Power spikes drive Texas electric retailer out of business

Posted on February 10, 2011 at 3:07 pm by Tom Fowler in Electricity, General

Comments()

E-mail

(Photo: Jeff Kubina/Flickr)

A Dallas-based electric retailer has defaulted on its financial obligations to the state’s grid operator, and its 7,700 customers are being shifted to other electric companies.

Abacus Resources Energy will have its customers — mainly residential — switched to two other providers by Saturday, Spark Energy and Our Energy, according to executive vice president Mark Angell.

Customers shouldn’t see any change in their rates or disruption in their service, Angell said.

Angell blamed the company’s financial problems on steep spikes in wholesale power prices that hit Texas last week when dozens of power plants suddenly went offline due to cold weather.

When wholesale prices rose quickly from around $100 per megawatt-hour to the market cap of $3,000, the costs to Abacus were too much.

“We didn’t want the customers to end up with the Provider of Last Resort,” Angell said, referring to the system Texas uses to keep power customers from having their lights turned off when their retailer goes out of business. “Why should the customers get killed on their bill because we messed up and ERCOT messed up?”

So Abacus moved the customers to two other firms they had worked with in the past to ensure a smooth transition.

The company still owes ERCOT about $750,000, he said, which will need to be covered by the company’s owner, Omer Varol, a German businessman.

Angell said he warned the company owner to hedge more of the company’s power purchases, but he was slow to raise the funds to do so.

“It was like playing Russian Roulette with a full revolver,” Angell said.

Abacus’ failure is similar to the problem faced by about a half-dozen small electric retailers in 2008 when wholesale power prices spiked due to congestion on the Texas power grid.

Many thousands of customers were forced to switch to other providers who were charging rates in some cases twice as high as comparable market rates.

The incidents led the Texas Public Utility Commission to increase the financial requirements for retail electric companies. Previously companies only needed to show they had $100,000 in a bank account, but new rules require companies to have at least $100 million in equity value in the company and a letter of credit of at least $500,000.

Angell said he believes other small power companies in Texas may be in a similar situation to his.

The breakout of Abacus’ 7,743 customers:

7,615 residential
125 small business
three medium business
Daily power use of about 383 megawatt-hours per day

Most of the customers, 4,318, were in the North Texas area served by Oncor, while 1,446 were in Houston-based CenterPoint’s region.

Abacus had about 20 employees who will now be out of work, Angell said.

What’s next for Angell?

“Monster.com,” Angell said with a laugh, referring to the job search site.

Were you an Abacus customer? Tell us about your experience with them.

Comments()

E-mail

Tags:Abacus Resources

« Previous Post

Tom Fowler

Contact:

Follow:

Latest Posts:

Steffy: Indictments create new worries for offshore workers 11/21/12
Chevron fire moves govenor to form task force 11/21/12
Oil-friendly Texas also gives a howdy to renewables 11/21/12
Chevron says NY official abused shareholder power 11/21/12
Toshiba shows four-legged robot for nuke disaster 11/21/12

13 Comments

elkoolero

February 10, 2011, 3:38 PM

Turn out the lights the party’s over.

#1
bob

February 10, 2011, 3:42 PM

This electricity selling by different hedge funds essentially is nothing but a joke to scam the public. Who allowed this? Check it out.

#2
momojr

February 10, 2011, 4:15 PM

Deregulation sponsored by the crooks in Austin caused this.

#3
TBone Peru

February 10, 2011, 4:21 PM

Bob, what are you talking about? That made no sense.

#4
GJO

February 10, 2011, 4:59 PM

I used Abacus over the summer months with an attractive 3 month contract. All was good until the contract expired and my rate was increased 67%. I dumped them for Kinetic – who offered the same great rate for a year.

#5
TXSFRED

February 10, 2011, 5:04 PM

What makes no sense is to allow 411 companies to get between you and the people who generate the power, maintain the power lines, and then call it DEREGULATION. Typical shyster talk. Then add Ercot for that famous Sergeant Highway descriptive term.

#6
bob

February 10, 2011, 5:45 PM

tbone you can buy futures – prices that you think will happen in the future – either higher or lower – you take your choice.

This is simply gambling for consumers.

#7
Sven

February 10, 2011, 6:04 PM

Always sad to see when the small guys go down. When I read the headline, I hoped Reliant was going down!

#8
420for412

February 10, 2011, 6:05 PM

I’d like to be number 412! Selling free electricity. It’s a natural money maker.

#9
Mike

February 10, 2011, 6:10 PM

Bob: “This electricity selling by different hedge funds essentially is nothing but a joke to scam the public. Who allowed this? Check it out.”

TBone Peru: “Bob, what are you talking about? That made no sense.”

These little power companies are leveraged, their cash flow is used for other things. It’s a total scam. This recent spike had nothing to do with them going out of business.

#10
rts

February 10, 2011, 8:44 PM

At one time, allowed to be an electric provider if you had $100,000. in the bank. Deregulation, just a joke and scam to rip off the public by people not in the power business. Gamblers and speculators controlling our electricity. Bad for all. And, in this case a German gambler playing the Texas market, with, no regard for the lives and safety of Texas power users.

#11
Roy

February 11, 2011, 2:02 PM

For more energy-saving tips and trends, check out Mega Watt: www.youtube.com/watch?v=mUNISl0mr5g

#12
Damon