Direct Energy Purchases Bounce Energy

This morning Direct Energy has announced their purchase of Texas retail electricity provider Bounce Energy. Bounce Energy, who has consistently been at the top of the Texas Electricity Ratings rankings (currently #1), has easily been the most innovative electricity provider in the country in terms of their online technology/capabilities and their success in reaching out to potential and existing customers through social media outlets.

Additionally, just recently, Bounce made groundbreaking contributions to the electricity space with the launch of their new MyAccount functionality, as well as their Build Your Own Plan functionality. The Build Your Own Plan is the only one of it’s kind in the electricity space, and allows customers to select their own plan term length, the amount of renewable energy in the plan, whether they want automated and paperless billing, and more.

In contrast, Direct Energy has long been lacking in the realm of online functionality, digital customer outreach, and a customer friendly web-portal. So on the surface, this seems like a very smart purchase by Direct Energy, but only if it’s viewed as a strategic purchase of specialists and experienced personnel to bolster some trouble areas of their business. If it is just viewed as a purchase of a customer book, then I’d purport that Direct Energy is wasting a great opportunity.

Fortunately, from some of the quotes in the press release, it looks like Direct Energy is very much viewing this as a strategic purchase:

“We are always looking for new ways to enhance our customers’ experience and satisfaction,” said Steven Murray, President of Direct Energy Residential. “Bounce Energy’s digital marketing insights and e-commerce platform will bolster our capabilities as we expand our product offerings to current and potential customers.”

 

“Direct Energy is the ideal organization with which to expand our e-commerce platform and digital marketing capabilities,” said Robbie Wright, CEO of Bounce Energy.

If that is the case, and by all appearances it seems to be a strategic purchase, this is great news for both Direct Energy and Texas electricity customers alike. Bounce’s technology and marketing savvy along with Direct Energy’s resources (which allow them to go toe to toe with incumbents like TXU and Reliant), could create the kind of Texas electricity company that will push innovation in new ways that will only benefit Texans, as well as customers in all other states Direct Energy sells electricity.

All in all, it’s a very interesting day for Texas electricity customers. The #7 company on Texas Electricity Ratings is purchasing the current #1 company, but there’s a lot of hope that the union will mean great things for customers. Congratulations to both Direct Energy and Bounce Energy!

Risings Costs – Your Electricity Company Has Little Choice In the Matter

It was a known fact that electricity rates would take a substantial hike after Donna Nelson and the PUC approved an increase in the market cap last summer. And I’ve been steadily watching those rates rise since then. And this summer in particular I’ve seen more angry reviews than usual from customers complaining about the available rates when they’re renewing their electricity plans. It’s a potent cocktail of panic over the supply on the ERCOT grid, and the PUC’s inability to pull back from hitting the panic button, mixed with the all too self-serving pressures from the existing generators for more, more, and more that are driving prices up and why they’ll likely stay there with no end in sight. Let me explain.

Why Are The Rates Increasing?

When the emergency market price cap for power was voted into an ongoing, every summer increase through 2015 from the original $3000/mWh in 2011 to an absurd $9000/mWh in 2015, people familiar with the market and the market drivers knew that electricity rates would go up. And while updating the Texas Electricity Ratings recently, I took the time to compare the rates from this summer versus last summer’s electricity rates. Of the 41 electricity companies listed on Power To Choose last summer, the average rate for a 12 month plan in the Oncor service area was 8.8 cents per kWh. This summer, of the 46 electricity companies listed on Power To Choose offering a 12 month electricity plan in Oncor, the average kWh rate was 9.8. That’s an increase of almost 13%.

An increase of 13% might not seem like much, but it came after the market cap increased from $3000 to $4500. The staggered increases are scheduled to keep increasing until they stop at $9000. If the numbers continue upon that projection, it would mean prices could settle after an increase of 52%. That would be an average 12 month contract rate of 13.3. That’s approximately 15% higher than the highest 12 month plan on the market today, and even that is a 12 month green energy plan which are even more expensive than regular 12 month plans. And that will be the AVERAGE plan rate.

