From 1,000 to 150,000 customers: Electricity Maine sees huge growth in first year

Electricity Maine opened its Auburn offices in December 2011.
Lewiston-Auburn Economic Growth Council
Electricity Maine opened its Auburn offices in December 2011.
By Lindsay Tice, Sun Journal
Posted Aug. 12, 2012, at 6:34 a.m.

A year after it began offering lower-than-average electricity rates to residents and small businesses, Auburn-based Electricity Maine‘s customer base has swelled from several hundred people to 150,000, and the company is credited with telling Mainers about their electricity rights when few others have bothered.

“It’s just huge — hugely successful,” said Electricity Maine co-owner Kevin Dean. “We had planned on, in a couple of years, thinking we’d reach 50,000 people.”

As a competitive energy provider, known as a CEP, Electricity Maine supplies electricity to Mainers who sign up for their service. All Mainers have had the right to choose their power supplier since 2000, when state law restructured the electric utility industry and prohibited major utilities such as Central Maine Power and Bangor Hydro from both supplying and delivering electricity. Those utilities would delivery power, but someone else — a CEP — would supply it.

Everything stayed on one bill and there was no interruption of power, making the transition so seamless that few families and small businesses noticed the change. Although they suddenly had the power to choose their supplier, few small consumers did. Instead, nearly all went with the “standard offer,” a rate bid by suppliers, accepted by the Maine Public Utilities Commission on Mainers’ behalf and requiring no action by consumers.

Although CEPs did business in Maine, most served only large accounts. They could make more money with one or two large businesses than with hundreds of small consumers, so few CEPs wanted to spend the time or money to educate residents and advertise.

In spring 2011, 11 years after the electric industry was restructured, 0.5 percent of CMP’s residential customers got their electricity from CEPs, while about 84 percent of CMP’s large customers did.

Then, last summer, Electricity Maine opened for business.

Open for business

Dean and business partner Emile Clavet owned more than 20 businesses and used CEPs to power them for years. They got great deals on the electricity that ran their offices, but they had trouble finding a similarly great deal to power their houses. So the pair, along with then-business partners Kirk Nadeau and Peter Whitney, created Electricity Maine and devoted it to residential and small-business consumers.

They believed they had a way around the challenge and cost of marketing to hundreds of thousands of residential customers: social media.

They were right, partially. Electricity Maine’s first customers heard about it through Facebook, friends of friends, workplace discussions and fliers. But soon after, Electricity Maine started to advertise. It now regularly runs ads.

“We’ve been using the TV (ads) to get them off the couch and get them to the site, and then using social media to spread the word to their friends,” Dean said.

The combination worked. So did the company’s prices. Electricity Maine vowed to always offer a per-kilowatt supply price that was lower than the standard offer. For a few months in 2012 — after Electricity Maine lowered its price for the year but before the new standard offer kicked in for CMP’s residential customers — Electricity Maine’s price was about 17 percent lower.

At that point, Electricity Maine was signing up 2,000 to 3,000 customers per day.

Its price is now about 5 percent lower for small CMP customers and about 1.5 percent lower for Bangor Hydro customers.

The ease of switching helped draw customers, too. Although sign-up requirements and fees vary by CEP, Electricity Maine designed its sign-up to be quick and easy, requiring only basic contact information and the customer’s CMP or Bangor Hydro account number. The company charged no sign-up fee, though its terms of service note a $100 charge to customers who leave before their one-year contract is up.

And as with all CEPs, Electricity Maine customers see no change in their electricity service. CMP and Bangor Hydro remain responsible for delivery and service, which means power outages, billing and line maintenance are their responsibility. Customers who sign up with a CEP still get one bill from their utility. If the power goes out because of a storm, customers still call their utility.

The percentage of CMP’s small customers who used a CEP skyrocketed from 0.5 percent a little over a year ago to about 23 percent now. Experts say most of those have gone to Electricity Maine.

Customer rates in mind

Maine Public Advocate Dick Davies credits the company for being the first to make a serious effort to tell consumers about their electricity options.

“They’ve done quite a good job,” he said. “We like seeing that happen because we want customers to have as many choices as possible, and this one has offered them, at least for the time being, a way of saving some money even over the standard offer, which is a pretty good price, relatively speaking.”

He does caution, though, that Electricity Maine could struggle to maintain its low rates in the future. Although standard-offer rates change once a year, they are typically based on a supplier’s three-year purchase of electricity. Electricity Maine’s rates also change once a year but they are based on electricity purchases made more in real time, Davies said. That means when electricity prices go down — as they have in recent years — Electricity Maine is better able to buy low and pass that savings on to consumers. But when prices go up — as they do during improving economies — the advantage goes to the standard offer because it was based on older, lower costs.

Electricity Maine guarantees its prices for a year.

“We’re telling people, ‘We buy your power for a year and it’s a one-year contract and it won’t change,’” Dean said. “We found people want to know it’s not going to change during that year.”

If Electricity Maine’s prices go up, or a customer isn’t happy with them for another reason, that customer can return to the standard offer by calling Electricity Maine and telling the company to switch the account back to the standard offer, though a fee may apply for customers who leave before their one-year contract expires. Customers who stay are automatically enrolled for another year.

If a CEP goes out of business, customers are switched back to the standard offer automatically.

Dean maintains Electricity Maine will always offer the lowest price.

“I don’t see anything that leads me to believe I won’t be able to,” he said.

At the moment, Electricity Maine has little competition. A year ago, 22 CEPs were licensed to sell to CMP’s residential customers. That number has jumped to 34, but experts say few, if any, are actively pursuing customers.

Electricity Maine is now signing up 2,000 to 3,000 new customers a week. It got a bump recently when CMP raised its delivery rates. Although supply and delivery are separate and Electricity Maine has no control over delivery rates, Dean believes a rash of customers signed up in an effort to offset their higher delivery charge with a lower supply charge.

The company that started with two employees now has more than a dozen and is looking to hire more, including call center and marketing workers.

It is also expanding outside Maine.

About six weeks ago, Dean and Clavet started Energy New Hampshire, a CEP for that state. They have about 10,000 customers.

“The growth has been faster than the initial Maine stuff,” said Dean, who believes that’s because he and his business partner know better how and where to advertise than they did when they started Electricity Maine.

“We were kind of newbies,” he said.

http://bangordailynews.com/2012/08/12/business/from-1000-to-150000-customers-electricity-maine-sees-huge-success-in-first-year/ printed on September 30, 2014