Pa. company wins gas sign-up BNG, Washington Gas lose Md. competition

Utilities

November 02, 1996|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

A Philadelphia power company has emerged as the winner in a contest to lure natural gas customers in the Washington suburbs, one of the first instances nationwide of utility industry competition.

Of the 6,600 Prince George's and Montgomery County residents eligible to participate in a voluntary pilot program to select natural gas suppliers set up by state regulators, Peco Energy Co. subsidiary Horizon Energy garnered more than half, signing up 3,693 households by the deadline yesterday.

But the victory carried an expensive price tag. Horizon estimates it spent nearly $500,000 to convince residents to switch, including money for advertising, the creation of a computer home page on the World Wide Web, mailings and research. That figure also includes the $50 apiece it pledged up-front to switching customers, a marketing campaign that will cost Horizon $184,650.

Horizon, which guaranteed a 5 percent savings to customers during the three-month sign-up period, doesn't expect to make a profit on the pilot program. Customers, conversely, should be the big winners, receiving as much as $1,000 a year in savings.

"The idea was to go into this and gain efficiency through volume and learn what the customer wants," said Gary Stockbridge, a vice president of Horizon, whose parent company is a $15 billion industry giant. "We were really surprised at the outcome, even though we knew we were quicker than others involved and we think we had better co-ordination."

Analysts had expected that Washington Gas Light Co. and Baltimore Gas and Electric Co.'s BNG Inc. affiliate would triumph, based on customer recognition and reputation. Washington Gas signed up 954 customers, while BNG finished last in the four-utility horse race with 350. A fourth competitor, Utilicorp United of Missouri, obtained 1,561 signatures. "We were a little disappointed," said Patricia M. Lovelady, a vice president of BNG, which had hoped to attract 30 percent -- or nearly 2,000 -- of the potential new customers. "We just weren't very aggressive, and we learned a lot. But next time, you'll see BNG being much more aggressive."

BNG can take some comfort in the fact that it entered Washington on the economy plan, however, spending $2,000 to $3,000. Washington Gas said its investment totaled less than $10,000.

The program represents one of the first instances of customer choice for power nationwide, attracting attention from analysts who view the Maryland pilot as a precursor leading to broader competition and industry deregulation. The pilots -- similar programs are also in the planning stages in Massachusetts, New Jersey, Ohio and other states -- also are causing jockeying among utilities eager to expand their service territories.

But even the utilities acknowledge that much about the pilot program remains unknown.

"This is just the warm-up for the big game," said Lynn Scruggs, a Washington Gas spokeswoman. "We have yet to see whether issues like reliability can be ironed out -- can people deliver what they say they will?"

Pub Date: 11/02/96

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