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Energy Firms Turn up Dereg Competition

Energy service companies looking to light up their customer base before the start of staggered deregulation in New York are luring consumers through direct mail programs touting discounts and cost savings.

ConEd Solutions, White Plains, NY, has issued its first-ever campaign as part of a phased approach to winning customers. Last week, the 1-year-old energy service company, which is wholly owned under ConEd, completed the first round of a marketing program that married mail, radio and print in order to draw 60,000 customers. The company faces deregulation June 1.

“This is the first of everything for us,” said Janice Murray, vice president of marketing at ConEd Solutions. “This the first time we did a mailing, the first time we tested a great number of our systems. This is the first real [effort] to move openly into the marketplace.”

Meanwhile, the state's smallest energy service group, O&R, Spring Valley, NY, has used billing inserts to attract new customers to its Power Pick two-year pilot program before deregulation May 1.

Billing inserts also will be the method of choice for New York State Electric & Gas (NYSEG), Binghamton, NY, for a test of its Customer Advantage program that launches Aug. 1 in two service areas. NYSEG said a one-time credit and reduced rates probably will be offered.

Although many say they think the route to new customers is going to be a slow one, ConEd Solutions said its approach seems to have been effective.

“We had expected, based on pilots in other states which were less than successful, to be within industry standards,” Murray said. “We were pleased that we exceeded our best expectations. The trend has been very good.”

ConEd Solutions' five-phase program aims to attract 60,000 new customers with each marketing phase. Each ad or solicitation is run with a toll-free number to help the company track responses through each medium. The offers included a one-time $50 credit on a customer's bill and other incentives. One piece featured a 20 percent discount to switch to AT&T, and another version offered 1,000 points toward American Express' Membership Rewards continuity program for those charging their first electricity bill on American Express.

“Our first goal was to get a response to the electricity offer,” Murray said. “Depending on the line the call came through on, we tried to cross-sell to the other offer.” The company declined to disclose the number of customers targeted in the mailing.

ConEd Solutions generated the list through a third party as it does not have access to its parent company's customer list. It purchased a basic list of consumers identified by ZIP code and selected a random subset for good representation, Murray said.

The company said its only concern is that the program may be considered too successful because it accepted only 60,000 new customers on a first-come, first-served basis. Customers had until April 30 to respond to the offer, which was dropped April 1. Customers responding after that date will be shifted to a waiting list for the next phase, which will drop a year from now.

ConEd Solutions managed the marketing program in-house and plans to analyze the responses within the next six weeks.

“We have to get on this quickly because it is going to influence decisions for the future,” Murray said.

Other companies are finding the response a little slower.

“Customers are not wildly embracing the idea,” said Mike Donovan, an O&R spokesman. “The market has to grow.”

O&R chose not to include incentives in its billing inserts, primarily because customers are likely to see only a 3 percent to 5 percent reduction in their bills.

Although customers may not realize huge cost savings by choosing different electricity distribution companies, that is not preventing NYSEG from dropping a direct mail test to introduce its Customer Advantage choice plan.

“We're trying to take advantage of efficiencies to keep costs in line,” said John Durfee, NYSEG's director of corporate communications. The company will issue bill inserts to 25,000 customers in two markets, Lockport and Norwich, which were chosen because they provide a mix of the company's customers.

“One of the things we're concerned about is making sure our billing and operational systems work before we go into full open access,” Durfee said. “Very soon, we will be announcing the incentive based on a cents offering or similar one-time savings to get things rolling.”

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