Voiceover: Welcome to the Experts Only Podcast, sponsored by Clean Capital, where we explore the intersection of energy, innovation and finance. Our host is Clean Capital’s Co-founder and former Federal Chief Sustainability Officer, John Powers. Learn how clean Capital is revolutionizing clean energy finance, and find more episodes at cleancapital.com, iTunes or wherever you get your podcasts. If you like what you hear, be sure to subscribe and leave us a five star review. Jon Powers: Welcome back to Clean Capital’s Experts Only Podcast. We’re joined today by Tom Matzzie, the President and CEO of Clean Choice Energy. We’re going to explore the wholesale markets with Tom. I’ve known Tom for over 10 years. He’s done an amazing job explaining the markets for folks. And if you aren’t as familiar with them as many of us, including myself should be, you learn a lot from the way he breaks it down. But we’re also going to talk about his transition from political advocacy, into clean energy and how, at Clean Choice, he’s helping make the experience for customers to move into clean energy, that much easier. Jon Powers: Tom, thank you so much for joining us on Experts Only Podcast. I want to talk a little bit about your personal history and our personal history. You and I’ve met over 10 years ago. It was one of my first visits actually, to Capitol Hill and we went to visit at that time, Senator Barack Obama. And we were going in to talk about what was happening in the war in Iraq. At that time, you were the Washington director of moveon.org. Talk a little bit about what got you into politics. Tom Matzzie: Sure. Thanks, John. It’s great to be on your podcast and it’s been great to know you over those 10 years, see the fantastic work you’ve been doing. I had always been attracted to politics. I grew up in Pittsburgh, and I think my story can’t be disconnected from growing up in Pittsburgh. It’s a town that has a working class culture associated with it as well. Even among the white collar professionals, there’s a working class sensibility. And with that comes a sense- Jon Powers: By the way, being from Buffalo, I completely understand that, 100%. Tom Matzzie: Yeah, exactly. Right. My father was a civil engineer. He was not blue collar, but he had the blue collar sensibilities, since he grew up in a steel mill town and all his buddies in high school, many of them were in blue collar jobs, et cetera. So that sensibility included a sense and understanding that politics was important and central to people’s lives. That politics could impact their livelihood, impact their healthcare, impact whether there were jobs, whether there’s economic growth. So I grew up around that. And with that understanding. I went to the University of Notre Dame. I studied economics and international peace studies, had great experience there and was always active and engaged outside of the classroom, I was restless and I always wanted to be doing something outside the classroom. And I moved to Washington DC in 1997 and started getting involved in different nonprofit advocacy groups and organizations right out of the gate. Tom Matzzie: In fact, that’s why I first met a couple of now rising political leaders, Tom Perriello, who was a member of Congress and ran for governor of Virginia was a friend of mine as early as ’97, when we were both doing different things in politics. And other people like Hans Reimer, who’s now the president of the Montgomery County Council in Maryland, and many others. And so, I’d always had that interest and I’d started to get involved. And then, what also happened at the same time is, I was very fluent in how to use the internet and technology in advocacy and in making change. And that gave me an opportunity to rise into leadership roles very early in my career, because it was the rise of the internet at the time. Jon Powers: Of course. Yeah. Tom Matzzie: And then suddenly, you could raise a budget to run a campaign while they let you spend it. Jon Powers: Right. And completely changing the dynamic, by the way, of how advocacy is being done. Tom Matzzie: I think so. And I think it’s led everything from the rise of the opposition to the Bush Administration’s excesses, to the election of President Obama, to the Arab Spring. And we’ve even probably seen a little bit of the boomerang on the negative effects of social media, now that we’re in this era of fake news and the ability to influence the public through dis intermediation and when that could be used by dishonest people. Jon Powers: Right. Like foreign nations that are impacting our elections. Yeah. Tom Matzzie: Yeah. So I’d always been involved and the first time we met it was… You were recently back from Iraq. I think you were six months or 12 months, within 12 months, I think you were back. And there’s a group organized through VoteVets, of veterans, mostly officers who had recently returned. And I recall very distinctly you were wearing your combat boots with a very neat suit and tie, that it made a distinct impression on me in those meetings. And I think it did on Senator Obama then as well. Jon Powers: Yeah. I grew up sort of similar backgrounds, but I had actually never gotten involved in politics in my life. And when I came back from the war, I was just so frustrated that the lack of leadership and what had sent us over to Iraq without a plan and so many different elements, I wanted to get into it. That the venue that you all gave me, and of course VoteVets, was life changing for me because I began to understand the bigger pieces at work and how to get involved in them. It’s what led me down