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September 12, 2000, by Will McNamara

LODESTAR Corporation, a provider of eBusiness and customer billing software, announced that it has expanded operations in Texas to bolster its role in the state's energy deregulation plan. The company has opened a new office in Houston to work with existing and new customers in the state. LODESTAR's focus in Texas will be on co-developing software solutions and supporting customer-related operations-from customer acquisition to data management and billing.

ANALYSIS: LODESTAR has established a name for itself in the energy industry by providing the software solutions that energy companies need to Support billing services for their commercial and industrial customers. LODESTAR markets its software solutions primarily to retail companies, distribution companies and independent system operators (ISOs). Within Texas, LODESTAR has already been working with clients such as Enron, Reliant and the Electric Reliability Council of Texas (ERCOT), which administers the Lone Star State's power grid and serves approximately 85 percent of its electric load. Also, PG&E Energy Services (now owned by Enron) and Select Energy used LODESTAR billing solutions in California, and Alliant Energy in Wisconsin also announced that it was using LODESTAR's platform. However, LODESTAR perhaps found its greatest success in Georgia, where it secured the contract to work with Shell Energy Services, which is a leading gas marketer in the state with over 300,000 customers. Shell Energy Services is actually based in Houston, so this contract is perhaps what has offered fuller opportunities for LODESTAR to expand in Texas now that electric deregulation is unfolding there.

Shell Energy chose LODESTAR because it needed a better customer information system (CIS) that would allow it to expand quickly from its various market segments-residential, small commercial and small industrial accounts. Each business segment poses a different range of rate setting and billing requirements, calling for a different configuration of back-office capabilities. Understanding metering information (load profiling) is critically important for energy companies so that they can analyze customer behavior and energy usage across various company operations. It is usually easier and more cost-effective for an energy company to purchase this function from a company like LODESTAR as opposed to building its own system with in-house programmers. LODESTAR markets its software as a Customer Choice Suite, offering such functions as customer acquisition and enrollment; load profiling, pricing and profitability analysis; electronic bill presentment and payment (EBPP); and settlement verification.

LODESTAR's contract with Shell Energy Services was its first penetration (of any significant size) into the residential billing market, a move that has some risks associated with it as the company is primarily experienced in commercial and industrial (C&I) billing. The billing structures between residential accounts and C&I accounts are very different-using divergent data models-and have little, if anything, in common.

In addition, LODESTAR has some fierce competition in the customer billing software market. Perhaps the closest competitor to LODESTAR is Peace Software, which has a product called ENERGY that manages both the customer and the commodity. Peace Software's ENERGY also offers acquisition and enrollment, load forecasting, scheduling and settlements services, along with B2B interfaces. Peace Software is primarily targeting energy service providers and energy service companies, and in fact also has a major implementation project in Houston, enabling Enron to target new markets.

Excelergy is also moving into the billing software solutions market. Excelergy had a path to choose early in its existence and it made a wise choice by splitting the interaction piece of software from the billing piece of software. This allows marketing to both retailers and distributors as both have a growing need to interact with multiple market players that they have not had to deal with in the past. These multiple market players include meter reading companies, retailers, distribution companies, ISOs, power marketers, and the like. Excelergy has been on an alliance binge for some time now, announcing partnerships with several companies, including Siebel Systems, Inc. for customer relationship management, Altra Energy Technology, Inc. for wholesale power, edocs, Inc. for electronic document management, Alliance Data Systems Corp. for application service provider expertise (outsourcing), and PricewaterhouseCoopers for consulting and programming expertise. In addition, Excelergy filed with the Securities and Exchange Commission for an initial public offering.

Yet, LODESTAR could be able to build a market edge in Texas through its already established relationship with Shell Energy. This could lead to a profitable position for LODESTAR as the onset of competition in Texas is a major development for the energy industry. With regard to population, Texas represents the second largest energy market (behind California), offering a market value of about $20 billion. Residential customers and businesses in the vast majority of Texas will have electric choice come January 2002.is using LODESTAR to consolidate load research analysis across the energy company, helping it to meet new regulatory and marketing demands.

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