It’s no secret among the Stream Energy employee family that I was a linebacker during my college playing years. But I have to confess that there is one aspect of the offensive side of the ball that I have a weakness for, and that’s the two-minute drill.

The two-minute drill: that time of the game when the offense has to make some pretty dramatic things happen in a short amount of time to win.

With the clock ticking down on 2012, Stream Energy is hitting its “two-minute drill” and we’re going for the win in a huge way. This is a historic time for us, as we’ve officially launched several service areas in the Northeast at the same time.

First, we rolled out natural gas service in the PECO area of Pennsylvania. This in itself is big news, as there are 453,000 eligible gas customers in the PECO footprint.

But to make sure we steamroll 2012 on our way to the end zone, we’re also exploding into the NYSEG and RG&E areas of New York. Together they combine for roughly 1.6 million potential new Stream Energy customer meters.

And we’re still not done, as we have the NatGrid service area of New York (with over 2 million eligible customer meters) hitting the field in mid-December.

As John Madden would say, “Boom!”

These areas represent enormous opportunities for growth for our firm and our Ignite Associates, and they come to life through the combined efforts of many of our team mates working together. I am so proud to be a part of this group.

I’ve said it before, and I’ll say it again: it’s not how you start; it’s how you finish.

Gone are the days of having customers undergo a QC phone call. Instead, they may confirm their identities during the Stream Energy online enrollment process, thereby saving themselves valuable time.

The purpose of the Customer Quick Check is to confirm the customer’s identity in order to help avoid identity theft, fraudulent energy accounts, or slamming attempts. This identity verification process is not a credit check and does not affect your customer’s credit score.

Customer Quick Check At a Glance:

• Customer Quick Check is in place for Northeast customers only. (Coming soon to Texas and Georgia.)
• The last four (4) digits of your customer’s Social Security Number are required during the enrollment.
• For ID Verification, the customer may be presented with four multiple choice questions during the enrollment.
• When finished with the enrollment, customers should record their 10-Digit Reference Number.
• REMEMBER there is no Automated Quality Control Call!
• If Stream Energy needs anything to finalize the enrollment, The OnBoarding Group at Stream Energy’s corporate office will contact your customer within one business day.
• Customer Points and MEI will be rolling in quicker than ever!

Please note that the multiple choice questions are formulated and confirmed by Experian and are selected from their Public Record database. Some questions may not apply to your customer and, if so, “None of the Above” is an option for all questions.

Stream Energy is the parent company of Ignite, the world’s largest network marketer of energy. Together, they have generated $5 billion in total revenues in less than eight years.

The firm is a proud member of numerous associations and industry groups:

Better Business Bureau
Direct Selling Association
Retail Energy Supply Association
North Texas Commission
ERCOT Board of Directors
National Energy Marketers Association Executive Committee
Captain Hope’s Kids Board of Directors

In its brief history, the firm has been a multiple recipient of various awards and honors:

Ernst & Young Entrepreneur of the Year / Southwest Region Award
Platts Global Energy Awards
American Business Awards
Communicator Award of Distinction
Corporate Philanthropy Award / Philadelphia
Top Workplace – National Standard Designation
KEMA Executive Forum Speaker
Big D NYE Fireworks Sponsor
Dallas 100 Entrepreneur Award
Dallas Chamber Momentum Award
Genesys Customer Innovation Award

If you want to be successful, then you owe it to yourself to partner with the proven leader of relationship marketers of energy – Stream Energy and Ignite.

When Stream Energy and Ignite launched in 2005, it was not only the beginning of an innovative energy company, but an opportunity to be a part of something truly unique.

As Stream Energy and Ignite grew in both size and maturity, the firm adopted certain “mantras” that shaped the internal culture. The mantras encompassed an overall feeling and attitude that the firm was not just a great company, but a great family.

Although the two entities had two different logos, they both represented one company and one team with one goal.

