Reliant: Too big to succeed?

Reliant Energy is not exactly alone in its current financial woes: other companies are facing credit issues and other Texas electric retailers are having challenges. But Reliant is still somewhat unique.

Like the roof of the football stadium that bears its name, Reliant Energy has seen better days. (Chronicle/Smiley N. Pool)

First, Reliant is both an independent power plant operator and a retail electric company. In the old days before deregulation we would have just called them a utility, but their power plants aren’t even in the same markets as their retail customers. So it’s really like two companies.
And as we mentioned last week, analysts really don’t like Reliant’s retail electric business. Of course, most analysts that cover Reliant cover either traditional, integrated utilities or independent power producers. Having retail operations in Texas, which is unlike any other power market in the country, makes them just plain complicated.
What about Dallas-based TXU? Aren’t they in the same boat? Not really.
Aside from having been brought private by investors last year, the no. 1 retailer by customer count and no. 2 by power sold still has its own power plants, or at least its parent company still does. TXU seems to buy much of its power from that wholesale power business (presumably through long-term agreements that might be better than what they could get if they were just out on the open market).
So Reliant has to buy power for about 1.8 million customers in the highly volatile Texas power markets without the benefit of affiliated power plants or an investment-grade credit rating, and while being publicly traded and subject to the whims of investors/Wall Street. That’s a lot of risk to manage, perhaps too much. Maybe there’s a limit to how many customers you can serve without actually owning power plants?
So what happens next? Do they find someone who will buy the whole business and keep it as is? Do they just sell the power plants and use the money to prop up retail? Or do they simply find better financing and keep slugging it out? Share your thoughts here.