Dynegy Details Retail Acquisition Strategy, Discloses Cost Advantage From Generation Ownership

During an investor day last week, Dynegy outlined the customer acquisition strategy for its retail business, highlighting the cost advantage resulting from its ownership of generation.

Dynegy said that its retail business only operates in markets where Dynegy has generating assets, and in targeting retail volumes, the company ensures that it has sufficient excess generation to manage load following risk

Sheree Petrone, Dynegy's Executive Vice President of Retail, told investors that Dynegy's generation provides it with an advantage of at least 75¢/MWh at retail -- 25¢/MWh from avoiding third-party collateral obligations, and 50¢/MWh in avoiding third-party wholesale premiums

Dynegy targets retail customers that offer large amounts of load and are cost-efficient to serve. This includes larger C&I customers and mass market customers acquired through municipal aggregation. Individual mass market customers with a low cost-to-acquire, such as those acquired through email marketing digital channels and affinity programs, are also targeted.

Dynegy also discussed retail pricing trends, telling investors that pricing driven by the polar vortex benefited 2015-2016 unit margins. "Following the Polar Vortex in 1Q14, we were able to capture price premiums and win additional Muni Agg load, in some cases with longer-dated contracts, benefitting 2015-2016 margins," the company said.

While unit margins will normalize over time, Dynegy sees increased retail volumes offsetting this margin normalization.

"Shifts in the competitive landscape provide [an] opportunity to gain market share," the company said.

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