CenterPoint Energy Services Studying Mass Market Expansion in East, Midwest Markets

CenterPoint Energy Services had been studying the expansion of its retail natural gas supply business to small volume customers prior to its purchase of Asgard Energy, and the purchase will give CenterPoint additional experience in serving small volume customers as it weighs expanding to the mass market, Eric Sullivan, Vice President of Marketing for CenterPoint Energy Services, told Matters yesterday.

Effective November 1, CenterPoint Energy Services (CES) acquired Asgard Energy, whose book includes more than 1,400 diverse large volume commercial and industrial customers and 13,000 individual accounts in the SourceGas Choice program in Nebraska and Wyoming (11/3).

Sullivan said that while CES was initially attracted to the Asgard book due to its non-residential volumes, Sullivan added that the residential component of the book also presented CES with an opportunity to gain some experience with a business line it had been studying for some time with respect to its eastern and Midwest gas markets.

No decision has been made yet regarding expansion to mass market gas sales apart from the Asgard book, but Sullivan reported that CES will be examining if the Asgard operations can be leveraged to support the expansion to small volume choice in states such as Pennsylvania, Michigan, Illinois, and Indiana.

CES does serve some small volume accounts in these states already, but these accounts are generally included in a larger national account or aggregation (such as serving an individual convenience store as part of a larger account for the entire chain)

CES' sales model is based on a high-touch experience with personal interaction, and thus CES focuses on accounts large enough to sustain this higher-cost approach.

The Asgard book will give CES experience with call centers and other mass market sales channels, however.

While CES has recently been expanding to more distribution companies in Pennsylvania, CES has, outside of a few national accounts, refrained from entering the Ohio gas market. Sullivan explained that CES believes that, given the Ohio market's competitive intensity, entering the market organically would not justify the investment, but entering through an acquisition would be more palatable.

With regard to CES' electric brokering, Sullivan said that the business line is mainly "defensive" to keep customers from finding another provider for electric procurement, which could lead to that provider also serving the customer for gas supply.

The electric brokering business, to date, has largely focused on procuring electricity for existing CES gas customers; however, CES is studying the expansion of brokering to mass market customers, independent of whether CES enters that market for gas supply.