To help make that point, Senior Director of Marketing Darryl Smith had an idea: merge the family-like atmosphere of Stream Energy with the team aspect of football into a visual representation of the firm’s support of the thousands of Ignite Associates around the country.

“Stream Energy and Ignite are a team,” Darryl said. “Supporting our Ignite Associates in the field is something every Stream Energy employee does on a daily basis. We are a very competitive group, and we have great passion and love for this firm – the same passion and love that many have for their hometown sports teams.”

“I wanted to take a symbol of that love and passion of each of our states and bring it back to the home office,” Darryl said. “It’s a symbol that we are always thinking about our IAs in all these areas, and a little piece of them is always represented in our office.”

Stream Energy and Ignite’s history can be seen in a unique visual timeline along one wall inside Stream Energy’s corporate office.

Each jersey represents when Stream Energy and Ignite entered a certain state or area. Each jersey has a number on the back of it which represents when we entered that particular state:

• Dallas Cowboys and Houston Texans – the founding of the firm in Texas in 2005.
• Atlanta Falcons – Stream Energy’s first expansion efforts reached Georgia in 2008.
• Philadelphia Eagles – the firm first entered the Pennsylvania market in the Philadelphia area in 2010.
• Pittsburgh Steelers – the firm expanded their Pennsylvania service to the Pittsburgh area in 2011.
• Baltimore Ravens – Stream Energy began offering service in Maryland also in 2011.

“As a lifelong, die-hard Cowboys fan, my office sits between the Eagles and the Steelers,” Darryl said smiling. “It’s not easy looking at those colors every day.”

Near the end of 2011, Stream Energy and Ignite expanded to a fifth state in the Northeast. To avoid confusion (and also because he just couldn’t bear hanging any blue and white jersey other than the Cowboys) Darryl decided to utilize a different sport to represent Stream Energy’s latest market.

•  New Jersey Devils – the entrance into Stream Energy’s fifth state in 2011.

But what comes after New Jersey? An empty spot resides next to New Jersey’s colors. We are anxiously awaiting a jersey to represent the loyal Associates in a brand new Stream Energy market.

“I don’t know what we’ll do if we ever go to Montana,” Darryl said jokingly.

The next jersey may be unknown, but what is certain is that Stream Energy and Ignite will continue to achieve huge long-term success as long as we work together as one team.

About eight years ago, a small group of people led by Rob Snyder and Pierre Koshakji put into action a ground-breaking business plan. The idea was to adopt a multi-level network marketing approach similar to those used by extremely successful direct-selling companies like Avon and Mary Kay, and apply that strategy to the recently deregulated energy market in Texas.

As details began to take shape, new investors committed to the idea; a PUC license was obtained; and a small amount of office space was leased in one of the most recognizable buildings in Dallas – the INFOMART. As a basic framework became operational, Stream Energy and Ignite were born.

In the more than seven years since Stream Energy was awarded a PUC license to operate in the state of Texas, Stream Energy has grown to over half a million customers in five states (Texas, Georgia, Pennsylvania, Maryland and New Jersey), employed hundreds of exceptional people at the headquarters in Dallas, and allowed thousands of Independent Associates the opportunity to seize control of their financial future and build relationships that can last a lifetime.

Along this journey, Rob, along with the executive staff and more than 260 Stream Energy employees, has been graciously thanked countless times by IAs who appreciate the vision, dedication and commitment to the plan first conceived in 2004.

While Stream Energy and Ignite have enjoyed record success in our short time, none of it could have been possible without the hard work and dedication of thousands who have worked to ensure our success.

The Stream Energy headquarters in Dallas employs more than 260 employees on a daily basis. When needed, these employees have worked weekends, overnight and incredibly long hours to ensure the success of Stream Energy and Ignite. They believe in this business—in helping people succeed. To the employees of Stream Energy: thank YOU.

