Commerce Energy Group Inc.

Power in the back office┬áHaving robust technology is vital to the gas or electricity retailer that wants to keep its customers, Commerce EnergyÔÇÖs Mark Podorsky tells John OÔÇÖHanlon. Commerce Energy Group provides energy to both commercial and retail customers. Its headquarters and customer service team are based in Costa Mesa, California, but its operation team is located in Dallas, Texas, which is where I caught up with Mark Podorsky, vice president of operations.   The company, he explains, serves a broad base of residential, small business, commercial and industrial customers located across the US in energy deregulated states. It was originally founded in 1997 to participate in the deregulation of the electricity market in California and is one of only a few retailers serving customers there.PodorskyÔÇÖs responsibilities include running the companyÔÇÖs account management group, which registers new customers and transactions with them, billing, accounts receivable and EDI operations. This, he explains, means making sure that EDI (electronic data interchange) transactions correctly translate into the correct CIS transaction, so that the business intention of the market participant is achieved.While everybody needs electricity and a huge number of urban domestic and commercial premises rely on gas, since deregulation started in the 1970s a multitude of retailers have entered the market. In Texas alone, for example, you can choose between around 50 suppliers, from the ÔÇ£big threeÔÇØ (TXU, Direct Energy and Reliant) to a host of small local and niche suppliers. Commerce Energy is situated in the middle tier, with revenues of over $371 million in 2007, and aims to grow by being the best in product offerings and customer service.The key to keeping customers is to give them a good experience, effective communications and reliable account management. The key to all that lies in the companyÔÇÖs IT, says Podorsky. ÔÇ£If you canÔÇÖt process your EDI transactions correctly, quickly and efficiently, youÔÇÖre going to suffer, because thatÔÇÖs the lifeblood of the energy industry. ItÔÇÖs how all the market participants communicate with each other.ÔÇØ Commerce Energy communicates with all its partners via EDI, and that includes the electricity and gas utilities and regional regulatory authorities like ERCOT (Electric Reliability Council of Texas). ÔÇ£Every time you send a registrational transaction, add or drop a customer, or receive usage to create a bill, all of that is done electronically through EDI, so you better get that right.ÔÇØFor EDI to work, the sender and receiver need to use the same standards so that everyone is speaking the same language. The Accredited Standards Committee of the American National Standards Institute defines EDI standards. However, there are variations from market to market in how the EDI transaction is interpreted. To take a specific example, the ÔÇ£Texas setÔÇØ transactions are looked at and modified most every year. ÔÇ£I think 2008 is the first time they have actually given us a year off, with no major TxSET release. Basically, itÔÇÖs an upgrade to your EDI translation platform and business rules every time they update the ÔÇ£Texas setÔÇØ of transactions,ÔÇØ Podorsky points out.Achieving best practices in EDI transactions is a complex and specialized business. To ensure that the companyÔÇÖs CIS platform can understand the transactions, Commerce Energy has brought in an EDI vendor, EC Power, to help clear and translate the transactions into the appropriate CIS format. One of the principles of EDI is to create a standardized format that can be used to wrap around a transaction and send it electronically to a trading partner, who can unwrap the message using the same transaction format, Podorsky explains. EC Power monitors protocol changes within each market. Commerce Energy also outsources much of its invoice composition, print and fulfillment documentation to Dallas-based Lanvera.The strategic plan includes growth where it makes economic sense, but growth is not currently the main objective, Podorsky continues. ÔÇ£What weÔÇÖre really after is value. ThereÔÇÖs no sense adding 50,000 customers if half of them are going to end up being bad debt, so weÔÇÖre not chasing numbers for their own sake. This year weÔÇÖre focusing on infrastructure and adding value.ÔÇØEvery company has to maintain a healthy cash flow situation. This summer has slowed down the rate of receivables into the accounts. Podorsky explains the background: ÔÇ£We offer both fixed and variable price products, and a lot of customers choose to pay a variable rate because in the winter that rate was cheaper than the fixed rate. Unfortunately, this summer oil and natural gas prices went through the roof. Added to that, it was a very hot summer in the Texas area, and people were seeing very high bills for their electricity. ThatÔÇÖs naturally going to force a higher percentage of ÔÇÿaged receivablesÔÇÖ.ÔÇØ By this he means delayed payments rather than debts that have to be written off. As customers begin to feel the squeeze from the credit market as well, they will go onto budget payment plans that spread their repayments rather than settling monthly. ÔÇ£This summer was definitely challenging,ÔÇØ Podorsky admits.The need for best-of-breed IT solutions is felt as much at the upstream end of the supply chain as it is in customer service. Sourcing electricity is a complex process, and it too varies from state to state. Take green energy. As Podorsky points out, the electricity on the grid looks the same to consumers, who rely on the industry to purchase the renewable power that they have paid a premium for. Commerce Energy offers its Clean Choice program in Texas, Maryland and Pennsylvania, but just how that energy is generated depends on where it is delivered. But the customers will still not write a blank check for premium products. ÔÇ£I think margins will always be tight. Competitive pricing interests them in the first place, but to keep a customer you need excellence in customer service and the right products. Clean air or green products can make you attractive. But we also have to be really efficient at what we do, with a solid infrastructure for scalability.ÔÇØYou can sell gas and power all you want, Podorsky concludes, but unless you can run operations and the back office efficiently, youÔÇÖre not going to be successful as a retailer. ÔÇ£To me itÔÇÖs all about having best practice EDI operations, best practice account management, accounts collection and customer care. ThatÔÇÖs what we strive for here, and 90 percent of our IT budget goes toward strengthening our operational systems.ÔÇØ ┬á