Social Innovation Forum
Can No-Profit Power Salvage Deregulation?
Wayne A. English
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With the deregulation of the electric utility industry almost anyone can buy and sell power. Originally touted as a boon to the consumer, the competition that was to lower the cost of power never materialized and power is now more expensive than ever. Can something be done to lower prices? Perhaps, costs may be reduced by using the Web, an online energy co-operative, and innovative marketing techniques.
What is an online energy co-operative? It is an organization that purchases electricity from generators, in bulk, just like an electric utility does, but that is where the similarity ends because the co-operative resells the power at cost. How does the co-operative make money to stay in business? First they charge a yearly membership fee for all residential, commercial and industrial members. A co-operative with 10 thousand residential customers would bring in some half-million dollars with a $50 dollar per year membership fee. Commercial and industrial membership fees would be much greater than that. Second, the co-operative would make available goods and services to members at a discount which might include a credit or debit card, checking and savings accounts, investments, or mortgages. As to hard goods, perhaps new and used cars, trucks, motor cycles, gasoline, home heating oil, clothing, cameras, electronics, just about anything really. With a co-operative credit card being used to pay for goods and services the co-operative would make money just like any other credit card vendor does. Further, the credit card allows discounts to be applied after the sale for things like pay-at-the-pump gasoline or diesel fuel. Of course, the fuel would be purchased at a participating dealer. Also, when co-operative members use services that pay a commission, those funds would flow to the co-operative.
Why would a business offer their merchandise at a discount? To gain access to the co-operative’s large membership and the buying power that it represents. Who would not offer a discount to an organization with thousands of members? Take cars for example. Dealers will give you a substantial discount when you buy two cars. The discount for buying tens or hundreds of vehicles would be significant. This concept holds true for all sorts of products and services. There is money to be saved in bulk purchases whether you are buying automobiles or laundry soap
Electric Power - The Ultimate Non-Profit Product
Electric power use is ubiquitous. Everyone, every business, store, factory, and office uses it. Selling power at cost will easily attract members. This marketing technique is so unique that it will make headlines around the world resulting in free advertising which in itself translates into passive income. In addition to reporting on the co-operative, media people would likely ask to join. They use a lot of power and may be among the co-operative’s first members. It is safe to say that the co-operative will have little trouble attracting members. So, what initially seems crazy becomes a significant economic impetus for residential, commercial, and industrial electric customers to join the co-operative and pay a yearly membership fee. Do you think this is far fetched? Does this sound too crazy to be considered?
The governor of Maryland, Martin O’Malley (D), has replaced the head of the Public Service Commission, which regulates the state’s electric industry. Further, a bill has been introduced in the General Assembly to allow counties to purchase wholesale power for residents. This is estimated to reduce electric bills by 10 percent. (Hartford Business Journal, Power Prices Putting Utilities In The Hot Seat, March 29, 2007).
This is not Fiction
Consider eBay, Amazon.com, or any other large online retailer or any electric, natural gas or telephone company. They routinely deal with hundreds of thousands, even millions, of customers keeping track of billing, customer service issues, and technical problems. The ability to do this is off-the-shelf technology. The hardware exists, the software exists, the Internet backbone is in place, the technical, business, and sales people are out there. As to customer service it can be provided locally or on the other side of the globe. Online billing, electronic funds transfer, PayPal, online payments, ordering and shopping are a reality. The public has the knowledge, infrastructure, computing hardware and software to do this. And we have the World Wide Web to tie it all together. Best of all, this will not require a high speed internet connection, anyone with dial-up can access their co-operative.
You are likely wondering about the technical side of transmission and distribution of electricity, as well you should. The co-operative will not be responsible for utility construction, poles, wire, electric outages, the reading of electric meters, billing, or customers’ complaints relating to things like low voltage or other technical needs. No, your local utility will handle the technical issues, and billing just as they do now for anyone who buys power from a competitor.
