On September 30, Plano, Texas-based Choose Energy acquired Power2Switch, a Chicago-based company designed to help energy consumers negotiate their way around deregulated electricity markets in New Jersey, New York, Ohio, Texas and Illinois, where the company had its largest footprint.
Founded in 2008, Choose Energy offers a user-friendly website that matches deregulated energy suppliers with energy consumers in Connecticut, Illinois, Maryland, New Jersey, New York, Ohio, Pennsylvania and Texas – the latter forming Choose Energy’s largest market.
Want a lower rate after the first 1,000 kilowatt hours per month? Choose Energy can help you with that, and you don’t even have to make a phone call. Want only renewable energy? Choose Energy’s site helps you locate it from a “shopping basket” of 28 energy suppliers including Green Mountain Energy (100-percent renewable) and Direct Energy, which offers 99-percent clean, renewable electricity programs.
In fact, according to Choose Energy, 40 percent of customers have elected to go green, frequently at neutral costs when compared to some traditional generation fuels. Equally noteworthy is the fact that, since its inception, Choose Energy has helped more than 150,000 homeowners and small businesses save millions on energy bills thanks to veteran energy industry gurus who are as comfortable in the information technology sector as they are in the electricity trading marketplace.
Power2Switch is right up Choose Energy’s alley. It provides Choose Energy with a synergy that reduces operating costs and financial obligations, and provides even more extensive financial and consumer reach, partly because Power2Switch had already created a very good user experience based on a great brand. And it is this superb customer service reputation, as well as the company’s similar venues, which provides Choose Energy with precisely the kind of business ‘muscle’ that will propel it into the newly deregulated electricity marketplaces of today and tomorrow.
Choose Energy, a private company, recently came away with $4 million in funding from private equity firm Kleiner Perkins Caufield & Byers (KPCB), which it used to enhance its operations. Now, with Power2Switch assets and expertise, Choose Energy may well achieve its next goal, of coverage across all 19 states where the selling of electricity is decoupled from its origin, and across slightly less than half the states in the continental U.S. where natural gas sales and pricing are disengaged from the supplier.
This separation, called deregulation, allows consumers to buy electricity from any energy company offering it under the auspices of the same RTO, or Regional Transmission Organization. These RTOs are usually comprised of ISOs, or Independent System Operators, commonly a group of states (with the exceptions of Texas and California, which are significantly larger than any other state).
Deregulation in effect decouples the source of electricity – the power plants – from sales of electricity, putting ubiquitous and increasingly expensive electricity into the basket of consumer goods whose prices are influenced by demand. This is good news for consumers, and even better news for Choose Energy, which capitalizes on choice to bring savings to electricity users and a larger, recognizable brand for itself – a brand which the company aims to augment using Power2Switch’s enviable reputation and its industry-leading user experience platform.
Choose Energy President Jay Webster does not see any more M&A’s near term, but sees deregulation as inevitable.
“The more people become aware that they have this choice, and the impact it can have on a consumer’s energy bill, the more eager they are to participate.
“I should think that the will of the people, translated through the legislative body of any one state, will cause more (deregulated) markets to open up.”
The impetus for this change, Webster notes, is the proliferation of experience that people and regulators have in currently deregulated markets – an experience that can run to about 200 choices and be completely overwhelming, which is another benefit for Choose Energy and a website that makes complicated energy options simple.
It’s still early days, and a rocky road in those states which have not refined their vision before passing laws. As Forbes notes, distributed generation, or plans that allow electricity consumers to buy energy from micro-generators, presents an existential threat to utilities similar to that which the U.S. Post Office currently faces.
It’s a threat which companies like Choose Energy, and its president, welcome. For the company, opening markets spell additional territory beyond the 14 states where low-cost solar is currently available. These are: California, Hawaii, Oregon, Arizona, Connecticut, Texas, Delaware, New York, Maryland, Massachusetts, New Jersey, Philadelphia, Washington D.C. and Colorado. The company also has a commercial solar program.
For Webster, it’s the challenge of an enterprise “much more intriguing than anything I have done before.”
For consumers, struggling in a lackluster economy and facing the prospect of layoffs, lower energy bills might be just the impetus that Federal Reserve Chairman Ben Bernanke and his “Fed printing press” have failed to produce.