A tough time to be an electric company in Texas

When Texas’ wholesale power prices spiked unexpectedly in 2008 due to problems with power line congestion, a handful of small electric retailers went out of business, leaving tens of thousands of customers on higher-priced plans with back-up providers.

When power prices spiked again this February due to a lengthy cold snap shutting down power plants, one firm went out of business, but it happened in a much less disruptive way for the customers.

After prices spiked this summer due to record-breaking heat and record power plant outages, the impact appears even more subdued: just one company, NRG Energy, said it was adjusting its expected earnings downward to account for money it lost during the spikes.

Even NRG CEO David Crane expressed a bit of surprise during the call announcing the adjustment that the fallout from the August price spikes wasn’t being seen more widely among Texas electric retailers.

But could the impact be going on a bit more quietly behind the scenes?

DPi Energy, a retail electric provider that specializes in pre-paid plans, said this week it is being bought out by Houston-based TruSmart Energy for an undisclosed amount. DPi was owned by Ed Lateef, who also owned one of the big losers of the 2008 power crunch, Riverway Power.

In September, New Mexico utility PNM Resources sold its First Choice Power retail business to Direct Energy.

And in late August, Canadian-firm Just Energy said it was buying Fulcrum Energy’s three Texas electric retail firms Tara Energy, Amigo Energy and Smart Prepaid.

OK, so it’s not clear if these sell-offs of smaller retailers to those with deeper pockets is the result of this summer’s woes. It could simply be a trend that started in the Spring when the successful retailer StarTex Power was acquired by Constellation Energy.

But one way or another, the impact will likely show up in consumer bills.

11 Comments

  1. If small undercapitalized retailers are being purchased by well capitalized firms that are better at managing the risks inherent in the wholesale power market, that could turn out better for consumers rather than worse.

    #1
  2. StarPower

    But StarTex Power has yet to pay out it’s employees the money it owes them via the ESOP. Could they be another Enron?

    #2
  3. strengthof10

    Only in Texas!

    In Texas, between the electric companies and the PUC, it always ends up in the customers’ bills. The tax payers pay the PUC to help the electric companies screw them.

    #3
  4. Texas has one of the higher rates in the US. It is time for te people to star dumping the electric companies for home generating plans. If the electric companies are not going to learn how to bring down the costs in Texas then the people need to drop them and provide for themselves.

    #4
  5. saved…. do you have any idea of how much it will cost to make your own? The biggest problem you have is de-reg and ERCOT. Some parts of Texas are NOT de-regulated. They are enjoying cheaper rates and more reliable poweer. Perhaps the solution will be do away with rick perry’s de-reg and do away with ERCOT and connect Texas with the Eastern or Western Grid.

    #5
  6. Steve

    Texas’ rates are just slightly above the US average. 15 other states have higher rates than Texas.

    http://www.neo.ne.gov/statshtml/204.htm

    #6
  7. Hhmmm – 15 have higher rates? That means 34 have lower! Still leaves us in the upper 35% bracket. Must be the same accountants and PR people as touting our wonderful education system . . .

    #7
  8. Augustus Call

    Whenever you do something for the wrong reasons it ends up biting you in the backside . Deregulation was just about lining the cheating Enron’s pocket . There is no reason the Texas electrical market should be deregulated … none … if it don’t rain you’ll find out why .

    #8
  9. Duh!

    And remember, Texas has more wind power than any other state by far. The states with cheaper rates also have a high concentration of coal fired generation and nuclear as opposed to Texas high use of natural gas… Can’t have it both ways people!!

    #9
  10. jukester

    The article is all about ‘retailers’, who are nothing more than ‘middle men’. The real issues with power in Texas are with the true suppliers, and the investments (or not) being made in both power generation and power transmission (delivery lines). The multitude of ‘power companies’ are nothing more than leeches making their margin on the fundamental supply (some add value by pushing rates down, many others do not).

    #10
  11. Bama

    To “saved”…. Sorry, but you wrong…. TEXAS Deregulated energy is one of the CHEAPEST in the US…. And rates have been coming down… Now, some of the AREP are HIGHER but the CREPs are cheaper and risk free. Also, some of the Regulated areas are raising THEIR prices such as SWEPCO and will for several years to come….. It’s time to break these companies up and SAVE money for the people living in these areas…

    #11