Energy competitors talk up choice

In attempting to illustrate the potential perils of volatility in the energy markets for suppliers ”“ and by extension consumers ”“ Jeff Mayer draws a bar graph on a white board covering the whole of his MXenergy office wall in Stamford and starts filling in the names of various commodities.

First he starts with a short bar representing gold, then he moves up the chart, through soybeans to the stuff that”™s really off the charts. Mayer”™s rendering of the bar for energy is literally so ”“ to make his point, he upends a wastebasket to draw the energy bar to the top of the wall with a felt-tip marker, and ends up continuing the bar onto the suspended ceiling itself.

Get the picture? If so, you are in the minority despite the best barker efforts of Mayer, his marketers at MXenergy and other energy resellers who purchase energy directly from generators and sell it to businesses and consumers, with traditional utilities like Connecticut Light & Power serving simply as the middlemen.

While the vast majority of Connecticut homeowners have stuck with CL&P and United Illuminating Co., that could soon change with the utilities themselves encouraging consumers to shop.

In the past few months, such resellers appear to be amping up their marketing dollars in Fairfield County. Levco Energy, which markets electricity from Dominion Retail, recently held a small gathering in Stamford to commemorate Connecticut”™s strides to open the market to competition. At Danbury Fair Mall, Brookfield-based Public Power & Utility Inc. has staffed a table to provide information to shoppers there. And Norwalk-based Verde Energy USA reached a marketing alliance with Gault Energy, a home heating fuel supplier located in Westport.

 

Mayer counts MXenergy among the granddaddies of them all, having started 11 years ago and having grown to offer electricity or natural gas in more than 40 utility territories in 15 states ”“ most recently in Pennsylvania where it is now taking on PPL.
With the benefit of declining prices, MXenergy has been able itself to cut prices to customers, helping to stem any flight of its own customer base to other suppliers.

 

“Prices have stabilized quite a bit, which we believe has had a material impact on attrition,” Mayer said in a February conference call with investors. “Prices are certainly significantly down from where they were in ”™08 ”¦ All of this has resulted in a general lowering of the prices that we offer to customers; and as you know, those prices are close to the lows that have been available over the past decade. So, customers clearly are aware of that.”

Because regulators force utilities like CL&P to purchase electricity in blocks at least a year in advance, that allows nimbler competitor suppliers to take advantage of price differentials by scheduling purchases more often.

Many of those suppliers, however, are operating on relatively tight margins.

“The bigger problem I foresee happening in Connecticut is that many of these small electric providers will go under when prices spike,” Mayer said, noting that occurred in Texas in 2008 when about a half-dozen suppliers succumbed.

As for his own company”™s outlook? Mayer said he does not pretend to have a crystal ball, but said with a 2009 restructuring in place, MXenergy has its best financial flexibility in some time.

“We”™ve survived some of the coldest winters in history, and some of the warmest summers in history,” Mayer said. “We survived the hurricanes that hit the Gulf.”