politics is what led me down clean energy as well. Tom Matzzie: Well, we’re happy you’re in leadership. Jon Powers: Yeah. Thank you. So how did you make that shift then, from the political piece? I think that you really weaved the technology story in there well, because it was a critical part of what was happening at the time. And it’s what really drove the ’08 elections and OFA and these really exciting things. And shifting that from focusing it on helping to get folks elected and helping to move issues forward, to now helping to drive clean energy. What drove that shift for you? Tom Matzzie: Yeah. There were a couple different personal parts of the story for me. And some of it more just changing interests. After president Obama was elected, I had been involved in running massive campaigns through the second term of the Bush Administration, to elect the Democrats in the House and the Senate in 2006. And then, create a wave that someone like President Obama could ride that wave. It was a lot. And so, I decided to take a step back. I wasn’t the person who would send into government. I was the person that would just go break down walls. Tom Matzzie: And so, once the walls have been broken down, there were other people like yourself, who were more suited for 7:00 AM meetings in the White House. And I went into business, and I had a consulting business that was successful, but I was restless. I always had the itch to build something and not just be on conference calls, collecting consulting fees. So with that, I was looking for something to do. At the same time, there are other things going on in my life. One was, my father actually passed in 2010, from a form of cancer that was closely connected to the pollution in Western Pennsylvania that he grew up around. Jon Powers: I’m sorry to hear that. Tom Matzzie: Yeah. And there had been stories that he had told me and passed on to me when I was a kid about the pollution of his town, Ambridge, Pennsylvania, that he grew up in. Ambridge stood for the American Bridge Company. It was a steel mill town, and the stories were of the pollution that they would sweep off their front steps every morning from coal plants before they had any filters on them and had any soot regulations and other types of clean air rules. And the same form of cancer affected other members of his family, other members of his neighborhood, his community. So I had a sense of trying to wanting to do something that was about replacing dirty energy with clean energy. That was part of it. But I also had an interest in building something. And then, I went through the experience of putting solar on my own home in Washington DC. Tom Matzzie: And I describe that experience as awesome, but very difficult. I was extremely motivated to put solar on my home for all the personal reasons. Also, I think I’d have to say for my motivations, they were environmental, but also very technology oriented is, solar’s the future. I wanted to be part of the future. I wanted the iPhone. I didn’t want the rotary dial phone, but I described it as awesome and difficult. The company that did the installation, Bastrom Solar, did a fantastic job. They executed brilliantly and perfectly. It still took 11 months to complete the project. You had to fight the utility to get the meter completed. It was just a difficult process. And all of my instincts from politics where we were using technology to scale something, the core lesson from that experience was, you had to make the experience very, very easy for the participant. Tom Matzzie: And if you could make it very easy, you could get more scaling, and scaling could drive the success. And so from that insight that, if you could make it easier, more people would participate. We started looking for business models on my own, and then joined up with some other people. But the first business model with our company is retail electricity. And so, this is a choice where people have in 14 us states to… Which is 40% of all us electricity consumption, to choose their electricity provider. So it’s non Virginia, unfortunately, but it is in DC and Maryland and through the Northeast and parts of the Midwest and in Texas. And we’ve been scaling that business since 2013. Jon Powers: And that started as Ethical Electric right now and then moved to- Tom Matzzie: Yeah, our first name was Ethical Electric, which was the name I put on the PowerPoint when I pitched my first investor. Eventually I hired a chief marketing officer who said, “We’re going to test everything, Tom, including the name.” And so, because electricity’s an intangible product, you can’t touch it, taste it, feel it, hold it. We decided we needed a very descriptive company name that said basically, what our product is. Jon Powers: Yeah, no, I love it. Tom Matzzie: Yeah. That’s Clean Choice Energy today. Jon Powers: And so through that process, you guys are working in… First of all, great description of what Clean Choice is doing. You are empowering utility customers across the country. You’re helping them cut emissions, support clean energy through 100% retail renewable energy choices, community solar. Going back to what you said earlier, you’re making it easy for them to participate. I think, as folks that are in the industry with a passion to do this, wrestling with the multiple steps to get solar on your roof could be an incredible headache and most people would walk away from that. So how does Clean Choice make it easy for them? What are you doing to attract those customers in? Tom Matzzie: Right. For any entrepreneur or any business, there are essentially three value