of a robust competitive market. "We believe that a fully competitive electricity market will bring about the best solutions for Pennsylvania consumers, and we will continue to advocate for the expansion of consumer choice in the state."

Direct Energy's proposal to the PUC submitted in August contained three key elements:

Allow competitive energy retailers to better compete to serve customers. While competitive energy suppliers are now operating in markets across Pennsylvania, the First Energy Corporation and Allegheny Power utility companies plan to continue to play a dominant role as the default service provider after the merger. This type of service should be a "back stop", not a "first stop" for customers in a fully competitive market. As a result of this ongoing role and other measures, which do not promote customer choice, only a small percentage of consumers are shopping for their electricity in the First Energy and Allegheny Power service territories.
Allow competing suppliers to bid for the opportunity to serve customers' energy needs. This process could potentially generate between $300 million to $1 billion dollars in funds, which should be returned to 2 million Allegheny Power electricity customers in Pennsylvania.
Create a separate billing company. It would be responsible for performing the billing functions that the utility does today, as well as sending bills to electricity customers on behalf of their competitive supplier of choice. At present, competitive electricity suppliers in the state are able to sell their products, but in most cases they are simply a line on the bill from the local utility. The creation of a billing company would foster the development of innovative products and services to help customers manage their overall energy bill, assist with the State's commitment to promote conservation and demand-response, while potentially translating into new jobs or the retention of existing jobs that might otherwise be lost to another state as a result of the proposed acquisition.

Direct Energy believes these actions can be carried out while preserving all of the important consumer protections currently in place, as well as maintaining programs that benefit low-income customers. Under the proposal, jobs in the state would be kept and potentially generated through the creation of a billing company.

About Direct Energy

Direct Energy is one of North America's largest energy and energy-related service providers with over 6 million residential and commercial customer relationships. Direct Energy provides customers with choice and support in managing their energy costs through a portfolio of innovative products and services. A subsidiary of Centrica plc (LSE:CNA), one of the world's leading integrated energy companies, Direct Energy operates in 46 states and 10 provinces in Canada. Direct Energy Residential and Direct Energy Business have approximately 300 employees in Pennsylvania. In 2009, Direct Energy Business located its North American headquarters in Pittsburgh, Pennsylvania. More recently, Direct Energy acquired Clockwork Home Services in June 2010, which has 29 small businesses in the State, employing as many as 215 people, and its affinity group members employ another 314 people throughout Pennsylvania. For more information, visit www.directenergy.com.

About the survey

The Pennsylvania Electricity Choice Survey, conducted by Zogby International on behalf of Direct Energy, was completed by more than 800 electricity customers in the four First Energy and Allegheny Power service territories. Telephone interviews were conducted by internationally recognized polling firm Zogby International in late September 2010. The margin of error for n=800 is at =+/- 3.5 percent.

SOURCE Direct Energy