Retail Supplier: Pricing Pressures 'Will' Lead to Consolidation; Could 'Improve' Retail Market

Pricing pressures facing retail energy suppliers "will drive consolidation" and, "could well improve the market," Direct Energy said in comments to the Connecticut PURA.

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Direct Energy was commenting on a series of proposals from PURA (click here) which would drastically add new regulations to the retail electric market. In particular, Direct was commenting on proposals that would limit suppliers' ability to assign their contracts to another supplier, such as a prohibition on the assignment of variable rate contracts.

"Limiting the ability of suppliers to assign variable-priced contracts will not solve any of the concerns customers have expressed about such contracts, and could negatively impact trends that would otherwise help to improve the overall functioning of the market," Direct Energy said.

"For example, it seems likely that the pricing pressures brought about by the recent weather event will drive consolidation in the electric industry. A certain amount of consolidation could well improve the market by providing opportunities for well-capitalized companies, which are better able to manage the risks associated with volatile energy markets, to acquire the customers of more thinly-capitalized firms that have little choice but to pass on higher costs to their customers," Direct Energy said.

"Making it difficult or impossible to undertake such transactions to the extent they involve customer assignment prevents this helpful trend from taking hold," Direct Energy said.