Another thing to consider is that the price per kWh isn’t the only thing that will cause your bill to increase. Electricity companies, trying to keep up with soaring energy generation costs, are getting more and more clever at disguising and passing on their costs to customers. One method is the increasingly noticed Minimum Usage charges. I’m seeing more and more customers complaining about them in reviews and emailing me asking questions. If customers are citing them more, it’s because their effect on bills is increasing enough for people to take notice. Minimum Usage fees are how electricity companies cover costs for servicing customers such as billing, call centers, etc. on customers if they aren’t using a given threshold of electricity, but there is no oversight or regulations on how an REP can implement their minimum usage rates. They can have a high rate from the start, or increasingly they can pick an arbitrary usage threshold and jack the electricity rate up astoundingly if a customer doesn’t meet that threshold. This way REPs can recover their expenses while still seeming to be offering competitive rates. So read your fine print, customers.

If Not The Electricity Companies, Then Who?

The natural assumption when a company raises their prices is that it’s entirely by their own choice. But in this instance, a better comparison would be the cost of gasoline. The cost of gas at the pump is tied to many things, first and foremost the cost of oil per barrel. Another is the cost of transportation (there’s a reason gasoline is cheaper the closer you get to refineries as opposed to places where it has to be transported by truck across several states). The cost of electricity is heavily dependent on the cost to buy the energy from the electricity generators (such as Luminent, NRG, etc). As when the cost for barrels of oil increases the price of gas at the pump, when the generators set higher rates for the sale of their energy, REP’s have no choice but to raise the electric rates they offer their customers.

So the real question is, why is the cost of generation increasing so substantially? Well, as I’ve written about before, the beginning of the problem is the perception of growing scarcity of energy to meet the increasing needs of the state of Texas. With the rapid population increase the past few years, and the growing industries moving to Texas because of a favorable business environment, the electricity needs of Texas are potentially outpacing the growth of generation. And because the Texas electricity market is deregulated, the private sector has to decide to invest in generation and build more power plants. The problem is, the generators are saying that they aren’t certain they’ll make the profits they’d need to justify the investment.

The power generators aren’t building many new plants. It appears they’ve decided to play chicken with the state of Texas’s electricity needs because, well, they can and with the PUC giving into their every request to date, they’re incented to do so.  PUC is proving itself to be more or less beholden to the electricity generators, and as a result every single decision they’ve made to try and spur generation has unsurprisingly seen in favor of the claimed needs of prospective electricity generation investors. The market cap was a move to entice generators to build more plants, but right now all it has done is increase prices for residents and REPs alike. As well, changes have been made to effect the longevity of emergency pricing events. Ancillary energy charge pricing has been moved up as well. Each of these moves feeds into the claimed needs of generation. And the generators are also hugely in favor of switching to a capacity market, which is another move that would also favor their interests as well, as opposed to consumers.

While the population increase of Texas can’t be controlled, one thing that certainly could change would be Donna Nelson and the PUCs willingness to lay prostrate for the energy generators and rubber stamp any initiative in hopes that they’ll eventually invest in new generation. The problem is, why would the power generators start building anything until they’re positive they’ve squeezed every last possible drop of profits and concessions from the PUC and Texans? It isn’t as if they’re meeting any resistance, or like the PUC is saying “No” to anything. If I were an energy generator, I’d also probably say nothing and let the PUC keep throwing consumer dollars at me as well. It’s almost like one of the ridiculous movie scenes where someone keeps bidding more money at an auction against themselves without anyone else putting out any bids.

A key to this whole bataan death march towards higher prices since the August of 2011 scare is that the pricing for residential electricity has been at an all-time low. Frankly, it was artificially low last summer heading into this spring, given the enormous jump in wholesale pricing from pre-summer 2011 to the pre-summer 2012 period. It’s as if REPs were waiting, hoping even, to see if there wouldn’t be a pull off from the wholesale pricing before they took the step of driving the prices in the market upward. This spring’s climb in natural gas prices appears to have been the final straw. Numerous reputable REPs ultimately moved prices upward significantly and the other names more or less followed. The luxury in the pricing lull for the PUC during all of the recent changes that will hammer residential bills is that they were able to claim, and often have repeatedly, that pricing on the residential side remained at all-time lows. Of course this was a house built on sand and now it’s being washed away. As the heat from residential advocacy groups rises again, it’s going to be interesting to see how the commission endeavors to handle further negative moves that favor no one but the bemoaning generators. It’s one thing to make moves when no one is looking, but something altogether different when everyone impacted begins paying attention.

