Energy Future Holdings’ bankruptcy will leave 1.7 million retail electricity customers ripe for poaching in a state that consumes the most power in the U.S.
The Chapter 11 filing of Texas’ largest retail power supplier has competitors “licking their chops,” said Rob Snyder, co-founder and chairman of Dallas-based electricity retailer Stream Energy. “Retailers in Texas will be asking: Do you feel comfortable with your electricity provider being in bankruptcy?”
Losing customers would drain value from TXU Energy, Energy Future’s biggest revenue-generating unit, representing one of the main risks for creditors if there is a prolonged reorganization. TXU has lost about 400,000 customers since 2008 as its parent has sought to ward off a bankruptcy.
The retail unit may lose more subscribers “if a lengthy and protracted bankruptcy plays out in the media,” said Jim Hempstead, an analyst at Moody’s Investors Service.
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TXU Energy’s business operations will not be affected by the restructuring, EFH’s chief executive officer, John Young, said in a statement. The state Public Utility Commission said Tuesday that it will protect TXU Energy customer contracts, and the retailer will continue operating.
The highly competitive retail market in the state, which has allowed customers of most investor-owned utilities to choose their supplier since 2002, has 225 entities jockeying to serve 11.1 million retail customers. Texas is the largest power consumer and producer in the U.S., according to the Energy Information Administration.
Direct Energy said Tuesday that it will offer incentives to new or renewing customers including up to $400 in gift cards.
Stream Energy, with about 360,000 Texas customers, began offering its sales staff financial incentives, such as credits on power bills, in September for signing up new customers as bankruptcy talks brewed, Snyder said.
Source Power, with more than 5,000 customers, hired a public relations firm and plans to increase its spending on marketing “significantly” in the second quarter from the first three months of the year, President John Werner said..
“This is going to be a once-in-a-lifetime event for all of us,” Werner said. “It’s going to be very interesting to see how the customers and suppliers react.”
While Texas retail power prices are 25 percent less than the national average, each household pays about $1,801 a year for electricity, among the highest in the nation, according to data from the Energy Information Administration.