propositions. You could offer a customer better, faster or cheaper. All right. Those are the three. Rooftop solar is better and cheaper, but it’s not faster. In some ways maybe, it’s not better since it’s hard, but our product is better and faster, because it’s renewable energy and it just takes a minute to sign up for it. You just fill out a web form to enroll. It’s not cheaper right now. That’s one of the final hurdles we need to get over as a business for our core retail energy business. Although our community solar product is our first foray into a product that will be price competitive… Lower prices than a utility rate. Although I would note, all of our prices today are cheaper than what utilities we’re selling for, four years ago. Tom Matzzie: So even in our core product. It’s just that the utility rates have declined over the course of our business. So what we do when a customer signs up is, for the retail energy product, it’s a renewable energy. We’re licensed by the states. We’re a member of the wholesale energy markets and we go buy wholesale renewable energy, which includes both a financial swap, as well as a renewable energy credit, in order to then deliver the renewable energy to the customer, through their utility. And we’re a member of the wholesale power markets, the PJM and New York ISO and ISO New England and MISO. And we transact there with the suppliers, as well as with ultimately the customer’s utility. So we provide the energy to the customer’s utility via the ISO. Jon Powers: So if I’m a customer in Washington DC, and I sign up, you basically take the demand that my monthly household demand’s going to be, go into the market, buy it as renewables and then provide it to Pepco, who is really transmitting it into my house. Tom Matzzie: That’s 100% right. Of course, the electricity is fungible. And that’s the case for lots of other products. Water’s fungible. There’s a whole market for contracting for fungible products, whether it be electricity or water, other types of commodities, liquid fuels, et cetera are transacted in similar ways. Jon Powers: Absolutely. And so, from a structural perspective, you’ve got customer service teams reaching out, engaging and finding more customers. And then you have an entire purchasing shop that’s on the market, buying these things? Tom Matzzie: Yeah. So if you look at our business, marketing is a big part of it to aggregate consumers together. Operations, which is the customer experience from lead to cash. Then the other components include data and technology, which is very important to what we do, as well as the finance and procurement. And the procurement we are… You might call it trading. So we have trading relationships with wholesale energy suppliers, generators, and investment banks who provide financial derivatives. And that’s that procurement, it’s actually the least exciting and interesting part of our business. It doesn’t move very fast and that’s good. We’re not speculators. We’re buying, we’re transacting for our customers. There’s a part of the business that’s entering the wholesale power markets and transacting for the product for our customers. Jon Powers: And when you look across your portfolio, what you’re buying, it looks like a lot of it derives from wind today versus solar. Is that just because wind’s cheaper in the market? Tom Matzzie: That’s right. Wind is less expensive and actually more liquid. There’s more availability for wholesale supplied wind right now, in the markets that we operate in. Jon Powers: Outstanding. So talk a little bit about, you’re working in a variety of states and obviously from a regulatory perspective, they’re almost their own individual countries when it comes down to it. Tom Matzzie: Yeah. Jon Powers: How do you manage all of that regulatory differences from a team perspective? And then also, talk a little bit about your relationship with the utilities, because it’s got to be pretty important here. Tom Matzzie: Yeah. The relationship with the utilities just to touch on that, is a regulated one. So once we are licensed by the states, we were able to enter into what’s called a supplier agreement with the distribution utility, Pepco, ConEd, ComEd, et cetera. And they’re essentially required to do business with us as long as we are meeting our obligations under our license and the supplier agreement. And those obligations include, scheduling how much power our customers are going to use at the ISO, as well as credit, credibility, administrative, et cetera. It is regulatory complex. We have a large team, it’s 60 people just running the business. There’s another 20 doing our contact center. We have in-house regulatory council. We have law firms in every state. We regularly go and meet with state utility commissions on the staff side, sometimes the commissioners. Tom Matzzie: And we definitely have to keep track of all the obligations we have. The good news is, you can set up the business as a platform. So you write your customer contract, it’s in compliance with all of the requirements for each state and you have to monitor whether or not there are changes in those requirements, but by and large, it changes not frequently, once a year, something like that. And then, your other compliance or obligations are typically on the consumer protection side. Just don’t make false claims, make sure you have a validation of your contract with your customer, whether it’s a wet signature or a recorded phone call or some other internet signature or something like that. And you set up your business as a platform, you use business process automation to make