Thousands of IAs bought into the idea of warm marketing and asking friends and family for their business. They have done so with such success that Stream Energy is in the record books as one of the fastest-growing companies in American business history. The success of this firm and the employment of over 260 Stream Energy employees would not have been possible without the hard work of our thousands of dedicated Associates. To the Ignite Independent Associates: thank YOU.

As most people know, the success or failure of a company hinges on its customers. Stream Energy and Ignite are in the business of helping our customers save money on one of life’s necessary commodities (energy) and doing it with a successful business model. With variety of different service providers offering energy service, customers in deregulated service areas are free to choose any service provider they like. To the loyal customers who continue to choose Stream Energy as their service provider of choice: thank YOU.

The hundreds of thousands of IAs who have joined us along the way, have attended at least one business presentation in a variety of venues to get more information on Ignite’s award-winning success model. Managers and owners of restaurants, hotels and motels have opened their doors to Ignite. Homeowners have opened their homes to new and prospective Associates. To all those who allowed the Ignite Opportunity and the Stream Energy story to be told: thank YOU.

There are countless people who have contributed in some form or fashion to the success of our business. To anyone who has contributed to this business; to anyone who has positively affected our firm; to everyone who remains loyal, committed and dedicated to the continued success of Stream Energy and Ignite: thank YOU.  

Although our achievements and successes are exciting, inspirational and motivational, Stream Energy and Ignite still have a lot of unfinished work. With over a half-million customers in five states, Stream Energy has proven it is a powerful and permanent force in the deregulated energy market.

What began as a simple business plan eight years ago has emerged into a business that has changed and bettered the lives of so many. With our spectacular team, Stream Energy is primed to continue our national expansion for a long time come.

If you could ask Rob Snyder a question, what would you ask?

The good sport that he is, Stream Energy chairman Rob Snyder took to the camera to answer the questions… check out Rob’s responses!

This week, our Ignite marketing channel management was asked to supply a student at an east coast university the answer to this question: “What does Stream Energy/Ignite look for in a state when considering it for our market expansion?” Without addressing profitability and only the market’s legislated/regulated structure, the following was our answer to this student’s question.

Creating a successful transition from the regulated vertically-structured utility industry to a deregulated retail electricity model

The current monopoly utility service consists of:

• Wires – Transmission and Distribution
• Generation – Power Plants, Power supply contracts
• Customer service – Customer Care and Billing, etc.
• Regulatory Management
  • Social Programs – Low-income assistance, etc.
  • Regulatory programs – Nuclear decommissioning, renewable energy, energy efficiency, etc.

In a successful deregulation of this vertical structure, the main issue is creating a level playing field for the new market entrants, i.e. retail electricity suppliers and independent power producers.

The vertically structured utility needs to become three separate companies:

• Regulated wires company – still receives a regulated rate of return on capital investments
• Generating company – standalone company competing to sell its product for the best possible return on investment
• Customer service company – customer service and billing, wholesale energy procurement for resale

These three companies, although they may be held by the same mother company, must operate independently.

Wires

The regulated wires company will have no competition because it still holds a franchise via the regulatory compact with the state regulating body. The wires company owns the meter at the power plant, the meter at the consumer and all wires, transformers, switches and breakers in between the aforementioned meters. Its electricity delivery service will be used by the consumer and either be billed directly by the wires company, or the wires company charges will be collected by the retail electricity suppliers and passed through to the wires company.  This regulated (franchised) entity will also collect funds from the customer that will be used for government-mandated social and regulatory programs, with this entity being common to all customers in their franchised area.

Generators

The newly created generating company will compete with the independent power producers (and other generating companies created, by deregulation, from other formerly regulated utilities) to supply the retail electricity suppliers. There will be a financial issue about the fact that the existing power plants, in the old paradigm, were built for specific utility consumers under a regulatory compact. The generating company will want to collect on any uncollectable “regulatory assets” that are stranded in the paradigm shift. To set the value of these power plants, the generation company will hold an auction and put every plant up for sale. These formerly vertically-structured utilities can purchase their own plants in the auction with no actual cost, being the buyer and the seller. If the sale price of the power plant portfolio exceeds the book value of the portfolio, there is no “stranded investment.” If the book value exceeds the sale price, the “stranded investment” will be collected as a “transition charge” paid by consumers over a designated period of time, via the wires company charges, as another regulator-mandated program. 

