ERCG continues its ABC leadership interview series with David Roylance, Principal of Prism Energy Solutions. We sat down with David and discussed several topics, including --
ERCG: When you co-founded Prism Energy Solutions in 2010, what market need were you looking to address for the C&I customer? In your view, has the risk profile changed significantly from then to now?
David: The decision to create Prism Energy Solutions was supported by three behaviors present in the market that we felt our skills and knowledge would be well received by customers and suppliers. Major REPs and ESCOs were continually restructuring, and that restructuring was adversely impacting their service, account management continuity, and product offerings. At the same time, new ESCOs and REPs were increasingly relying on indirect channels for customer acquisition. Finally, you had (and still have today), very little barrier to entry for ABC companies. This resulted in many of the customer representatives and brokers not having the requisite skills to help customers navigate the changing landscape of the legacy REPs or truly differentiate and appreciate the value of the new entrants. The concept of Prism Energy Solutions, just as with an optical Prism, was to provide transparency by breaking down an integrated item into tangible components. For C&I customers and REPs, this meant our focus was breaking the various products into discernible value streams so a customer could make an informed risk management decision. Our experience in the wholesale markets and at major ESCOs, gave our team a unique perspective to draw from in helping customers harness the benefits available to them from choice. Our focus is not just on the consumer. We also believed that our objective was to facilitate a healthy relationship between consumer and supplier, and to increase customer and supplier awareness of each other’s expectations. Alignment of supplier and customer is something we focus on in our daily activities. Facilitating a healthy market interaction for customers and suppliers based on transparency, trust and aligned objectives is our goal.
While some of the foundational drivers for the formation of Prism Energy Solutions have changed, our focus and value remain relevant for consumers and suppliers. REPs and ESCOs rely heavily on ABCs to access customers, and the track record of well qualified brokers has strengthened the bond between customer and broker. Account management continuity and an open productive dialogue with their broker is bringing more value to the customer that uses a broker to navigate the market and who openly explores risk management decisions with their broker. It extends service continuity while having the flexibility to change suppliers without losing momentum in account relationships. The sustained dialogue between broker and customer facilitates better decisions between supplier and customer, and the customer is more open as they have less concern their experience or knowledge will migrate when their supplier representative changes or leaves, because they have continuity with their broker.
ERCG: Over the past couple of years, Prism has been selectively expanding to markets outside of Texas. Is this driven primarily by customer interest, or does Prism identify opportunities (perhaps in conjunction with suppliers) and present these to your customers? What new markets are most exciting for you?
David: Our expansion to markets outside Texas has largely been driven by customer interest and request. Our focus is toward sustainable relationships with customers, and as we expand our dialogue across departments and within divisions of our customers we find opportunities to assist them in attaining their energy related objectives in multiple markets or commodities. We remain optimistic about the current competitive markets, and look forward to more open access in several western markets, including California, Nevada, Arizona and Oregon. The value to Customers in competitive markets is becoming more broadly recognized, and we as an industry need to be relentless in our pursuit of opening additional markets to competitive choice. Choice spurs innovation and accelerates adoption of new products – clear benefits to consumers. Although many markets have a very large number of brokers, we find that competition is quick to distill the less qualified brokers and highlight ABCs with more expansive knowledge, relationships and sustainable resources.
ERCG: What qualities do you look for in an ideal supplier partner?
David: Beyond the baseline of competitive pricing, balanced product features and contract provisions, and responsive account management, we seek out suppliers that share our commitment to a consultative productive dialogue with the Customer. Unlike many of our peers, we do not shelter the customer from the supplier, and instead seek a collaborative discussion between supplier, customer and us. This consultative approach does not rely on velocity or matrix structures in a price-only dialogue. We seek a deeper understanding of our customer’s objectives and of the supplier’s capabilities to find optimal alignment with each transaction. From our perspective, relationships facilitate transactions, versus transactions defining relationships.
ERCG: There are multiple paths that leaders in the ABC community have taken. You worked your way up the ranks at large gas and power retailers. Given the diversity of experiences in the ABC industry, what are some ways to standardize the level of training and expertise among the numerous ABC firms to enhance the customer experience?