it scalable. And it’s definitely achievable. Jon Powers: Are you finding once you get a customer, they’re pretty sticky? Tom Matzzie: I think there’s varying amounts of stickiness. Churn is part of our business. And it’s because the ability of the customer to leave us is a feature of the product, right? Jon Powers: Right. Tom Matzzie: And that’s important, I think to keep in mind is that customers want flexibility, and not just because they might leave. They might see an offer from a competitor. So we have to earn their business every day. Jon Powers: Oh, that’s interesting. So I always assumed it was much like when you sign up your electricity bill, and people sign up and forget, but there is a lot of competition in that space. Tom Matzzie: There’s competition, less green competition, but it’s just a feature of the product that the customer can leave. And I’ve talked about how our product is more expensive right now than a utility rate. That’s one of the final hurdles we need to overcome, that will materially improve churn. And community solar is one way to do that. And there could be future business models in an environment where there’s a carbon tax or something else, where our product becomes less expensive. Jon Powers: Yeah. I want to come back to that point specifically, because I want to talk a little bit about Secretary Perry and the FERC efforts that are going on. But before we leave, just Clean Choice overall, talk a little bit about, you guys had a recent announcement of launching an energy lab in New York City. What do you hope to accomplish with that? Tom Matzzie: A big part of what we do as a business is, use technology to make the customer experience better and to help us find the customers who are most interested in renewable energy. So we are using machine learning, artificial intelligence modeling, to predict which customers are most interested in renewable energy, and likelihood to stay around as our customer, all sorts of things like that. And so Clean Choice Energy Labs, which is open in New York City, and it also exists in our headquarters in Washington DC as well, is one of the places that we invest in the business to create the customer experience through technology and the data methods that we need, in order to be successful in our business. And we decided to really give it a little recognition with the branding and labeling, for the team led by our Chief Technology Officer, Daniel Murray, who came to us from the data operation of the Obama campaign, 2012. And he leads that part of our business, includes our platform for community solar that we’re developing in order to make it better customer experience for community solar customers, as well as what we’re doing today. Jon Powers: No, that’s really interesting. It’s a great way to drive innovation within a growing company. It’s exciting. Tom Matzzie: Yeah. Jon Powers: So going back to what we were talking about on pricing. And I think there’s a significant push by the Trump Administration, through Secretary Perry, to really bail out the coal industry here and specifically the pursuing a FERC ruling to financially allow power produced by coal plants, to charge a premium, allowing them to stay afloat. Provide some thoughts on this and where do you see it going? And what should the industry be doing to push back? Tom Matzzie: Yeah. So the wholesale electricity markets, in those markets today, there are a variety of different commodities that are procured and sold. It’s not just energy, actually. You would naturally assume you go to the whole energy market to buy energy. But the three core commodities that are procured in those markets are energy, which is what it sounds like. Capacity, which is the ability to have a lot of energy when you need it. And then flexibility, which is the ability to very quickly modulate how much energy is being consumed or generated very quickly. The out of whole cloth, the Trump Administration, it would appear to be at the urging of the CEO of a coal company have created some fictional, other need, which they’re terming resiliency, which is a 90 days of fuel on site that a power plant that can hold 90 days of fuel on site should be compensated for its ability to do it. Tom Matzzie: It’s a very wasteful use of resources. It’s the energy market equivalent of prepping, where you’re keeping hoards of food and water in your basement. And it’s an absurdity, because you think there should be no… The supply chain disruption that would be needed to not be able to deliver fuel to power plants for 90 days, would mean that there would be something so dramatic has happened in our country, that we would have much larger problems than whether or not the power plant has enough fuel for the next 90 days. And the reality is that, most resiliency risks in the energy market have nothing to do with the ability of power plants to turn on or off and whether they have fuel. We have lots and lots of power plants, way more power plants than we even need in the energy markets today. Tom Matzzie: The disruptions to resiliency and reliability for consumers come from power lines falling. Jon Powers: Exactly. Tom Matzzie: Everyone knows this. You get the blizzard, the tree loads up with snow, the tree falls, it knocks down the power line, the lights go out. That’s the story. That’s the total story of the real resiliency risk that most people face every day. There are certain places where they have transmission constraints. They don’t have enough power lines or you have additional reliability issues, but by and large, the threat to resiliency and reliability is driven by