Strategic Energy tangles
with Detroit Ed at PSC

Michigan's PSC has been asked to determine whether Detroit Edison is dragging its feet on switching customer defections.
     The pleas of marketers are themselves a test of the PSC's resolve to carry out the legislature's will in fostering a competitive market or whether regulators have other drivers.
     The confrontation is now out in the open.
Detroit Edison has valiantly tried to hold onto customers but financials show the damage it's sustained.
     It told investors last summer that choice is the culprit.
     "The program, as structured, sends incorrect pricing signals," said DTE Energy Chairman Anthony Earley, and puts the cost burdens on Detroit Edison.
     "This structure is neither competitive nor sustainable," he added, and puts more financial pressure on the firm.
     What can Detroit Ed do?
     Its chances of repealing competition are not politically feasible. Strategic Energy, one of America's top few marketing firms, claims Detroit Edison has a company-wide program of slowness in switching customers who shop -- more than 480 of 746 switching requests have taken more than the 45 days in Edison's tariff.
     Detroit Edison actually holds customers "captive" until the switching is implemented, Ron Carrier, Strategic Energy's Midwest regulatory affairs manager, told RT.
     Strategic had tried unsuccessfully to resolve the issue directly with Detroit Edison then decided it would have to rely on the PSC.
     Edison's view?
     It is swamped by the quickening pace of switching and is going as fast as it can, even as it asks the state to reconsider opening up the retail market, a policy that has put it in dire financial condition.
     The utility wants the state to put in a 1 mw threshold before a customer becomes eligible to pick a supplier -- a proposal opposed by other suppliers.
     Strategic alleged to the PSC that Detroit Edison is out of compliance with that part of its tariff requiring customer switches in 45 days while many have taken 90 to 120 days to switch.
     Those delays, Strategic's Carrier said, resulted in its customers not getting savings guaranteed in their contracts with Strategic.  He called the issue an emergency.
     Edison's switching delays make potential customers wary of moving to choice thus damaging Strategic Energy's relationship with new customers since they don't get the benefits they had contracted for.
     Then word spreads that switching is a difficult, time-consuming process thus dampening the enthusiasm among customers who might otherwise have switched, Carrier said.
     Constellation NewEnergy is "close to doing something similar" to Strategic's action, said Phil O'Connor, its vice president in Chicago.
     O'Connor has a backlog of switching requests.
     The timetable seems to be "open-ended," O'Connor added, and is not a matter of just a few days.
     NewEnergy two weeks ago had about 80 customers (12 mw) past the 45-day mark, O'Connor reported, and recently 10 other customers were switched after waiting 71-87 days, even though the PSC's time requirement "has the force of law."
     Yet Detroit Edison favors legislation to compensate it for losses related to shopping (RT, 10/31).  The competition law was intended to keep customers in Michigan, Earley reminded an EEI audience.
     Even schools, Earley complained, are taking advantage of choice and where's the risk they'll leave the state, he asked.
     The utility claims it lost margin of $165 million through the end of this year from customers' switching and hasn't been allowed to recover that or $100 million in implementation costs.
     Subsidies for choice customers encourage customers to shop and create an "artificially attractive market" yet utilities with frozen rates can't compete to keep them, Earley added.
     The credits are so rich, he noted, that Detroit Ed sends some of its largest customers checks for the credits.
     The utility is asking the PSC to divert that money so low-income customers can get help in paying their bills and expects quick action.
     (Story originally published in Restructuring Today 2/17/04)