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NRG Retail Margins Down on Supply Costs, C&I Pressure NRG Energy reported that its retail supply businesses have seen lower unit margins for the first six months of 2013, from higher supply costs and pressure on commercial and industrial pricing.
Specifically, aggregate retail gross margin declined from $24.6/MWh for the first half of 2012 to $21.7/MWh for the first half of 2013. For Texas retail unit margins, the impact was about a reduction of $1/MWh versus the year-ago.
In Texas, NRG attributed the decline to higher supply and hedging costs, and weather. Specifically, NRG hedged for hotter weather which did not materialize.
NRG also said that Texas margins were negatively impacted by competition in the C&I space, while aggregate margins were impacted by a change in customer mix as well.
Regarding Northeast margins, James Steffes, NRG Retail Regional President for the Northeast, said that, "competition remains very intense in the C&I space."
"We do believe there's again pressure because costs have increased. But we're seeing sort of a stabilizing in those key numbers," Steffes said.
Overall, gross margin was lower by $67 million during the second quarter, versus the year-ago, primarily due to a reduction in mass and C&I load as a result of persistently mild summer weather and increased supply costs not fully recovered as a result of competitive renewal and acquisition pricing, partially offset by additional margin from higher customer count.
NRG said that it continues to organically grow retail customer count in Texas as a result of effective execution and expansion of innovative products and services. NRG said that it has seen retention rates improve by 10% to 20% for customers enrolled in these products.
NRG's retail customer growth during the three months ended June 30, 2013 was first reported by Matters on Friday (click here)
Total retail volumes were down close to 7% for the quarter, NRG said, driven by weather and discipline on pricing and margins in the commercial and industrial segments. In the Northeast, while margins have been under pressure, NRG was able to increase total revenues, grow customer counts, and nearly double retail volume sold across the region, the company said.
NRG said that it is recalibrating its retail cost structure to respond to changing market dynamics. Year-to-date results indicate that operations and maintenance cost per customer is down 4% year-over-year, NRG said.
NRG's Retail segment recorded second quarter adjusted EBITDA of $140 million, versus $219 million a year ago.
On a GAAP basis, the Retail segment recorded a loss of $82 million, versus net income of $797 million a year ago.
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August 12, 2013
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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
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