Action Requested: Allow the City staff to promote an opt-in power aggregation program via Ichoosr.

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Virginia Cannon
6 years ago
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1 To: Mayor & City Council From: Michael Kovacs, City Manager Date: November 16, 2016 Agenda Item: Discuss, consider, and take any necessary action regarding the City sponsoring an opt-in power aggregation program via Ichoosr for City residents. Action Requested: Allow the City staff to promote an opt-in power aggregation program via Ichoosr. Prior Action: The City has assisted in trying to keep total costs for families down using our resources and knowledge. Last year, we improved our fire/water system capabilities and documented them to lower home owner s insurance premiums by changing our ISO (Insurance Service Office) rating from 6 to 2, which saved some homeowners and businesses up to 30% on their annual insurance premiums. We continue to participate in the Atmos and Oncor Cities Coalitions to provide collective city oversight of our regional utilities and have been successful in keeping rate increases down for residents and businesses on both gas and electricity. Future efforts like opt-in aggregation power purchasing and FEMA s Community Rating System, could result in additional savings. These efforts take administrative coordination, but can yield major values for homeowners. Overview and Background: Due to much of the south side being in the Farmer s Electric Coop (FEC), this effort would only apply to the Oncor grid s service area residents who can currently shop their electricity purchases. This adds some complexity. For information on Ichoosr, check out: & The basic problem is that most households do not shop their electricity purchases. In a deregulated market, people are overpaying, but they are too confused by and the various deals they hear about, or they don t want to spend the time doing the homework. Our demographic is better educated and younger, but also very busy. Should the City educate and assist people to get a deal on their power bill? I think so, if we can do it at minimal City costs with our small staff, but that is essentially the question tonight. We actually tried an opt-out and opt-in model as Texas cities via the STAP and CAPP coalitions (STAP subsequently merged with CAPP to form TCAP, the Texas Coalition for Affordable Power, but we couldn t get the power companies to work with us (I served on the STAP board at the time). The business environment has changed. A European company has acquired a Texas aggregator s license and is ready to start up the opt-in power purchase coop market, using a successful cities-sponsors model. IChoosr is based in Belgium and has offices in Holland and the UK. They ve turned their business development to look to the U.S. and are going to be doing a pilot project in Texas. They have partnered with cities in Europe to encourage citizens to opt-in on an auction process with no strings on the back-end and are getting 30% or more conversion. Since 2008, ichoosr s programs have attracted over 3 M residential customers of which 1 M have switched to a better electricity rate. These programs are a big hit with municipalities in Europe. See map of the UK attached. Explanation with the UK map: Ichoosr works with 160 small and large municipalities (in the UK local councils ) in total. Attached is a UK map with an overview of the local councils they work with. Dark yellow is where they work with the whole County, light yellow is where they work with one or more City Councils, District Councils in the County.

2 Financial Considerations: Hard costs for public education and coordination will probably be a wash with the revenue share provided. City staff have limited capabilities and time, but I will see if I can muster a small team to assist me as this is something I really believed in a long time ago, and it is great to see someone making it work and trying to save our citizens money. At least our citizens will be educated about shopping their electricity. We cannot devote the time to really go all-out like they did in some of the UK auctions with public education, but we are discussing a more efficient and limited staff time model that will allow us to continue to work on our long list of projects for the budget year with minimal impacts. Ideally, we could get other cities to go in with us, and to Ichoosr and our residents, that will probably be where we can bring the most value. The company has offered to help with most of the hard cost items in order to get a presence started in Texas. Supporting Documents: Additional Information section follows. UK map Additional Information: Sample page: Here are the company s plans for Texas: our service and plans for Texas in short: The Town or City promotes the program, very often through existing channels. We will help you with that, we have template s, letters and webpages you can use, branded with the City of Fate logo. Example attached. (I did not include, just showing you his webpage above) This way we can build a cheap but effective campaign to get residents interested, educate residents and offer them a competitive rate for their electricity and support a smooth switch to the winning electricity provider. We have the platform, supplier contacts, customer support and knowledge how to do this.

3 We share a part of the fee we get from the auction winning supplier with the town or city (in the UK we see a lot of Towns or Cities using this fee to fund their switching campaign for next year or they give it to a charity to support their community). The plan is to start in May 2017 with the auction and switching in June. This way people can switch to a cheap 12 months fixed rate, to protect themselves during the expense summer months when Texans use most of the home electricity. City participation: Direct mail piece with City letterhead or leaflet. (Ichoosr offered to help with costs). to e-bill households (this is the most effective way to get people to register). Support from a local radio station or a local newspaper. Possibly interest from a local paper, may have a cost (Ichoosr offered to help with any costs). Rockwall Farmer's market in spring/summer, do booth if Rockwall joins us. Links as a signature under the s going out from the staff at city hall (will limit to only program related s). Press release to local press and local news papers etc. Maybe supported by a symbolic first registrations by the Mayor, Council, & City Manager when the program is launched? Communications with homeowners associations. How many of the 4,000 households do we expect will register? Maybe 10%, 20% tops? More Details: 1. Procurement Procurement professional service (exempt from bidding) or sole source. Nobody else is doing this yet that we know of. RFP/RFQ option, just to be sure will likely cause added delays/staff work for no public benefit 2. PUCT aggregators registration Registration in place, under ichoosr LLC with registration number They actually have a good relationship with the PUCT and have met with them twice to keep them informed on progress. 3. Power-to-Choose website promotion, and some City residents selling residential electric Although Power-To-Choose is a great website Ichoosr does not believe in offering energy by presenting customers with large lists of electric offers. Their consumer research tells them that people find that complex and are confused and therefore refrain from making a choice. They present registrants with a personalized offer with an annual cost estimate compared against the market. Ichoosr participating suppliers are only allowed to bid with a 12 month fixed contract, which has an easy to understand price structure (no rate tiers, no minimal usage fees, no usage discounts etc.). They try the make energy easy to understand for people, as it is perceived as complex by people anyway. The City should mention Power-To-Choose in our materials, but maybe we should give it a little context. There is at least one new City resident that has contacted us about electrical purchases. That person may want to be mentioned as an alterative and will be upset if we don t include him.