Retail Electricity Suppliers (REP)

The only true assets of this company are the customer contracts. The REP holds no wires, meters or generators. It has the opportunity to collect and service customers and process data. This company will purchase wholesale power from the generation companies for the intent of resale, having it drop-shipped to its customers directly by the wires company (generation meter to consumer meter). This company will be limited, by law, from competing with the generators by owning generation assets. The state regulatory body will manage/mandate/oversee the REPs’ customer service policies to insure fair business practices.

Level Playing Field

The REP that is affiliated with the formerly vertically structure utility (Affiliated REP) will have no rights beyond those of the new market entrant REP (Competitive REP). The generating company that was also part of the vertically structured utility will have an arms-length relationship with its Affiliate REP and affiliated wires company in order to allow the Competitive REP equal access to the energy produced from the generators. No customer shall be penalized for switching from any REP to another within the switching rules of the state and his or her current REP’s retail contract.

Upon my return from Houston last evening, I was directed to this post via an email by one of our Ignite associates. I do not know the identity of the author of this blog, but I have in the past read some posts at the Texas Electricity Ratings blog — and found the views of this blog owner highly insightful, if not always 100% accurate.

Anyway: our blogger friend is about 90% correct in this post, which is the first public realization that I have thus far seen that appreciates what is now happening in the ERCOT retailer sector.

However, I am fairly certain that the blogger misunderstands the perspective and manner by which most of the market’s bigger players procure their wholesale energy: and can assert in any case that he is completely off-base in respect of any perceived dangers, difficulties or hardships to Stream Energy – as the only thing that has been making us sweat at the InfoMart is when we exit the building to walk to our cars at the end of the day.

Thanks to the advent of energy deregulation, Stream Energy and Ignite were founded to deliver energy services and a unique business opportunity to Texas, Maryland, Georgia and Pennsylvania residents and business owners. The opportunity has led to competitive energy service rates and unlimited income potential for Ignite Independent Associates along with numerous recognitions.

Across the United States, more and more states are deregulating their energy markets. What does this mean for the consumer? It means that more companies can now offer you energy service in places such as Maryland, Texas, Georgia and Pennsylvania. Many energy markets are no longer dominated by huge corporations that can charge anything they want because no one else has been allowed to sell energy at competitive rates.

The deregulation of energy has created the opportunity for companies such as Stream Energy to offer customers many options and plans to choose from when selecting their energy services. Before deregulation, people usually only had one or two companies from whom they could receive energy service. Thanks to deregulation, however, more choices for consumers equal more competitive rates for consumers.

Stream Energy has earned a name for itself by being recognized by Direct Selling News as the largest direct seller of energy in the world for 2010, as well as being named a finalist for the Platts Global Energy Awards multiple times, along with many other honors. 

Deregulation of energy has offered the opportunity to many entrepreneurs to build energy network marketing companies such as Stream Energy / Ignite.  Energy network marketing companies pass the opportunity to you, the consumer, which gives you the ability to generate extra income by reselling deregulated energy to friends and family. This is a great opportunity for consumers who live in Texas, Georgia, Maryland and Pennsylvania to choose who they want to receive competitive energy rates from and make additional income.

The Present

A prevailing issue in the move from regulatory compact to competition is overcoming the paranoia of losing reliability without all of the regulation-required redundancy that is built into our electricity grid operations. As long as electricity consumers see our product as being in the same class as air and water, they will be willing to pay for 99.9999% reliability. But with near real-time energy markets, the need for ancillary service capacity markets will dwindle, and I predict that other than the ever-present need for the “regulation” capacity market, and the ability to buy energy-only products in near real-time, the responsive and non-spinning reserve markets will be done away with.

