ERCOT Retail Market Competitive Intensity Higher Than Ever, Burke Says

The ERCOT retail market is as, "about as intense as we have seen in any period over the last decade," TXU Energy CEO Jim Burke said Friday, citing retail offers which he characterized as below the marginal cost of power and wires charges.

As first noted by Matters Friday, TXU lost a net of 32,000 residential customers from December 31, 2010 through March 31, 2011 (4/29)

Burke said that variable rates for new customers are down 20% versus the first quarter of last year, despite a relatively stable wholesale market. New offers for a 12-month fixed product are down 10-15% despite an increase in the forward cost of power over 12 months versus the year-ago period.

Burke said that the lowest offers are introductory rates which are "not sustainable," and added that the emphasis of such rates is a recent competitive dynamic that has materialized over the last six months. Burke said that it is "hard to say" how much longer such low promotional rates will continue to drive the market.

Energy Future Holdings executives said that continued customer churn at TXU reflects its continued margin discipline.

Retail electricity revenues for the quarter were $1.203 billion versus $1.421 billion a year ago. A 10% decline in sales volumes (1Q 2011 = 11,000 GWh) decreased revenues by $145 million, which resulted from the aforementioned churn as well as milder weather. Lower average pricing decreased revenues by $73 million reflecting declining prices in both the residential and commercial markets.

Retail bad debt decreased $14 million in the quarter, reflecting improved credit quality in the retail book.