(ghi^markets.com - Oct. 16, 2006)
 

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Marketers have been selling prepaid power in Texas for years but most plans have estimated customers' use and subjected them to true ups.

Dallas-based marketer REPower, a start-up firm is marketing a novel prepaid plan to apartment dwellers using an innovative meter (RT, 6/14).

That's a big market. About half of the occupied households in Houston and Dallas are rental units, according to census data.

It's what competition proponents dreamed of when opening up the retail market, Herb Roberts, executive vice president at REPower, told us.

REPower's plan is the first meter-based prepaid product offered in Texas. The system lets customers track use in real time and add more power themselves. Roberts should know. He developed and led Direct Energy's multi-family program for three years. It was a good program but just didn't fit the needs of a lot of apartment owners, he told us.

He wanted to find a better product to address their needs. Thus he teamed with Richard Enthoven to give apartment customers a new way to buy prepaid power.

Enthoven, REPower's president, has led three apartment-services firms and founded Retail Energy Credit Control to develop customer management systems for power marketers.

REPower's plan lets customers put a balance on a SmartCard that they then insert into their in-home customer information unit.

That equipment transfers the balance to REPower's special SmartMeter that's separate from the meter used by the local wires company.

SmartCards can be refilled at kiosks to be placed at convenience stores or other nearby locations.

Customers can see on their information unit their power use, balance and estimated days remaining.

That gives customers real choice over power use, explained Roberts. Customers using the meters in other markets have cut their use about 15%, he told us. He's heard horror stories this summer of customers in 600-square-foot apartments getting bills for $500.

REPower's prepaid plan eliminates surprises. It facilitates budgeting while setting up incremental buying where needed, Roberts said. Customers monitoring their information unit can choose to cut back on AC or other appliances if they want to stretch their prepaid balance.

About 5.5 million customers in the UK and South Africa use the meters. The Ampy-made meters are used by nearly 40,000 customers at Salt River Project in Phoenix plus cooperatives in Colorado and Texas.

It's a good time to enter the Texas retail market -- if you have something different, Roberts told us, because of the lack of real product choice in ERCOT.

Everyone is still competing on price apart from a few green plans, he noted. Nobody, though, is offering customers a new way to buy power. That's the market REPower wants to fill. What impressed us most about REPower was the price. The marketer in June had told the PUC it would initially sell power in First Choice Power's territory at 14.6¢/kwh for the average 1,000 kwh/month customer compared with First Choice's 14.46¢ price to beat.

A few mills premium for a value-added service that lets customers monitor use while giving them bill stability?

REPower intends to compete on price, Roberts revealed. Most prepaid plans have traditionally been priced higher -- close to POLR prices -- because marketers guessed customers' monthly use thus boosting risk.

REPower is basing its strategy on hard data. Customers won't have to pay costly initiation or reconnection fees since the SmartMeter shuts off and turns on automatically based on the prepaid balance.

Power won't be shut off nights, weekends or holidays and REPower has developed deferred payment plans too (RT, 8/8).

Priority reconnect fees for traditional products range $85-150, Roberts reported. And customers still might have to wait two or three days to get the lights back on. With REPower all customers need to do is refill their SmartCard. REPower offers bad-credit customers flexibility as well, Roberts noted. They don't have to endure a credit check or post a deposit to get power. The marketer gives customers budget certainty without having to qualify based on credit or need.

REPower will sell in all five incumbent territories and has signed deals with property owners in First Choice Power and CPL Retail Energy's footprints.

It's about to sign a contract with an apartment owner in TXU Energy's territory as well. REPower plans to roll out its service as best it can while its petition for a declaratory order works its way through the PUC.

REPower wants to make sure that its plan meets customer protection rules since its prepaid model wasn't envisioned when the rules were written.

Marketers are worried that REPower's SmartMeter might shut off customers who have switched to another marketer if the meter's prepaid function isn't turned off fast enough (RT, 9/15).

That won't be a big problem, Roberts assured us. Landlords at each apartment will have a special SmartCard that sets the meter to "bypass" mode where it doesn't register prepaid power and won't shut off service for a zero balance.

Thus he doesn't expect problems in turning the SmartMeters off quickly after receiving switching notification from ERCOT.

Consumer advocates, of course, have raised several concerns about the plan. Nobody is forcing customers to take prepaid service, Enthoven reminded. He wants regulators to let the market and customers decide whether REPower's product is attractive.

Originally published in Restructuring Today on September 20, 2006

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