Second point, ERCOT showed in the extreme freeze of 2011, that the current system works like clockwork. ERCOT should be lauded for its success in maintaining grid reliability by using rolling black outs. The cost of being any more reliable, not just in ERCOT but in any region, would quickly reach the point of diminishing returns and cost consumers billions more than the current system.

Now, there is a marked difference in how Stream Energy currently does business in Texas and in the Northeast. In Texas, Stream Energy does the billing in a manner called Supplier Consolidated Billing, where Stream has possession of the customer relationship via the bill and a large portion of the customer contacts. 

ERCOT

–      65% Smart Meters, 100% by 2013

–      ERCOT settles Imbalance Market with Suppliers based on Load Profiles, settlement process disconnect from smart meter data

–      Supplier Consolidated Billing Model

In the Northeast we are privileged to be a virtual subcontractor to the incumbent utilities, while they maintain the billing and usually the first contact with the customer on most issues that require the customer to ask a question. Some retail electricity providers are very satisfied with this process because it simplifies their life and places issues like credit management and bad debt as minor or non-existent issues.

I do not see the long-term benefits of a utility consolidated billing model outweighing the risks. It is imperative to maintain the customer relationship through the billing and customer service channels in order to become the “lifestyle products” vendor in the future.

PPL

–      95% Smart Meters

–      Smart Meter Actual Use Data used for determining supplier’s exposure to the PJM Imbalance Market

–      Utility Consolidated Billing Model, Supplier loss of contact hinders customer relationship

Currently, there are operational disconnects in both Texas and the Northeast that must be overcome to allow AMI/AMR to become a driving force in the creation of an efficient smart grid.

In Texas, our imbalance market is settled using by ERCOT-generated customer profiles and not the reality of our customer’s real-time energy usage. 99.999% of the time, in a steady-state environment, the error generated using this method is acceptable; but a few of our smaller retail electric providers had issue with this process in the massive freeze ERCOT experienced in 2011. 

One retailer in South Texas saw a huge number of power outages for its customers – they were not consuming power at all; some even had empirical data from smart meters that verified their non use. But ERCOT’s profile-driven process stated that there was consumption in every 15-minute settlement period of all the settlement periods where the empirical data showed no usage.

On top of that issue, 1) the ERCOT weather-adjusted profiles showed excess usage over and above the supply hedges the retailer had in place, and 2) the imbalance market clearing price was pegged at the maximum of $3000 per MWh. So, that retailer paid a premium for energy that was not actually consumed, instead of being compensated for the difference between the supplier’s actual load, which was lower, than its scheduled load.

Lower Prices and Innovative Products

As for deregulation and lower prices, with the assistance of a former PUCT manager turned consultant, I was able to piece together this slide. The question for Stream’s Chairman Rob Snyder from the Dallas Morning News on a panel of experts which included PUCT Chairman Barry Smitherman was, “Has the ERCOT region of Texas seen a drop in residential electricity prices since state-mandated deregulation occurred in 2001?”

As you can see, we needed to take into account two things in our conversion: 1) the cost of Natural Gas, which is the fuel source for electricity at the margin 100% of the time in Texas; and 2) the Consumers Price Index stating actual inflation over those 8 years. The answer is a resounding “YES.” 

And if you look at 2011 data, you can see gas prices have gone down, inflation has gone up and we have seen another 10% decline in the electricity rate TXU Energy currently offers. 

May 2011 TXU Published Rate

• 10.2 Cents per kWh
• January 2010 to March 2011 Average Inflation Rate = 1.83%
• Natural Gas Price $4.30

I use TXU Energy data because they still serve three million residential meters. If a consumer is willing to do some research, they can find more and differing products at lower costs from reputable suppliers.