4 4. Cost for the City They do not charge any cost to the city. (Apart from the letter they would need to print if we do paper registrations as well. I would say we don t do the paper registrations. Staffing we are only going to be able to provide a few hours here and there to this effort, so we are working with the company on a reduced scope for City staff than what they typically do in Europe. The actual hard cost would be on the communications budget, ie. most effective are the leaflet inclusion and the direct mail to all 4,000 households (with the understanding that many are FEC customers and won t be able to switch, which we will need to remind them). The company s income is fully success based (they get paid per switcher, see below). They would need some form of commitment on the communications plan before starting from City staff. 5. Revenue for the City The electricity contract on auction will be a 12 months fixed price deal, with an easy to understand price structure (no built-in usage charges/credits). They get paid by the winning electricity provider per successfully switched customer through a one-off payment, meaning a residential customer that is accepted by the winning provider and executes a Residential Customer Agreement with the winning provider. This fixed fee is irrespective of the customer s monthly usage and how long a customer stays with the provider. They pay the City a one-off payment of $10.50 per successfully switched customer. They will track which customers haves registered via the City of Fate. They use the remainder of the commission fee for taking care of: the project management, maintaining and enhancing the IT switching platform, training and operating the customer service (inbound/outbound calls, s, chat), conducting the auction and managing the conversion to a new energy supplier. UK examples for funds allocation: they work with 160 Towns, Cities and Counties in the UK and the funds raised through the groups switch programs are used for various purposes. This ranges from using the income for the communication/education plan for the subsequent group switch program; or supporting municipal initiatives aimed at promoting energy efficiency products or measures; generating income for the municipality. Calculation example: Conversion rates ranging between 25% up to 50% in the UK (from registrant to switcher). As this a new market for them, I d rather use lower figures, to manage expectations. Let s say a range from 10% to 30% for conversion. The average of our estimate: 15% of 4,000 households (need to delete FEC households, not estimated) >> 600 households to register - 30% would give 60 or 180 switched households. Revenue City of Fate would range between $630 and $1, Project stages and deliverables The pilot program has 5 stages, which are described below including the deliverables needed from both the City and ichoosr. An experienced ichoosr project team will execute the pilot and take care of the project management (IT platform, customer care, communication/education plan, conducting the auction and managing the winning energy provider).

5 1. Preparing the pilot campaign Deliverables ichoosr: example s and letters; campaign branding examples; sample text for web site of the City. Deliverables City: image City logo 2. Registration phase (4 weeks) Deliverables ichoosr: registration webpages and accompanying s; reporting tool; customer care ( s and phone calls); signing electricity providers for the auction. Deliverables City: execute communications plan (e.g. letters and s). 3. Reverse auction (1 day) Deliverables ichoosr: conduct the reverse auction; organize the winning provider meeting; signing the Project Working Agreement with the winning provider; prepare customer care briefing and presentation; prepare acceptance customer journey; prepare a winning rate/provider briefing note for City. Deliverables City: circulate the winning rate/provider briefing note among the relevant people within City Hall. 4. Decision and enrollment phase (3 weeks) Deliverables ichoosr: send out personalized offer; reminder campaign; deal with customer queries; expand reporting tool. Deliverables City: lower effort required from City at this stage. 5. Customer satisfaction survey Deliverables ichoosr: formulate and send out Customer satisfaction survey; analyze the results and draw up a report. Deliverables City: lower effort required from City at this stage. Risk and mitigation Customers are worried about running into unexpected costs. Therefore ichoosr will inform customers in a transparent and easy to understand way wherever information is complex or unclear. The program offers customers to lock-in on a 12 months fixed rate plan. This way they pay the same rate for electricity for the duration of the plan and this protects them from price spikes. Another risk for the program is that customers have a bad customer experience due to something going wrong with their switch to the new provider. ichoosr s main focus will be to ensure that customers have an excellent customer experience when enrolling into the program and when they decide to switch to a new provider. The ichoosr Provider Agreement demands that providers have a robust enrollment process in place. ichoosr also agrees with the winning provider how both sides will deal with customer queries and agrees on a robust route for escalating any problem cases. Registrants can reach ichoosr by phone and . Queries and complaints are categorized and forwarded to 1st, 2nd and 3rd line agents in our helpdesk. When a query or complaint is escalated to the 3rd line, which is the assistant project lead, then this query is dealt with in the project team or is taken up with the provider directly. ichoosr s service and IT platform are specifically designed for group switching programs and the company has organized over 150 successful large scale group switching programs since Over 3

6 million consumers participated, and over 1 million consumers accepted their offer for an energy contract through ichoosr in four different countries. ichoosr typically get high ratings for customer satisfaction in their customer surveys. ichoosr experience Established in 2008, 50 employee company, active in the Netherlands, Belgium and UK with group buying programs. Markets for gas & electricity switching and solar panel purchasing for residential consumers. They have organized over 150 auctions with 3 million participants of with 1 million enrollments. ichoosr is specialized in working with local government: they work with 200 municipalities in 3 countries. ichoosr has a Texas broker registration (Public Utility Commission of Texas #80419)

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