Beyond the basic plan described in the body of this paper, entrepreneurial insurers could maximize profits for their clients and themselves through these, among other, approaches:
Because the insurer/client team has reduced not only the cost but also the use of energy, they have passively reduced the production of harmful emissions such as sulfur dioxide, nitrogen oxides, and carbon dioxide (CO2). The first two of these are currently tradable commodities that can translate into dollars. The insurer and the electric supplier would need to negotiate to provide for the buyer receiving all or a portion of the emission reduction allowance and to determine the basis of value by margin or average. While there is currently little market for CO2 , there may be in the future, although the value of an allowance is uncertain.78
Although each client's portion of the value of emissions reductions would be quite small and depend on a number of factors, including the fuel mix of the local utility, in aggregate it could be significant to the insurer. For this reason, it might be appropriate for an insurer to market electrofinance in certain areas on the basis of emission profiles or noncompliance with federal air regulations.
Another area where value could be added would be to concentrate on EE&LM activities (and on PV systems) in geographic areas requiring expensive transmission and distribution upgrades due to load growth. Various studies have shown that the use of EE&LM and/or distributed generating options such as PVs to displace upgrades may be the least-cost route in numerous instances, such as when older underground trunk lines can no longer accommodate increased loads.79
In one instance, a state's restructuring legislation mandates that if an expansion of capacity of the distribution system requires a rate amendment, the regulators must determine if it would be more cost-effective to use demand-side management as the mechanism to alleviate the constraint.80 Under such conditions, it might be possible for the aggregator to negotiate a fee for increased activity in that locale, thus deferring the need for costlier measures. The proceeds of that fee could also be allocated to the annuity portion of the plan for participants whose actions reduce the loads.
A natural program extension would supply not only aggregated electricity but also either aggregated oil or gas sales for heating, domestic hot water, and cooking. While this would require further organizational resources, it is notable that Shell Oil announced its intention to sell both electricity and natural gas directly to homes and businesses sometime in 1998.81 Another company, DTE Edison, is attempting to become the discount chain of energy by charging a membership fee that allows participants to purchase energy at DTE's own cost if they buy both gas and electric service along with other allied services.82 This could open up another avenue for a potentially large energy savings stream to augment the annuity portion of the bill. Because heating and hot water costs are often a larger portion of the total home energy bill, they also represents a more palpable motive for insurers to invest in more significant home energy upgrades, including ceiling and wall insulation and furnace/boiler upgrades.
The electrofinance program will hold particular appeal to green consumers, since it facilitates their environmental commitment. One reservation expressed is that it would be unfortunate if any profit from an environmental activity such as saving energy were invested into an annuity that might fund anti-environmental activities rather than sustainable practices.83 For this reason, as well as others, an insurer or other aggregator would be wise to provide for investment into one or more socially screened mutual funds for the annuity to attract the environmentally active participant.
Attracting and keeping this audience also provides incentives for insurers to provide an energy supply option that features a high degree of green power in its portfolio.84
Not all consumers need an additional retirement fund if this is already provided for through work-related pension plans or other savings. They may, however, wish to save for some other activities such as a college fund for their children. "Studies regularly find that about half the parents who expect their children to go to college do not save for the expense; and many who do save do a poor job."85 Other options might include saving for long-term care or even membership in assisted care retirement communities. Electrofinance should be flexible enough that participants have a broad investment menu that meets their particular needs. For instance, several states have tax-exempt funds that allow people to save for their children's college tuition.86 Funds of this nature should be among the choices provided for electrofinance plan members.
In Australia, the Adelaide Bank is already deeply involved in the direct management of 52 retirement communities because it has identified this as a growth industry. In 1997, this provided 5% of the bank's total annual profit, and officials project that will grow to 10%. It is conceivable that as the baby boomer generation grays, one of the options that might hold ever greater appeal would be for their savings to pay for membership in such planned assisted retirement communities or other long-term care options.
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