By Teresa McUsic — Special to the Star-Telegram
Discounted cruises, hotel rooms and DVDs will join lower electric rates soon as lures to draw consumers to one of North Texas' 11 retail electricity providers.
But this time, energy provider TXU will be among those leading the charge.
Jan.1 marked the third anniversary of electricity deregulation in Texas. It also phased in a new era, allowing the incumbent electric utilities -- TXU in North Texas and Reliant in Houston -- to offer discounts and other incentives as their upstart competitors have been doing.
“We've learned more about our customers in the last year than in the last 100 years,” said Brian Tulloh, senior vice president of strategy for TXU Energy. “Prior to deregulation, there was no incentive.”
The company will launch a loyalty program next month that gives customers discounts on a variety of products. By early summer, customers may be able to get discounted electricity rates.
Today there are big reasons for TXU to know what customers want -- to retain them and to bring back those who left for cheaper rates.
More than 900,000 Texans -- or one in five residential electric customers -- have switched electricity providers since deregulation began, lured away primarily by discounts, said Paul Hudson, Public Utility Commission chairman.
About 8 percent of TXU's original base of 2.6 million residential customers has shifted providers, according to company officials.
That figure pales compared with the number of businesses that have switched statewide -- more than half of small commercial users and nearly 70 percent of large companies, Hudson said.
Meanwhile under the PUC's oversight, TXU has slowly ratcheted its regulated “price to beat” electric rate up five times for a total rate increase of 30 percent since deregulation, citing rising natural gas prices. The company's rate now stands at 10.98 cents per kilowatt hour.
Those increases have allowed competitors to get a foot in the door with thousands of households, with some retailers offering more than 10 percent in savings over TXU, Hudson said. “Every time the price-to-beat increase is requested, the competition is out knocking on doors,” he said.
That competitive edge may be significantly undercut soon, however. The deregulation legislation allows TXU to set its own pricing floor this month, effectively allowing it to lower prices without regulatory approval. It must still get permission for rate increases.
The powerful electricity giant intends to offer one- or two-year term agreements at discount rates by midsummer, said Jim Burke, TXU senior vice president for the residential segment.
We're going to continue to drive the entire industry into being more competitive, “Burke said. Annualized savings for term agreements is something we would be able to deliver.”
TXU has not determined what discounts will be given to those who sign up for longer-term agreements, or whether the offering will be a flat rate or seasonally adjusted (TXU currently raises its rate in the summer and lowers it in the winter). But Burke said the company will realize savings by locking in customers.
Another TXU marketing program will be an attractive rewards program called TXU Energy Rewards, Burke said.
TXU customers in North Texas will be able to sign up for the pilot program online in mid-February. It will offer a variety of discounted products such as DVDs, software, hotel rooms, airline tickets, cruises and condominium time shares.
TXU will put 50 reward dollars a month in participants' accounts, with a starting bonus of 100 to 150 reward dollars, Burke said. These reward dollars can be used to buy products and services on the company's Web site.
Last fall in Houston, 10 percent of TXU customers signed up for a rewards program after one direct mailing, Burke said. The full North Texas launch is set for June.
“We are really trying to reward people to do nothing more than stay with us,” Burke said, adding that they wanted a program that would have a broad appeal among its customer base.
Some TXU competitors have also developed reward programs. Houston-based Gexa offers airline mileage with Continental and American Airlines in which every $1 on your electric bill gets you two miles. First Choice, based in Fort Worth, offers its customers a discount card for local restaurants and merchants.
Many of the electric retailers also focus on customer service and lower prices. Gexa, Arlington-based Starlight Electric and Houston-based Cirro Energy have prices 12 percent to 15 percent below TXU's.
TXU's potentially generous rewards program, along with a discounted rate for longer-term customers, could sound the death knell for some competitors, warns Ken Malloy, chief executive of the Center for the Advancement of Energy Markets, a Washington think tank focused on energy issues.
“At the end of the day, they have put into place a mechanism that results in unfair competition that benefits the incumbents,” Malloy said. In a more competitive market, such as Georgia's natural gas market, all of the incumbent's customers had to decide on a new retailer or be automatically placed with one after 18 months, he said.
Still, Texas leads the nation in electric competition, Malloy said. Achieving a truly competitive marketplace will just take longer than it might have with a law similar to Georgia's.
“It's going to be 10-plus years before the incumbent advantage is nullified,” he said.
Teresa McUsic's column appears Mondays and Fridays.