Has the deregulation of the utilities industry been beneficial to consumers?
In our opinion, there is no doubt. For the first time, in markets across the country, consumers can choose their energy provider. Consumers have responded overwhelmingly to this freedom by switching in large numbers from the old incumbent utilities to alternative energy suppliers. In particular, Ambit Energy is one of the fastest growing retail energy providers in the markets in which we operate. In fact, thanks to utility choice, our customer base has grown by almost 8000% since the beginning of 2007. Has deregulation worked? The utilities consumer – the only constituency that really matters – has answered with a resounding “yes!”.
Has competition had any positive effect on consumer prices?
By opening markets to competition, retail pricing is now based on market forces, not government mandates. As in any other competitive industry, when real market forces determine prices, rather than artificial price controls, everyone wins. There are currently 23 states in various stages of deregulation. Of those states, half are at or below the national average for utility rates (based on the US Energy Information Administration’s most recent 2008 statistics). And energy deregulation is relatively new. As these markets continue to mature, we believe those averages will continue to become more competitive. It should be noted that the majority of the still-regulated states that are cheaper rely on “dirty” sources of energy – primarily coal. In Texas, on the other hand, a de-regulated state right around the national average, “dirty” sources are being phased out. Coal is no longer a majority source of power generation. In fact, the majority of power sources (more than 60%) come from “clean” and/or renewable sources such as natural gas, wind, solar, and biomass.
What effect has competition had on technology in the utilities industry?
We firmly believe that without competition, the innovations you’re currently hearing about – the “smart grid,” smart meters, Home Area Networks (HANs), etc. – would never have gotten off the ground. Where there is no competition, there is no incentive to innovate – why innovate (i.e. spend money) when you don’t have to. Today, thanks to deregulation and the demands of consumers, the costs of not innovating are too high. Jere Thompson has stated “We’re bringing innovation to a 100-year old industry that’s never seen innovation before. And I think that’s what you’ll continue to see from Ambit going forward.” For more than a century, the utilities industry has operated the same delivery systems. In the electricity world, these technological initiatives are an attempt to optimize the way we generate, distribute, and use energy – essentially, to revolutionize an archaic infrastructure.
What is the “smart grid?”
The smart grid is essentially a data-driven overlay on the electro-mechanical grid infrastructure. In other words, the smart grid is an intelligent monitoring system. Much like the Internet “overlaid” real-time interactive communications on conventional sources of information – allowing a library book or videotape to be instantly “delivered” to us electronically instead of having to physically go to the library to get it, for example – the coming smart grid will overlay two-way communications on the transmission and delivery of electricity to our homes. Meter reading is a prime example, and something that’s already being implemented across the country. Today, most homes possess an electro-mechanical meter that simply “records” the amount of electricity used by a consumer. Once per month, a meter reader physically appears at the consumer’s home and reads the mechanical dials. In most cases, the consumer doesn’t even know he’s been there, and the consumer certainly doesn’t know how to read that meter himself, nor determine how he’s using his electricity. Digital smart meters will allow the energy supplier to read those meters remotely without sending a person to the physical address. In turn, once this revolutionary system is fully implemented, the consumer will be able to monitor his usage in real time and communicate digitally with his or her energy provider in return.
What will these technological changes mean to the energy consumer?
Energy consumers will no longer be passive participants in the transmission and delivery of electricity to their homes. For the first time, the consumer will be able to process and understand this information for himself. Consumers will be able to manage their energy usage on a real-time basis – making decisions about what they use and when they use it every minute of every day if they so desire. In fact, consumers will be able to determine how much power they’re using right down to the individual appliance. In return, the energy supplier will also be able to monitor the customer’s usage in real time, alerting him to changes in his use, advising him of ways to save money, or offering time-of-day pricing alternatives.
As an energy supplier, is Ambit Energy preparing for the implementation of smart meters and the smart grid?
Absolutely. In fact, we’re already there. The smart grid can only be realized when all players on the grid adopt a more robust information technology platform. Ambit Energy’s information technology platform already offers a highly scalable, flexible platform for supporting smart grid initiatives and turning such initiatives into true value propositions for consumers. Our platform is already designed to handle the massive data sets that hourly rate pricing (i.e. time-of-day pricing) will require, for example. In addition, Ambit’s relational data system is capable of supporting smart grid technologies such as digital smart meters, Home Area Networks (HAN’s), and dual-way delivery – an innovative concept in which consumers with alternative energy sources, such as solar panels, will be able to sell their surplus energy and route it back to the grid.
Are there any other benefits to open markets?
Let’s not forget customer service. As a result of open market competition, the utilities consumer is no longer an afterthought. The days of take-what-you-get customer service are long gone as retail energy providers compete for the precious energy consumer. For the first time, retail energy suppliers actually have to earn the consumer’s business.
At Ambit Energy, we offer a host of incentives to the electric and natural gas consumer. In addition to a variety of competitively-priced conventional and green energy rate plans, we offer a customer loyalty program that includes extraordinary travel rewards just for being our customer. In addition, we offer our customers the chance to earn their monthly energy supply for free, just for referring others to Ambit Energy.
But more than that, customers are not an afterthought; they’re why we’re here. We realize they could choose any retail provider, even their old incumbent. Choosing us deserves our best. When a customer has a question or challenge for us, we treat that customer like he or she is the only one we have. And our call center is state-of-the-art, fully bi-lingual (English and Spanish), and US-based.
What is Ambit Energy’s relationship with the transmission and distribution utilities such as Oncor in Texas and Con Edison in New York?
Our relationship with the distribution utilities is excellent. As our partners in providing energy to our customers, they can’t exist without the retail energy providers, and we can’t exist without them. Indeed, the coming innovations in the utility industry, and the exchange of data they will require, would not be possible without the retail/distribution partnership.
Despite the recent economic conditions, how has Ambit Energy achieved such fast growth?
As in any energy-dependent retail industry over the past 3 years, the business conditions have been volatile, and therefore unpredictable. During this period, a number of competitors have not survived. Not only have we survived, we have thrived.
Ambit Energy was recently named the fastest growing privately held company in Dallas, for the 3-year period 2006 – 2008, by the SMU Caruth Institute for Entrepreneurship in their annual Dallas 100™ Awards.
Our patented, home-grown, and smart grid-ready back office systems have allowed us to efficiently meet the needs of our customers, and be a market leader in terms of forecasting and purchasing power, and in turn, providing the best value and service to our customers.
In addition, our highly-motivated network of Independent Sales Consultants brings us a continually-growing circle of loyal customers.
Why did Ambit Energy choose network marketing as their customer acquisition model?
We believe there is no better way to acquire loyal customers. In essence, because of our acquisition strategy, our customers have their own personal connection to their energy provider. In other words, our customers know somebody with the company! We pay our Independent Sales Consultants (a force currently over 60,000 strong) to gather loyal customers – people they know and trust – and teach others in their circle of influence to do the same thing. In addition, acquisition costs are considerably lower through one-on-one relationship marketing than they are through more traditional methods of mass advertising. In short, using network marketing as our primary acquisition strategy means we get loyal customers. And because of their connection to their own personal Sales Consultant, they pay their bills on time, every time, and stay aboard for the long haul.