Purchasing Energy and Related Services in a Restructured Electricity Industry

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This paper presents an analysis of approximately thirty Request for Qualifications/Proposals (RFQ/RFPs) for electricity and related energy services issued by a mix of government, large commercial and industrial energy consumers. We evaluate the RFQ/RFPs on a variety of issues such as: economic sector of issuer, specific services requested, pricing approaches, and criteria used to select service provider. We have augmented our analysis with a series of interviews of representatives of the issuing firms. These solicitations are useful in understanding revealed preferences of large customers as retail competition develops. These solicitations also enable us to evaluate a variety of efficiency related issues, such as potential roles for energy service companies (ESCOs), the specific efficiency services desired, and concerns regarding purchasing power and efficiency services from single suppliers. Initial findings include: (1) solicitations have a number of uses beyond simple purchase mechanisms, such as learning about the emerging market and influencing legislators and regulators; (2) a variety of pricing approaches are emerging depending, significantly, on the objectives of the potential purchaser; (3) providing a Agreen power@ option is important to many aggregators intending to include residential customers in their aggregations; and (4) customers appear interested in exploring a wide variety of value-added services, in addition to the purchase of commodity electricity.

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