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SCIENTECH IssueAlert, November 30, 2000
TNPC Wins Pennsylvania Customers, Continues to Go Green
By: Will McNamara, Director, Electric Industry Analysis
===============================================================

TNPC, Inc., parent of The New Power Company, reported that the Pennsylvania
Public Utility Commission approved the "Competitive Default Service Agreement"
between The New Power Company and PECO Energy for almost 300,000 customers.
The PUC is expected to issue a final order on this matter in the next few
days.

ANALYSIS: As you may recall, a dispute erupted between TNPC and Green Mountain
about a month ago over this large number of customers in PECO Energy's
service territory. Under a regulatory mandate from the Pennsylvania PUC,
PECO had initiated an auction for the approximately 300,000 residential
electricity customers who had not selected a competitive energy service
provider registered within the state. This represented about 20 percent
of PECO's residential customer base. Three energy providers*TNPC, Green
Mountain and one other unidentified company*bid for the customers with
various service packages. PECO chose TNPC, which had offered a fixed discount
of 2 percent for the residential customers, because it believed the offer
was in the best interest of PECO customers.

Green Mountain contested this decision, arguing that its hydro- and natural
gas-based energy package would ultimately be "less expensive for consumers
and environmentally cleaner." Green Mountain also claimed that its proposed
offer was a full 2 percent less than PECO's shopping credit, compared to
TNPC's offer which would average about 1.83 percent below the shopping
credit. PECO's response was that Green Mountain had missed the deadline
for the auction and consequently did not present a valid offer. Over the
last month, both Green Mountain and TNPC fought hard for PECO's customers,
which was understandable as Pennsylvania represents arguably the most 
successful
retail market in the United States, if not the world.

The PUC ruling clearly puts the 300,000 PECO customers into the hands of
TNPC, which of course is the product of the residential retail marketing
alliance between Enron, AOL and IBM. Securing the 300,000 residential 
customers
in one swift motion is a significant achievement for TNPC and gives it
a substantial market edge over other energy service providers in the 
Pennsylvania
market. The customers will be randomly selected from those that have not
shopped for an alternative supplier under the state's electric competition
program.

However, what I find most interesting about the latest development in this
case is what's happening behind the scenes of the dispute, and more 
specifically
how TNPC continues to move toward a renewables perspective. I discussed
just two weeks ago (IssueAlert from Nov. 13) that TNPC's stock (NYSE: NPW)
was taking a nosedive. Keep in mind that the stock had a terrific IPO in
early October. TNPC's IPO offering of 24 million common shares was priced
at $21 per share, a surprisingly strong showing for a company that has
only been in existence since May of this year. Momentum grew as the first
day of trading saw the stock price climb to $27.  Yet, contrast that with
the current stock price of $6 3/8 (as of Nov. 30), and certainly questions
about where TNPC will go from here start to emerge. The decline in TNPC
stock seemed to start when the company reported a 3Q loss of $69.9 million,
or $2.96 per share. TNPC argued that the losses were not meaningful due
its limited operating history, but investors seemed to think otherwise.


Around the same time that TNPC's stock began to drop, the company announced
that it would be adding wind-generated energy to its package for customers
in the Philadelphia area. Under terms of a brand-new agreement, TNPC will
market wind power supplied by Community Energy from a site under development
in the mountains of northeast Pennsylvania. My reaction to this announcement
was that TNPC's addition of wind power to its portfolio was an attempt
to quell further objections from Green Mountain. Yet, TNPC's move toward
renewable energy now appears to be an attempt to save its sagging stock
price.

In another ironic twist, TNPC also announced that it is forming a partnership
with Green Mountain, which was an adversary only last month. TNPC disclosed
that it is in negotiations with Green Mountain regarding the disposition
of up to 50,000 competitive default service customers (out of the 300,000)
within PECO's territory. Reportedly, the relationship will benefit 
Pennsylvania
consumers and help TNPC and Green Mountain to achieve their business goals.
In addition, TNPC claims that working with Green Mountain in this manner
is consistent with its objective of enhancing a "positive customer portfolio
value." However, considering that TNPC fought so hard to obtain all of
the 300,000 customers from PECO, it seems odd that the company would suddenly
be willing to share 50,000 of them with Green Mountain.

Certainly, Green Mountain wins from this partnership. The company gains
50,000 residential customers when it, based on the PUC's ruling, could
have ended up with nothing. The company offers three service packages in
Pennsylvania: EcoSmart, EnviroBlend and Nature's Choice, varying mixes
of hydro, natural gas and new renewables, with Nature's Choice containing
more renewables than the other two power blends. Marketing power that it
bills as "dramatically cleaner than typical Pennsylvania electricity,"
Green Mountain may be able to expand its reach in the state by attracting
energy customers who seek out environmentally clean energy.

What remains very unclear is TNPC's true motivations and the future of
the company, which made such a big splash when it began operating last
spring. Is this a classic case of an energy start-up chasing down trends
(e.g., the current high value of renewable energy stocks) in order to 
rejuvenate
itself, or a true identity transformation? The questions are pertinent
as long as TNPC continues to generate losses and its stock continues to
struggle.
==============================================================
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Sincerely,

Will McNamara
Director, Electric Industry Analysis
wmcnamara@scientech.com
===============================================================
Feedback regarding SCIENTECH's IssueAlert should be sent to 
wmcnamara@scientech.com
===============================================================

SCIENTECH's IssueAlerts are compiled based on independent analysis by 
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