Roots of competition

Startup marketers are selling electricity, but the savings potential is small

May 28, 2006|By PAUL ADAMS | PAUL ADAMS,SUN REPORTER

His new office is the cluttered former home of a mortgage firm that shares a driveway with an equipment rental company just off the Beltway in Rosedale.

His marketing machine consists of a creaky, overburdened phone system, a self-made Web site and a whole lot of shoe leather, which he proudly wears through while going door to door in mostly low-income neighborhoods throughout the city.

His name is Sheirmiar White, founder of startup Ohms Energy Co. And he wants to sell you electricity.

"I told people two years ago that energy was going to go through the roof," said White, who was sipping from a can of Red Bull "energy drink" during a recent interview at his office. "We have to educate customers and let them know they don't have to roll over for corporate America."

While politicians and regulators clash over how to keep electricity rates from soaring, tiny Ohms Energy and a handful of power marketers big and small are acting on their own. Slowly, they are sowing the seeds of electricity competition in Maryland, the beginnings of what state lawmakers envisioned when they pulled the lever in favor of electric deregulation in 1999.

Only a small fraction of Maryland residential customers have switched to alternative suppliers, and the potential for savings is slight - maybe only several dollars a month for some. But industry experts say Maryland's rising electricity rates will continue to draw competitors and could soon replicate the experience in states like Texas, where nearly one-third of residential customers have switched providers in hopes of shaving a few dollars off their monthly bills.

In addition to Ohms, Arlington, Va.-based Pepco Energy Services and Washington Gas Energy Services of Herndon, Va., are signing up residential customers. Orange County, Calif.-based Commerce Energy also plans to enter the residential market in Maryland but is holding off on its marketing effort until the political feuding over utility rates is resolved. Stamford, Conn.-based Direct Energy also has said it plans to target Maryland residents, but it has similar concerns about market uncertainty. Several more providers are said to be on the way.

Until now, energy marketers say, competitors have mostly stayed away from the residential market here, choosing instead to focus on large industrial customers. No one could beat Baltimore Gas and Electric's rates after regulators capped them at 6.5 percent below 1993 prices for six years as part of the move to deregulation.

But with those rates set to rise in July to today's market price - an average increase of 72 percent - the new entrants see an opportunity to snatch customers from BGE by offering up to 10 percent off a customer's energy supply costs. The only thing holding some market entrants back is continued uncertainty about what lawmakers will do to mitigate the BGE rate increase and how that might affect their business plans.

"Frankly, there's been a lot of rhetoric on the part of elected officials who continue to indict deregulation before they've given it a true chance to work," said Robert L. Gould, a spokesman for BGE's parent company, Constellation Energy Group.

"We've said all along that once the [rate] caps come off ... competitors will have greater incentive to come in and compete for the business," Gould said.

BGE competitors are hoping to capitalize on some of the consumer anger over this summer's projected rate increase. The depth of dissatisfaction is evident in the response White is getting as he hunts for customers. Ohms Energy's Web site gets tens of thousands of hits a day, he says.

And his phones have been ringing so often that he recently had to sign a deal with an outside call center in New York to handle the load. In recent weeks, callers to his office and cell phone have rarely been able to get through, and the Web site briefly suffered problems when it was attacked by a virus May 18.

By all appearances, White - who says he has just a handful of employees - is suffering all the growing pains and credibility problems of a typical startup. But industry experts say he typifies the type of small, low-budget energy marketer that tends to crop up in deregulated markets. Some succeed, while others fizzle after a year or so of struggle, leaving behind frustrated customers.

White's business plan is to sign up thousands of customers across Maryland and Delaware, and then market their power load to wholesale energy suppliers at a price that undercuts the utilities he competes against. About 15,000 have signed a document asking to be part of his aggregation plan, he said.

An affiliate of BGE's parent Constellation Energy is among the dozens of wholesale energy suppliers that Ohms and competitors with similar business models will look to for their supply of electricity.

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