(ghi^markets.com - Feb. 13, 2006)

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He's talking about the Texas retail power market, speaking as the ERCOT vice president at Suez Energy Resources North America.

The market's seen a number of high-profile defaults in the past two months -- for him a sign M&A is on the way, Roberts told us.

Buyers are putting a much bigger emphasis on the credit worthiness of marketers, he's found. With a rash of POLR drops since November, customers are seeking supplier names they consider stable -- even if that means passing up ultra-low, fixed-price offers from start-up firms.

Buyers are awakening to the reality that we're in a new price environment where gas won't fall below $5/mmbtu in the forseeable future.

At the start of last year, a lot of customers were switching to index pricing, he explained.

They thought gas price spikes wouldn't last and didn't want to be caught on a long-term contract when prices started to fall.

Today he's seeing more customers coming back to long-term deals. Customers have stopped trying to guess where fuel prices are going, Roberts observed.

They don't want to be bothered with the time and expense of tracking markets but they do want transparency.

That's why Suez came up with its Price Watch program (RT, 11/28). It prices a customer's daily load and sets targets for when customers should update their contracts.

Headroom has gotten better in Texas, Roberts said, and was really only a challenge late last year. Jim Nordloh, Suez's vice president for the Midwest, sees big growth for Suez once Let's Pretend competition ends in nine months.

Do incumbents still have a big advantage in having a name brand? Nordloh doesn't think so.

Commonwealth Edison (Exelon) in Illinois is a utility "people love to hate," he observed, so he doesn't think marketers face a big challenge in selling against the brand.

Besides, Suez has a big name too. Yes they did build the canal.

Originally published in Restructuring Today on February 6, 2006

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