What’s disturbing in all of this is of course that the whole point of an electricity-only market is to maximize the efficiencies of the market’s ability to produce the last necessary MW of power. It’s not a design intended to have excessive length in the ability to generate power.  Nonetheless, every decision made in the last two years has basically planned for the worst possible scenario, a market seize-up due to running out of power – something that has never occurred and has a likelihood of occurring even in current situations of scarcity at an infinitesimal percentage. It’s as if almost having to institute rolling blackouts for a few hours on a few days in a once-in-115-years-of-weather-history weather event in August 2011 has now been established as the accepted norm for planning with all market actions into the future. That that would create a market with excessive length to the detriment of every participant for 718 out of every 720 days seems to be moot. Here we are, 2 years later with more reserve margin than 2011, normal weather, and virtually zero pressure on the grid regarding scarcity, yet pricing for consumers is soaring and will continue upward.

So What Happens Next?

Unfortunately the only certain answer to that question is that electricity rates will continue to rise. For consumers, I’d suggest locking in long term rates for as long as possible. As for the PUC, who knows what will change in that regard. It’s hard to see their behavior towards energy generation changing any time soon, at least not until a 3rd member is added to replace the existing vacancy for the 3 person panel of commissioners. And while Kenneth Anderson has been a more consumer oriented voice on the commission, the truth is that little will probably change in the near future for the PUC. The best customers can do is understand what and who is causing their rising electricity rates and to be diligent in shopping for the best deals they can find. And then duck for cover

Donna Nelson On Residential Customer Demand Response

I’ve been fairly critical of the PUC in recent posts, but recently Donna Nelson did speak out on something that I do actually agree with…or at the very least, it seems fair. As the generation capacity of Texas continues to shrink, and as the PUC’s efforts to lure new generation to date have failed,  Continue reading “Donna Nelson On Residential Customer Demand Response” »

Texas Electricity Ratings: Rankings Update 2/19/13

We’re well into the new year, and it is time for a new update of our rankings here at Texas Electricity Ratings. We’ve had rate changes now that companies are preparing to move back into summer rates, and there’s also been another round of customer reviews that I’ve entered into my system. So with that in mind, here’s our latest round of rankings:

Bounce Energy                        4.04
Champion Energy Services     3.91
StarTex Power                         3.81
TriEagle Energy                       3.69
Gexa Energy                            3.58
Direct Energy                           3.17
Amigo Energy                          3.09
Tara Energy                             3.02
Green Mountain Energy           2.79
TXU Energy                              2.53
Texas Power                            2.46
Reliant Energy                          2.13

Congratulations to Bounce Energy, who is back in the top spot! Bounce is followed by Champion Energy, who slipped a little but during this rankings system. StarTex Power has slipped back into the 3rd spot, even after their purchase by Constellation Energy. That speaks well to how they’ve been transitioned into Constellation.

During my rankings update, I’ve also noticed some more things about the Power To Choose website rankings, but that will be another post I’ll put up later today or tomorrow.

PUC Looking to Revise Financial Requirements for REPs

This news is a bit old, but it is worth a quick mention. Per Paul Ring, at Energy Choice Matters, the PUC is looking to reexamine and likely revise the financial qualifications it takes for REPs to be certified to sell electricity in the state of Texas. This is a direct result of the PUC raising the market cap in August, with more raises Continue reading “PUC Looking to Revise Financial Requirements for REPs” »

What Is Proton Energy Thinking?

Since I’ve been writing this blog and running this website, I’ve seen a lot of new Retail Electricity Providers (REPs) enter and exit the market. At this point, it takes more than just low rates to set yourself apart in a crowded Texas electricity market, companies have to interface well with their customers. And in my personal opinion, in the age of the Internet, any company that doesn’t have a decent web interface/presence is beyond help. Which is why this video below from Proton Energy just completely blows my mind:  Continue reading “What Is Proton Energy Thinking?” »

Potential TXU Bankruptcy: What it Means for Texas Electricity Customers

The Texas electricity market has been abuzz the past few weeks after a series of articles have been released speculating about the possibilities of Energy Future Holdings separating their competitive assets (TXU and Luminent, respectively) from Oncor in preparation of possible bankruptcy. There have been several articles in the Dallas Morning News, which you can read here, here, here and here, as well as an article here in Bloomberg. Right now everything being written is just speculation,  Continue reading “Potential TXU Bankruptcy: What it Means for Texas Electricity Customers” »