transmission distribution, line disruptions and not by power lines. And so what’s this all about? Look, it’s best I can tell, it’s about two or three companies who have close ties to the Trump Administration and are in danger of bankruptcy. And they are trying to get these bailouts to save their companies for what, maybe another nine months, other 12 months? Tom Matzzie: They want to disrupt the energy market design that has been very successful in lowering costs. I think this is one piece that people don’t appreciate is that, consumers and businesses have benefited from competitive power markets that have materially lowered costs for consumers over the last few decades. And this is be a massive disruption to that. We would be paying people who own power plants to just own the power plant, not to do anything that’s useful or generate electricity or something like that. Jon Powers: Yeah. The irony from one, not even to talk about the free market position a lot of these folks have started with now, they’re shifting over, but to look at when they talk about resiliency overall, it’s completely opposite of the way the military’s approaching it. It’s completely opposite of the way data center companies like Google and eBay and Amazon are approaching it. They’re looking at distributed onsite energy. As you said, it’s a complete handover to a handful of folks that… There’s obviously ways to slow role and rules and there’s going to be lawsuits around it. But if you could give advice to companies out there to get involved, what would you tell them? Tom Matzzie: Well, the first process is somewhat opaque in the end. It’s hard to know what the commissioners will- Jon Powers: Right, but it’s supposed to be independent too. Tom Matzzie: It’s supposed to be independent. I would say, we have some very good commissioners, even some of the Trump appointees. I think the former chairman who’s the interim chairman, Neil Chatterjee, Commissioner Chattergee has not shown himself to be a big supporter of competitive electricity markets. He seems to be more on the socialism end of energy markets and looking to give out corporate bailouts to power plate owners. And that’s been very disappointing to see. We have other commissioners, like commissioner Paulson, who was the former chair of the Pennsylvania Public Utility Commission. The Pennsylvania Commission was a very professionalized commission that was very straight shooter, would just put together regulations and to protect consumers and to do the right thing for the state. I don’t think he wants to disrupt competitive electricity markets. I think he’s a believer in the competitive electricity markets. We’ll see what Chairman McIntyre, who is the newest commissioner, what his perspective will be. It’s unclear so far, but I don’t think that there’s the other commissioners other than Chatterjee, are somehow coal idealogs. I think they believe in competitive power markets, and we’ll hopefully see that prove out. Jon Powers: Great feedback. Thank you. Tom Matzzie: Companies should get involved however they can. You should make a filing effort. I think the most important people that should be getting involved, are consumers. So if you own a big business, if you own data centers, if you own a steel mill, any sort of manufacturing at all, you are highly sensitive to electricity prices. And the Trump, Perry, Department of Energy Proposal to the FERC would increase power bills for consumers, but by more than $10 billion by some estimates. And that’s bad for US manufacturing, that people will be put out of work by that. It’s a real issue that needs to be taken seriously, the risks to American manufacturing from this terrible proposal to Federal Energy Regulatory Commission. Jon Powers: So Tom, to end on a lighter note, going back to yourself and Pittsburgh, when you’re coming out of high school or going back when you were graduating from Notre Dame, if you could sit down and have coffee or beer with yourself, what piece of advice would you give the younger version of you? Tom Matzzie: Oh wow. I had an opportunity to be a very early employee in broadcast.com, which Mark Cuban sold for a couple billion dollars. I turned that down. I don’t have any kind of business or political advice I would’ve given myself. I think I’ve made good choices in those regards, typically. I think the biggest lessons I’ve learned as I’ve got a little more gray in my beard now, I’ve starting to get a little gray in my beard, is really the value of relationships and friendships and just investing in those. So if you’re a young person today, those friendships and relationships you’re building are just going to be invaluable. Like us, John, we’ve known each other for 10 years. Jon Powers: It’s true. Tom Matzzie: And I think, you don’t always appreciate that until you’re a little older, how important and how much happiness they can bring you, to have those relationships. Jon Powers: That’s absolutely right. Well, Tom, thank you so much. And thanks so much for taking the time to join us today. Tom Matzzie: Yeah. Thank you. And congrats on all the success of your business. Jon Powers: Thank you. Tom Matzzie: Take care. Jon Powers: Well, thanks again to Tom, for joining us. What a fascinating conversation. You can go to cleanchoiceenergy.com to learn more about the work they’re doing. And always visit us at cleancapital.com. Give us your feedback on how we can improve this podcast. I’d like to thank our producers, Emily Conner, and Lauren Glickman, for their hard work as always. And thank you for listening and look forward to continuing the conversations.