The original question was, “Has deregulation lived up to its promise of lower prices and innovative products?” I believe that the inefficiencies that the regulatory compact has perpetuated have been squeezed out of the deregulated markets (with market power issues being the remaining issue) and that the “still regulated” markets are taking notice and doing their best to eliminate the inefficiencies in order to stave off being deregulated. 

Has deregulation offered innovative products? I think yes, mostly in the renewable offerings and payment options. Now, look at telecom! 20 years ago (1991) I was paying about $25 a month for all of my telecom services and long-distance calls were an additional incremental charge. Today, my monthly telecom costs exceed $175 a month, but the innovations that I have the choice of using are astronomical and almost unbelievable to a 1991 mind. As for the future of electricity, to quote Frank Sinatra, “The best is yet to come … we ain’t seen nuthin’ yet.”

Lastly, the fate of the DR Companies

The DR companies that have sprung up all over North America are taking advantage of the ability to aggregate customers into blocks of negawatts (thank you, Jim Rogers, for such a descriptive term) that are bid into the capacity and imbalance energy markets of the ISOs.  I personally believe that these companies are “stop-gap” entities that are taking advantage of the limitations of the DR marketplace where, even with smart meters, customers cannot directly participate in the selling of their negawatts. 

With the advent of a fluid and unconstrained DR market where every entity is a participant, as described in Dr. Cazalet’s white paper, the need for aggregators of negawatts will disappear, energy suppliers or “lifestyle products” suppliers will develop their own methods of assisting/aggregating their customers in taking advantage of DR markets.  The best move I have seen in the DR Company environment is when Constellation purchased CPower in anticipation of the future needs of even their smallest customers, of which they just collected 650,000 more with the announcement of the purchase of MX Energy and StarTex Energy.

As kind of an afterthought, because I read something interesting in Restructuring Today recently …

Jim Rogers, CEO of Duke Energy, again introduced a new term into the industry’s vocabulary - DISINTERMEDIATION. It’s a term that has been used in financial circles for a while, and when I broke the word down, I discovered it means “no bilateral problem solving.” 

Jim pointed out that if DR market participation and conservation by the consumer is done without the suppliers cooperation or coordination, there may be issues as to long-term planning and real-time load following, as well.

At first blush, I think Jim has something here; but, my second thought is that conservation and DR market activity would follow the same patterns, based on economics, whether the supplier manages the customer or a 3^rd party manages the customer. I think those patterns could easily be deciphered and planned for.

My colleagues at Stream Energy asked me two great questions, based on the fact that the Smart Grid will allow all participants to transact, and that the credit issues will be extremely manageable, if not virtually eliminated.

Question #1: Is it feasible that the DR companies could actually evolve into a supply-side entity the size of an NRG or Calpine?

Answer: Again, in reference to what the Constellation/Excelon move of incorporating a DR company into their operation, I personally believe that my sector, the retail electricity providers, will incorporate DR services into our offerings and use our relationship with our customers to eliminate the need for the customer to use a separate entity for DR. I also believe that when the ability exists that a homeowner can place a bid into a market bid stack on his own, a certain percentage of consumers will bypass all service companies and do it for themselves, bypassing even their trusted electricity supplier. However, I perceive that the total customers that play the DR markets, in the future, will never exceed 10% of the market.

Question #2: Could the demand-side entities, like homeowner associations, municipal aggregators or even consumer protection groups, become the agent buyers of a huge magnitude?

Answer: NO! The credit issues that will be mitigated in the future are the supplier’s exposure to bad debt. A supplier still has the same credit issues on the wholesale side of the house at to hedging supply for customers on long-term contracts. Besides, as municipal aggregators have experienced, there is no loyalty to their “cause” and every state that has adopted municipal aggregation has legislated that the customer can opt-out at any time with no penalty. Municipal aggregators may still be around, but I believe that the homeowner’s association would be less knowledgeable and successful in operating this kind of aggregation and the consumer protection entity would not see this as a core competency.