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TXU plans expansion into Pennsylvania, following the herdJun 04, 2011 (The Dallas Morning News - McClatchy-Tribune Information Services via COMTEX) -- Energy Future Holdings is making plans to expand into Pennsylvania. The company's TXU Energy retail electricity business has acquired licenses to sell electricity under the brand name Brighten Energy. A Brighten website said it will begin doing so this year. The Dallas power company joins a stampede of Texas retail electricity providers to other states, including Pennsylvania, New Jersey, New York and Maryland. Those states, like Texas, have dismantled their utility monopolies and allowed electricity companies to compete for customers. The expansions could generate fresh revenue, or fresh headaches, as companies compete for slender profits. "Pennsylvania has redesigned its market with a view towards the Texas model," said Rob Snyder, chairman of Stream Energy, which already sells electricity in Pennsylvania and Maryland. But "the margins there are kind of tight," he said, partly because people in the cooler states don't use as much juice for air conditioning as Texans. Pennsylvania first deregulated its electricity market in 1997, shortly after Texas. Soon after, Pennsylvania capped retail rates, giving electricity providers little room to compete. Many left the market. During the past couple of years, those rate caps lifted, and the retail providers returned. Now, more than 30 companies offer retail electricity service in Pennsylvania, including Texas' Stream, Ambit Energy and Direct Energy. TXU and Reliant have licenses to serve retail customers but aren't yet doing so. On Wednesday, the Pennsylvania Public Utility Commission will hold a hearing on improving the competitive market. They've invited TXU Energy chief executive Jim Burke, Direct Energy chief executive Chris Weston, and Texas PUC Chairman Barry Smitherman to speak. "We're following Texas' lead," said Pennsylvania PUC Chairman Rob Powelson. "We are really using the BAA principle: borrowing, adding and adapting some of the good ingredients of the Texas model here in Pennsylvania." Of Pennsylvania's 12.5 million electricity customers, 1.3 million have switched from incumbent utilities to competing retailers. That gives the Texas retailers room to grab customers. Stream's Snyder said he has signed on 110,000 customers in Maryland and Pennsylvania this year. Stream uses a multi-level-marketing approach in which salespeople pay the company to become representatives, and then earn commissions as they sign up new customers. Several other retailers, including Ambit, are using a similar sales approach to the Northeastern states. Slow approach The expansion could be particularly important for TXU as its parent company, EFH, struggles to boost profit to pay off debt. When private equity investors bought EFH in 2007, observers speculated they aimed to expand to other states to boost the value of the company before selling it. TXU spokesman Michael Patterson said company officials haven't decided when to begin marketing electricity in Pennsylvania. "We're committed to the market, and we're just not there yet," he said. Houston retailer Reliant, a unit of NRG Energy, is also taking a slow approach. The company is licensed to sell power in six states outside of Texas but isn't doing so yet. Direct Energy, a Houston retailer, serves 10 states. The company expanded its presence last month in New Jersey, New York and Pennsylvania when it bought Gateway Energy Services Corp. for $91 million. "We were looking at getting into those markets where it's now much more competitive. The markets are much more ready for us to get in there," said Direct spokeswoman Claire Monaghan. Tough switch Snyder, of Stream, predicts those former utility monopolies will struggle to enter new markets. It's just not in their DNA, he said. "Basically there has never been, in the history of deregulation, a former utility that has materially expanded its reach into other jurisdictions," he said. The former Texas monopolies, TXU, Reliant and Direct, lose their brand recognition in other states, and they don't have the incumbent customers who won't switch, like they do in Texas. "They're going to go up there, and they're going to go door-to-door and they're going to buy [power] on the same terms as everybody else," Snyder said. To see more of The Dallas Morning News, or to subscribe to the newspaper, go to http://www.dallasnews.com. Copyright (c) 2011, The Dallas Morning News Distributed by McClatchy-Tribune Information Services. For more information about the content services offered by McClatchy-Tribune Information Services (MCT), visit www.mctinfoservices.com. |