EnerNOC: Grid operator wants power cuts for free

LOS ANGELES Wed Feb 16, 2011 8:06pm EST

LOS ANGELES (Reuters) - Energy monitoring and efficiency company EnerNOC Inc said it never engaged in a practice known as double counting as it looked to assuage investor concerns that have sent its stock down nearly 20 percent in the last week.

EnerNOC executives, on a conference call with analysts, disagreed with grid operator PJM's allegations of double counting, saying the issue was that PJM was not willing to give customers credit for reducing power usage beyond their agreed-upon amount.

"PJM is suggesting that they should get demand response for free," Chief Executive Tim Healy said in an interview following the company's fourth-quarter earnings release.

So-called demand response companies like EnerNOC work with power grid operators, utilities and large electricity consumers to reduce energy use during expensive peak hours, alleviating pressure on the grid. During times of peak demand, customers agree to reduce their consumption by a specified amount. If one customer's power reduction exceeds that amount, that excess can be used to offset a shortfall by another customer -- a rule EnerNOC said PJM and the Federal Energy Regulatory Commission do not dispute.

PJM, however, does not want to pay customers for overperformance, EnerNOC said.

"We think it is unfortunate to try to suggest that this is an issue about double counting when their policy position really amounts to underpaying," EnerNOC President David Brewster said on the call.

A statement issued by PJM on February 4 called on companies like EnerNOC to stop double counting, calling it "market manipulation." It did not name any of the companies suspected of the practice, but EnerNOC accounts for about 35 percent of PJM's demand response market.

PJM operates the power grid and energy market serving 51 million people from New Jersey to Illinois.

"Our way of managing a portfolio is the right way," Brewster said, adding that complaints to the grid operator by rivals with smaller portfolios had been the catalyst for PJM's statement.

If the Federal Energy Regulatory Commission approves rule changes that are aligned with PJM's statement, EnerNOC said it could see a 5 to 10 percent impact on revenue this year and smaller impacts in subsequent years. The company does not expect any such changes this year, Brewster said.

Also on Wednesday, EnerNOC reported a fourth-quarter net loss of $21.2 million, or 86 cents per share, compared with a net loss of $15.2 million, or 64 cents per share, a year ago.

That was worse than the 83 cents per share loss that analysts had on average forecast, according to Thomson Reuters I/B/E/S.

Revenue fell 15 percent to $22.7 million from $26.7 million. Analysts were expecting revenue of $22.98 million, according to Thomson Reuters I/B/E/S.

For the first quarter, EnerNOC said revenue would be between $25 million to $31 million, with its net loss per share between 85 cents to $1.05.

Shares in EnerNOC rose 2 percent in post-market trading at $19.70 after slipping 3.5 percent to close at $19.30 on Nasdaq.

(Reporting by Nichola Groom and Matt Daily; Editing by Gunna Dickson, Phil Berlowitz and Richard Chang)

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