Acceleration in TXU Customer Churn Continues

Updated November 1, 2010

TXU Energy's residential customer churn accelerated further in the quarter ending September 30, 2010, as TXU lost 30,000 residential customers (net) versus June 30, 2010.

That compares to a net loss of 19,000 residential customers from March 31, 2010 through June 30, 2010. For the first three months of 2010 and final three months of 2009, residential customer attrition was relatively flat at only 13,000 and 14,000 in each of those quarters, respectively.

As of September 30, TXU residential customer count stood at 1.800 million, versus 1.830 million as of June 30, 2010, and 1.876 million a year ago.

TXU's small business (< 1 MW) customer count as of September 30, 2010 was 228,000, versus 241,000 as of June 30, 2010 and 273,000 a year ago. The 13,000 small business customers lost since June 30, 2010 compares to net attrition of 9,000 small business customers from March 31, 2010 to June 30, 2010.

TXU's current large customer count of 22,000 was flat versus June 30, 2010 and compares to 23,000 versus the year-ago period.

Total customer count is 2.050 million, versus 2.093 million as of June 30, 2010 and 2.172 million a year ago.

Retail electricity revenues decreased to $1.880 billion, from $1.968 billion a year ago, reflecting the following:

• Lower average pricing decreased revenues by $111 million reflecting declines in both the business and residential markets. Lower average pricing reflected competitive activity in a lower wholesale power price environment and a change in business customer mix.
• A 1% increase in sales volumes increased revenues by $23 million. Residential sales volumes increased 1% reflecting greater average consumption driven by hotter weather, partially offset by a 4% decrease in customer count due to competitive activity. Business sales volumes increased 1% reflecting a change in customer mix resulting from contracts executed with new customers.

See chart for select retail electric revenue, volume data

Executives at Energy Future Holdings said that TXU Energy margins improved in the third quarter, from lower gas prices, but did not quantify the improvement.

SG&A expenses at the combined wholesale and retail competitive electric segment at Energy Future Holdings decreased $9 million, or 5%, to $183 million in 2010. The decrease reflected $13 million in lower bad debt expense (reflecting the absence of 2009 delinquencies due to delays in final bills and disconnects resulting from a system conversion), as well as $5 million in lower marketing expenses.

On a consolidated basis, EFH reported a GAAP net loss of $2.9 billion, versus a net loss of $80 million a year ago.

The 2010 loss primarily reflects the impact of a non-cash goodwill impairment charge of $4.1 billion, which was taken to further reflect the estimated effect of lower wholesale power prices on the enterprise value of Texas Competitive Electric Holdings, driven by the sustained decline in forward natural gas prices and declines in market values of comparable companies.

Adjusted operating results at EFH for the third quarter 2010 totaled $17 million of net income compared to $10 million of net income for the third quarter 2009.