The names of retail electric companies in Texas can be a bit colorful at times. There’s Juice Energy (now extinct), Brilliant Energy, Bounce and Dynowatt. Every few weeks it seems like a new one is filed with the Texas Public Utility Commission.
But earlier this month several really odd names showed up: TexRep5, TexRep6 etc. up to TexRep10. Was it a serial entrepreneur with no marketing skills behind the dull names? No, it was Energy Services Group, or ESG, a Massachusetts firm that runs billing and data processing for dozens of electric retailers here and around the country.
The TexReps are essentially shell companies that ESG is setting up to make it easier for new retail electric companies to get into the market, said Drew Fenton, vice president of business development for ESG in the Houston area.
In order for a retail company to begin selling power to customers it needs to have all of the so-called back office systems synchronized with the state’s largest grid operator, the Electric Reliability Council of Texas, to make sure data flows smoothly between the many links in the chain from the power plant to the power meter on the side of your home. This process, called the “test flight,” takes place over several months and is only conducted three or four times a year.
If a new retailer’s systems aren’t up and running and ready for the test flight they might have to delay starting their business for a long time.
“If you miss the beginning of the test flight by even 15 minutes you have to wait another three months before the next one comes around,” Fenton said. That’s a long time to delay the launch of a new business.
So ESG is putting the TexRep’s through the test flights, getting them primed and ready for a company to come along, purchase or lease them, put their name on it and start doing business. They even come with a bank account holding $100,000 in cash, the minimum financial standard the PUC requires of electric retailers.
“We would just transfer the bank account over to the new retailer,” Fenton said.
ESG has created a few shell companies in the past that were leased by retailers looking to serve large industrial customers (Fenton wouldn’t share names), but he expects the new shells could be used for residential retailers too.
This begs the question: doesn this actually make it easier for fly-by-night operators with no experience in electric markets to start signing up Texans? Is it setting up a repeat of the disasters of spring 2008 when thousands of customers were stranded when several small retailers went out of business because they lacked the financial resources (and possibly the business savvy) to ride out spikes in the wholesale market?
Perhaps not. With the exception of the largest retailers, companies like ESG handle the technical stuff for most retailers anyhow. Maybe these ready-made shells really just let start-ups focus on the kinds of things that differentiate retailers, like marketing, rates and customer service?