David: Continuing education and broadening market experience are key elements to ensuring sustainable markets and the value of an ABC. What I love about the energy markets, is while many think of it as an outdated industry, the actuality is we are very progressive and the current groundswell of innovation makes our industry very dynamic and interesting. Market participants must continually seek information on these trends. I do think regulators have some role to play to ensure that all market participants, including ABCs, are registered and that a customer, supplier, or peer company has a fair complaint process, open access to markets, and clear product guidelines. In the end however, the customer should be asking the hard questions about the qualifications of their chosen representatives, should check references, and should also have access to quality education and market resources. I think professional organizations like TEPA, ILEPA, GARP and NEMA are positioned to accelerate the availability of education for market participants. As the market demands higher quality representation and market knowledge, the better equipped suppliers, ABCs and Customers will benefit.
ERCG: As former President and COO of a residential ABC solution, you've seen firsthand the qualities of a leading/scalable residential ABC solution. What advice would you give to the many startups in the residential ABC space to take their company national and challenge legacy firms in that space?
David: Research has shown that residential and small commercial switching rates lag those of larger energy consumers. I believe online resources have a key role to play in granting these customer groups better access to competitive offers. And more importantly, changing the language between supplier and consumer. Key to that effort is making supplier and product selection less cumbersome and more user friendly. Our industry dialogue does not translate well to a residential consumer. Per kWh rates, ESCO fees, regulated charges, multi-component rates all lead to complexity. I believe online tools can simplify and change the dialogue and “language of the supplier to consumer” by making easier rate comparisons, providing total expenditure comparisons, and integrating a customer’s actual usage profile versus standard and often misleading average energy usage to develop a rate comparison. In addition, using customer data to time renewals and introduce relevant products would be a sustainable value for residential consumers, not unlike how American Express disaggregates data and then sends relevant updates and value proposals to its members.
ERCG: In Texas, there is a policy suggestion to move towards a Straight-Fixed Variable (SFV) rate design for recovery of transmission and distribution charges. What is your position on this issue?
David: I am not convinced that SFV rate design for TDUs is the optimal answer for consumer and investor-owned or other utilities, but I am convinced the current rate designs are outmoded and not reflective of current or highly probable future changes in consumer (or prosumer) energy behavior. The energy consumer landscape and the eco-system, including consumer data, is rapidly evolving and legacy amortization structures for utilities relying on usage and dated capacity factors does not align with increasing capacity utilization, exponential access to data, consumers as producers, and distributed intermittent resources. TDU rates in competitive markets are becoming a much larger percentage of the consumer’s total cost. That increasing percentage is going to lead to louder consumer voices for change, and SFV or other rate designs must quickly evolve to address the market’s evolution. The evolution of the market is also stressing the traditional role of the utility, and future rate design needs to recognize that certain legacy roles (and return on related investment) of the utility are no longer guaranteed to be a utility function. Utilities should focus on safe and reliable transmission and distribution of energy, but questions of data compilation, exponential growth in energy consumption/monitoring points, and distributed generation are challenging the core beliefs in what reliability, utility functions and infrastructures are necessary for the next several decades.
ERCG: You recently completed your 2-year term as TEPA President. What do you consider your key accomplishments during your tenure? If you had more time, what more would you like to do?
David: I am very thankful for the opportunity to serve TEPA and appreciate the legacy of my predecessors who set the stage for what TEPA is today. I am continually impressed with the dedication of the all-volunteer team that makes TEPA a reality every day. My focus was sustaining the expansion of the organization beyond Texas, improving the resources available to TEPA to advance regulatory support, education, and for scholarships. I am very proud of the increased profile of TEPA, our increased regulatory presence, and the straw model for advancing a recognized and sought-after certification program. I look forward to seeing the rollout and adoption of the certification program in 2017. During my tenure I was able to increase the dialogue among the various industry groups, including NEMA, ILEPA, EPO and GCPA. I would like to have made more progress in coordinating or integrating the efforts of these organizations with TEPA. Our industry needs a louder voice for the consumer, and coordinating efforts could lead to a better focus, message and advancement of competitive choice.
For more information, contact Young Kim, Principal at ERCG
Phone: (617) 903-0877
ERCG sat down with leaders of dozens of ABC firms to get their insights on the market and how to build a successful business