Power

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The power play of the century is going on now in the back rooms of L.A.’s biggest energy users.

California’s energy market opens to competition Jan. 1, and many of the state’s biggest energy users are in Los Angeles.

That situation has drawn an army of salespeople from some of the nation’s biggest power utilities to L.A., all vying for the most prized commercial accounts.

They’ve come armed with slick presentations, reams of literature, and promises of savings up to 10 percent off electric bills in the short term and up to 30 percent in the long run. At stake: hundreds of millions of dollars in commercial power accounts.

“It’s a very intense pace,” said Mark Shunk, vice president of Energy Pacific, the energy marketing arm of Enova Corp. “We are probably approaching 50 contacts a day, responding to inquiries, initiating new contacts, and following up or talking to existing customers.”

Indeed, Energy Pacific’s sales team of 30 has been scouring the state for months hunting for contracts with major business customers. It has responded to several requests for proposals so far, though its only major score has been a contract to supply energy consulting services to Sears Roebuck & Co., said Shunk.

On the other side of the negotiating table, major energy users have been swamped with sales calls from energy marketers over the last few months.

“We get them knocking at our door all the time,” said Christi Robinson, energy manager of Pacific Bell, which spends $100 million each year for its use of 1 billion kilowatt hours of electricity, making it one of the state’s largest energy users. “Some of them are very aggressive. They’re in frequent communication communication at high levels in our organization.”

Robinson declined to name specific companies that are courting Pacific Bell. However, some of the major firms known to be aggressively pursuing Southern California companies include the energy marketing arms of Enron Corp., Southern Co., Enova, PacifiCorp, Pacific Gas & Electric Co., Southern California Edison, Duke Energy and Louisville Gas & Electric.

Starting Jan. 1, the California Public Utilities Commission has ruled that those and other companies can sell electricity and electric services to any energy consumer now served by investor-owned utilities.

Companies served by municipal-owned utilities, such as the L.A. Department of Water and Power, will not be able to choose their energy provider until a later date, to be determined separately by each utility. The municipal utilities are not required by law to open their markets; however, most municipal utilities, including the DWP, have indicated they will. The DWP has not yet set a date for that opening.

Among the army of energy marketers plying Southern California, most have focused their early efforts on big energy users like PacBell. They prefer such accounts because they are relatively easy to service and provide a major revenue stream.

Energy marketers are also hoping to exploit new relationships with these big-use customers to sell them a host of other services, ranging from energy conservation consulting to load management services. (Load management involves such practices as shifting use to off-peak hours, and spreading out use more uniformly during the day, to avoid power interruptions and reduce costs.)

With so many big utilities and a slew of wannabes knocking on their doors, many firms like PacBell have turned to a bidding system to find the best deal.

PacBell issued a request for proposals to 20 potential providers on June 20 and will hold an electronic auction on July 10 and 11, from which it will select three vendors for further negotiation, Robinson said.

The company will probably sign some form of agreement with one or more companies by Nov. 1, since that’s the deadline for energy users to file notice with their current utilities that they intend to switch power providers as of Jan. 1.

Besides cost savings, another advantage big energy users will enjoy in the deregulated market is consolidated billing. Operations in multiple service areas will now be able to contract with a single provider, thereby aggregating their accounts into a single bill, which is easier to monitor and manage.

One major company that expects to enjoy substantial benefits from aggregating multiple accounts into one statement is Universal Studios Inc.

In addition to its facilities in the City of L.A. and unincorporated L.A. County, Universal would also like to move the California operations of its parent company, Seagram Co. Ltd., onto a new, consolidated statewide account, said David Thomas, vice president of facilities, health, safety and environment.

Together, Universal and Seagram currently use about 1.2 billion kilowatt hours of electricity each year, though Thomas declined to say how much the two companies pay for that power.

“We’ve already talked to six firms and will talk with three more,” Thomas said. “Our intent is to go through a three-step process. Based on initial discussions, we expect to send out RFPs to about four companies by the end of July or beginning of August. Then, based on responses, we expect to enter into negotiations with one firm by late September or early October.”

Another major group of users that stands to benefit from aggregating multiple accounts into a single statement are oil companies, which often operate multiple refining facilities, pumping stations and filling stations throughout the state.

Mobil Oil Co., one of L.A.’s major refiners and one of its biggest energy users, has been in negotiations with several potential energy providers for the last few months and hopes to have a supply agreement in place by the end of the third quarter, said spokeswoman Kathleen Juhring.

“In the past, a big company like Mobil had to consider our refinery different from our stations,” she said. “Now we’re leveraging our buying power and aggregating our total electric demand across our business units.”

Gas stations aren’t the only retailers that will benefit from the competition among energy marketers. Ralphs Grocery Co. has also been talking with more than a dozen potential providers for months now, and the Compton-based company plans to narrow the field to three to five candidates in the weeks ahead, said Regis Herlehy, energy management specialist at Ralphs.

“We’ve had everything from A to Z coming in,” he said. “As we draw nearer (to Jan. 1), I’m getting a lot of cold calls from wannabes out there.”

Some industry analysts speculate the power marketers may be willing to take near-term losses on energy sales for a shot at establishing lucrative, long-term relationships.

Past critics of deregulation have said the major utilities will clamor for big business accounts that can generate lots of revenues while neglecting smaller business and residential accounts that are less profitable

As a result, they say, big energy users will reap the benefits of lower electricity rates, while small firms and residential customers end up subsiziding those lower rates with higher rates of their own.

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