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home | Today's headlines | VP for growth at North American Pow . . .

VP for growth at North American
Power reveals strategy
May 14, 2012
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TSCHAMLER: Plan includes

adding gas, new territories


North American Power, a Norwalk, Conn-based power retailer born just over two years ago, will start selling natural gas starting with New Jersey and New York "within the next few months," Taff Tschamler, senior VP of business development and well-known energy market expert, told us last week in an exclusive interview.

          "We view ourselves as a marketing and data company, not necessarily as an energy company," Tschamler said with typical candor.  "We're not building power plants or drilling wells.  We're trying to attract and keep customers and to manage all the complexities of doing business with utilities and ISOs."

          So far, that focus has led to success.  Revenue from the firm's founding in March 2010, through year-end 2010 was $25 million.  Full-year 2011 revenue was $125 million and the firm is profitable and cash-flow positive, Tschamler said, declining to provide net income numbers.

          Employee headcount as of mid-May was 45, up from 40 a month before.  He expects it will reach 50 next month.

          Customer count at the privately held firm is 160,000, up from 100,000 in November 2011.  North American sells in the residential power markets in 16 utility territories in Connecticut, Illinois, Maryland, New Jersey, New York, Ohio and Pennsylvania.

          "We have ambitions to expand into all the states with residential choice that we expect to be viable," including Massachusetts, New Hampshire and Texas, Tschamler said.  The firm also wants to pick up customers in some territories not yet tackled in states where it is already selling.

          North American's emphasis is unabashedly on marketing.  "Part of our differentiation from other retailers is using three main marketing channels." The firm has done "an enormous amount of direct mail" in the Northeast, sending "many millions" of pieces with help from an undisclosed partner and building "a large base of mail customers."

          The second channel is "traditional telemarketing" and the third -- now yielding about 40% of the firm's new business -- is a variant on the network-marketing business model.  That model is used by many retailers, he added, but it typically requires customers of a retailer to pay a fee upfront to offer the service to prospective customers, who may in turn become reps.

          It usually requires a monthly fee to use a company-provided website to manage the home-based recruiting and sales operation, Tschamler said.  North American charges neither fee, making it unique in the industry, he added.

          "We are very excited about the prospects of this channel because it has the potential for viral growth," he said.


                Savings is key message


          Clearly North American is concerned foremost with offering customers savings, as the firm's website puts claimed savings on its opening page.  Where Commonwealth Edison charges Illinois customers 7.73¢/KWH, North American charges 5.99¢/KWH, the site said recently.

          "It's quite difficult for us and anyone else to truly differentiate on the product," Tschamler said.  "This is a product that's relatively low-interest.  It's not like a car or a handbag or a cup of coffee.  It's mainly your electric bill."

          In addition to appealing to the pocketbook, the site aims at the consumer's conscience.  "Change for you as a consumer -- and for humanity at large," it proclaims.  It offers to make a monthly donation to each customer's charity of choice.


                Skepticism addressed


          Within the FAQ tab, customer skepticism is addressed with a page headed, "We know -- this is hard to believe.  We expected your skepticism.  Magellan had to convince people the world is round."

          It even addresses naive but real-world questions such as "will my utility be mad at me for choosing North American Power's supply?" The site answers, "Not one iota." The site veers into the cutesy: "Who do I contact if I need a hug?" is paired with the answer, "Still us."

          That language is all deliberate, Tschamler said.  "Our chief marketing officer and his team are extremely focused on being a marketing company educating customers on the energy piece but making it simple and maybe even a little bit fun," he said.

          "It's very important for us to have the look and feel that goes beyond both mom-and-pop and a large corporation."

          In addition to power and soon gas, the firm sells renewable-energy certificates (RECs), under the brand name "American Wind." It uses RECs in delivering both its standard 25% renewable power and its premium-priced 100% renewable power to retail consumers.


                Falling prices helped


          Tschamler, who ran DNV KEMA's retail energy practice for part of his 15 years with that consultancy, believes that falling power prices have helped retailers compete with incumbent utilities.  "If we were facing an increasing price market, that would make it more difficult," he said.

          "If utilities had bought their long-term contracts two or three years ago and prices were now much higher, it would be much harder for us to compete.  But that hasn't been the case."

          In his view, deregulation everywhere should put an end to utilities' playing any role at all as suppliers, as it did in Texas.  Outside Texas, North American and its competitors "have a strange relationship with the utilities.  We compete with them but at the same time we're highly dependent on them."

          Tschamler would prefer that, as in Texas or the UK, competitive retailers take on the burdens of billing and support typically still retained by the incumbent utilities.  "It would be better for the customers," he added.

          And he believes utilities necessarily are less innovative than competitive retailers because they are regulated monopolies.  "There may be some utilities that have an innovative mindset but they don't have the direct financial incentives we do."

© 2012 GHI LLC

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