This technique has real advantages when two or more businesses unite, pool their assets, and purchase their own generator because they pay an energy charge in addition to a demand charge and generating their own power lowers both of these costs. For example, an office building and a hotel might team up. The office building needs power predominately during the day and the hotel needs power predominately during the night. Of course there is overlap when both will need power. The advantage is that the generator can be kept at, or near, 100 percent of it full load capacity around the clock where it is most efficient. The technical and economic advantages are real. Here’s an example.
In Stamford, Connecticut mayor, Dannel P. Malloy, is going forward with plans to remove the city’s government building from utility supplied power. There are plans to use solar panels on the building’s roof and later to install a generator. Mayor Malloy hopes that surrounding businesses including the UBS Investment Bank and others will join the city and form an energy district. (Hartford Business Journal, Cities Seek A Power Play, April 30, 2007).
Where Will Your Co-operative be Located?
The interesting thing about this concept is that the co-operative can be as geographically large or small is it needs to be. You can have a co-op for an entire state, a city or town, or even a single building in a city such as New York. Of course the services and goods that co-operatives offer will vary based on the needs of members.
As to the physical location of the computing technology it can be anywhere in the world. It is likely that the Information Technology (IT) people responsible for maintaining the hardware will locate it where it is cheapest to do so. This will also hold true for customer service as anyone who has called for assistance knows. Most of them are in Asia. Your co-operative’s hardware may be located there too. Might not.
Advanced Technology, Avatars, and The Future of Shopping
As the software that drives the online world develops and hardware costs continue to fall the online experience will evolve. Someday soon you may have your own avatar or bot. What’s an avatar? It is an animated caricature that you choose to represent yourself in a virtual world. To see one for yourself visit http://secondlife.com. Avatars there are serious business, not a joke or something for kids to play with. Many companies have a presence on secondlife.com and business is being done there.
How does this relate to an online co-operative? Your avatar will know your likes, dislikes, clothing size, favorite color, what make and model of car you drive, where you live, and any other pertinent information that you care to give it. It also may be semi-intelligent. When your avatar finds merchandise that it knows you want to buy it will inform you by email, cell phone via electronic voice, or text message. When shoes go on sale you may want a phone call. When the computer you want hits your predetermined price the avatar may simply buy it and notify you after the fact. Of course, the avatar will query co-operative members before scanning the net for the best price. With a semi-intelligent avatar you can do business 24 hours per day in real time. Further, your bot may learn your likes and dislikes. These heuristics will make your bot far more useful because it will be able to make decisions and take actions on its own in your behalf. This technology can be extended to just about anything you wish to purchase or track online like stocks, bonds, currency, mortgage rates, investments, airline tickets, you name it. Your bot will buy your movie, theater, or sporting event tickets, getting you the best seats in the house, as soon as they go on sale. It will be your eyes and ears online scouring the virtual landscape for everything from the best seat at the game or theater to you next home.
When in the market for a new home, apartment, or condominium co-operative members will shop in a manner that we can only dream of today. There will be no more driving around and looking at place after place with an agent. Those days will be gone and anyone who has done this will be glad to see them go. With three-dimensional, high resolution, digital photography you will be able preview a property without actually visiting it. When you find what you are looking for, schedule a walk through with your agent. Then all you need to do is complete the deal and schedule the closing. The closing will likely be completed online, like your mortgage was. All done in hours or days, certainly not months. As to moving, your bot has gotten the best price and scheduled a crew to take care of that. And because you won’t have time to shop the bot made a reservation for you at a local restaurant.
To sum up, your co-operative will offer everything from utilities to vehicles to fuel and electronics and perhaps even real estate; all at a discount. The co-operative makes money and survives, vendors increase their customer base selling more products and services as co-operative members buy more and more products and services at a discount; a win - win situation for everyone. And electricity? Oh that? You buy it at cost.
About the Author:
Wayne English is published in national and international newspapers, magazines, and newsletters. He lives in Coventry, Connecticut and has expert knowledge of electric distribution. Visit him on the Web at: http://www.WebContentRX.com. E-mail: firstname.lastname@example.org
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