National Power makes good, but at what price?


As we reported, Houston-based electric retailer National Power Co. changed its mind yesterday about jacking-up all its fixed-price power plans. This was shortly after meeting with Public Utility Commission officials in Austin, although the PUC has not dropped its investigation of National.
But judging from reader e-mails not everyone will be returning back to the warm embrace of National’s 11.9 cent per kwh pricing plan. To quote one message:

“I and my close friend here in the neighborhood, have decided to march forward with our divorce with NPC and continue with the switch to [another provider] … The reason is perhaps twofold. Trust in Mr. Hunter [the CEO] and NPC has been lost. Second, no one can forecast what condition we may face in November when a renewal or switch would present itself.”

National Power isn’t sharing with us the reason behind the attempt to raise its prices, but it told customers the price it pays for power rose well above the price it was charging them. In other words, the company may not have hedged successfully against the possibility of rising wholesale prices .
Patricia Dolese, the former head of consumer protection at the PUC who now runs a consulting firm, notes that the “material change” clause it seems National invoked still leaves it between a rock and a hard place.

“So, what are the real options; force [retail electric companies] to honor their contracts, and in so doing, acknowledge [they] may go out of business, dumping their customers to higher-priced [provider-of-last-resort] service, or allow them to modify their existing contracts and risk losing some or all of their customers anyway.”

From a customer perspective, both options will likely result in higher prices, Dolese said to us in an interview, but from a market perspective, one option may better foster the development of a competitive market, while the other may favor large, established providers (the Reliant and TXU’s of the market).
Short of not sending the letters in the first place, how could National have done a better job of managing this situation?
Let us know your answers.