‘Niche’ electricity retailer wins Texas PUC approval

By Ann de Rouffignac
OGJ Online

HOUSTON, Aug. 15, 2001 — Texas electricity regulators certified a niche power retailer with plans to pursue the subprime market when full competition begins in January 2002.

The Texas Public Utility Commission approved Gexa Energy Corp. as a retail provider of electricity. The small company, traded on the “pink sheets”, will not go head-to-head with the big residential retailers New Power Co., an affiliate of Enron Corp., Houston; Shell Energy Services, a unit of Shell Oil Co., Houston; Reliant Energy Services, a unit of Reliant Energy Inc., Houston; or TXU Energy Services, a unit of TXU Corp., Dallas, Tex., said Gexa CEO Neil Leibman.

“We are marketing to the subprime market — the small user of electricity in apartments or mobile home dwellers,” said Leibman. “We will target the customer that nobody else wants.”

So far 30 companies have been certified by the PUC to provide retail electricity service to customers in January. Only seven companies are actually marketing electricity for the pilot program now under way in Texas. And those companies are marketing almost solely in TXU’s and Reliant HL&P’s service areas.

Gexa is modeled on deregulation of the telecommunications industry in Texas when many niche long distance companies with no networks of their own bought telecommunications services from big companies and resold those services to specific customer groups.

“We looked at this market and saw it echoed the telecommunications experience in Texas,” Leibman said.

Gexa is currently negotiating to buy power from a unit of TXU Corp., the largest utility in Texas, which will also schedule Gexa’s customer load with the grid operator.

The company said it will begin marketing to customers mostly through landlords of apartment complexes. When a tenant signs a lease, Gexa intends to offer electricity to those customers at that time. “When a lease is signed, they can check a box on a back page for electricity services,” explained Liebman. A deposit and application for service would then be forwarded to Gexa.

When the market opens in January, retailers will be allowed to charge what ever price they can get for electricity. Electricity consumers can, however, choose to continue buying power from the incumbent utility at a price guaranteed by the PUC. This so-called price-to-beat will be available until utilities lose 40% of their customer base to competitors or in 5 years, whichever comes first.

“I hate that term price-to-beat,” Liebman said. “We will get what ever price we can.” The PUC is currently determining what the “price-to-beat” will be for the different utility service territories.

“We are hearing that they [some landlords] may be trying to steer a customer base to a particular provider,” said Terry Hadley, spokesman for the PUC. “We will be watching the marketing efforts whether it’s a provider, or a group, or a landlord to make sure they show the options that are available.”

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