Electricity Complaints Continue to Decline

Recharge Texas, a group that I’ve often disagreed with in the past, released a new report discussing how PUC complaints have declined year over year from their peak in 2010. Of course, TCAP was also quick to point out that  Continue reading “Electricity Complaints Continue to Decline” »

Texas Electricity Customer Satisfaction Tops in JD Power Survey

As I wrote about yesterday, JD Power & Associates released their 2012 survey of Customer Satisfaction for the Texas electricity market. I’ve already written about the specific results and the electricity providers that excelled in the survey. Today I want to take a look at another segment of information that was released in the survey:

Customers in Texas who are able to choose their electric provider are increasingly more satisfied with their provider than are those who do not have a choice, according to the J.D. Power and Associates 2012 Texas Residential Retail Electric Provider Customer Satisfaction StudySM

Since Texas deregulated in 2002, the market has had it’s ups and downs. It took a couple years for the pricing to get in stride, and it also took a few years for most people to come to understand the process of shopping for and selecting new electricity providers, as well as the difference in responsibilities between companies like Reliant and Centerpoint, or TXU and Oncor. Lots of people got frustrated, and lots of people in places like Austin and San Antonio pointed fingers and said deregulated electricity was a failure.

However, in the past 5-6 years, the market has settled down. Prices hit all-time lows with the cost of natural gas, and right now they are actually some of the lowest prices in the country while Austin is on it’s way to having one of the highest electricity rates in the state of Texas. Additionally, some reports from biased groups like Recharge Texas have interpreted that rising customer complaints after deregulation are a sign of overall customer dissatisfaction, as opposed to customers simply participating in the marketplace. Well, this recent JD Power Survey seems to put that to rest once and for all:

Overall satisfaction among residential customers of electric retailers in Texas is 678 (on a 1,000-point scale), an increase of 44 points from 2010. This is the highest level since the study was first published in 2008. Moreover, this is the first time satisfaction among customers with a retail choice of electric providers exceeds both the Texas and U.S. national averages for all factors measured in the study. Among Texas customers with regulated residential electric service, satisfaction is 646. Regionally, satisfaction among customers in the Metropolitan Dallas/Fort Worth area is 677, compared with 681 among those in the Houston area, three points higher than the statewide average.

So Texas has the highest customer satisfaction when compared to any other state in the country, particularly and including regulated states. Additionally, when comparing the customer satisfaction between the regulated and deregulated areas of Texas, the average customer satisfaction is overwhelmingly better in the deregulated areas. Despite a bunch of naysayers about deregulated electricity, and customers paying higher prices, and being dissatisfied with a confusing process, it looks like the market actually is working and customers are happier.

Here’s some other interesting facts and snippets from the JD Power Survey:

“Many electric retailers in Texas are considering how to better serve their customers when they are contacted,” said Andrew Heath, senior director of the energy and utility practice at J.D. Power and Associates. “The large improvements show that electric retailers are putting practices in place that improve satisfaction, which helps retain customers.”

Satisfaction is 218 points higher when customers’ questions or problems are resolved on the first call, compared with when their questions or problems require two or more calls for resolution (799 vs. 581, respectively). Similarly, online customer service interactions echo the need for quick resolution, as satisfaction with customer service is 800 among customers whose questions or problems are resolved on their first visit to the website, compared with 644 when problem resolution requires two or more visits.

“Customers do not want to spend much time getting an answer or fixing a problem with their bill or service,” said Heath. “The dramatic increase in satisfaction for first-contact resolution is a clear indicator that Texas electric companies should strive to quickly resolve issues or questions.”

Among customers who are aware of their retailer electric provider’s corporate citizenship efforts–such as supporting local organizations or volunteering in the community–satisfaction averages more than 60 points higher than among those who are not aware of such efforts.

So it looks like the innovation and focus on customer service that was expected to result from a deregulated market have taken place. Companies are focusing on customers, as well as innovating in the online space. Some companies are even making a larger push at civic involvement and their customers are aware and pleased at this fact. The rates in the deregulated areas of Texas are among the cheapest in the entire nation. It looks like the deregulated electricity in Texas is a success. Or at the very least, the customers buying electricity certainly seem to believe it’s a success.