Breeze Energy customers got a rude surprise on May 30, 2018. They received notification that their retail electric provider had gone out of business. They would now be served at a high market rate by the Provider of Last Resort, or POLR. What would you do if you received such a notice? And what is the risk of it happening to you?
What Happened to Breeze Energy?
First, let’s understand a little about why Breeze Energy went out of business. The simple answer? Cold, hard cash.
ERCOT, the Electricity Reliability Council of Texas, is the clearing house of power. Among other things, they ensure that transactions flow between wholesale suppliers and retail energy buyers. They also settle transactions in the state’s wholesale spot market for electricity. Think of it as “ERCOT balances the books.”
Retail Electricity Providers (REP) must meet a variety of obligations to ERCOT. One obligation? Have sufficient collateral to purchase wholesale power for your customers. Breeze Energy did not have sufficient collateral resources for the electricity they needed to buy. Because of that, they were forced to close up shop.
Breeze had approximately 9,800 customers when they shut the doors. About half of those customers were in the Centerpoint area of Texas. All of these customers were dropped to the Provider of Last Resort (POLR) for their market area. This letter communicated their status to their customers.
What is the Provider of Last Resort (POLR)?
When the Public Utility Commission of Texas set up the deregulated electricity market, they established a Provider of Last Resort, or POLR (pronounced ‘polar’). The POLR serves as a back-up electricity provider to handle customers if their REP goes out of business suddenly. The PUCT automatically assigns the defunct REP’s customers to a POLR provider.
Sounds great, right? The lights stay on, no worries. But oh, the cost of that service!
Average market prices for the summer of 2018 are 10-12 cents per kWh. POLR rates are averaging 17 cents per kWh, but can go even higher based on electricity market conditions. That means that Breeze Energy customers need to shop for a competitive offer, and switch to a new provider, or risk paying high bills this summer.
Need to shop for a new provider? ElectricityPlan.com can help you compare and save by locking in a fixed rate plan.
Will There Be More REP Defaults?
Is this a sign of things to come? Maybe, maybe not.
This could be the “perfect storm” summer after three years of relatively flat market conditions. Three major coal-fired plants shut down going into summer, and NOAA’s weather forecast is warmer than normal for most of Texas. Electricity reserves (the difference between the amount of supply that can be generated vs. the expected demand for power) are lower than normal. And, the Texas population grew by 400,000 people in 2017*, driving power demand even higher.
All of these factors drive electricity prices up. And if your REP doesn’t have the cash reserves to secure power, it may be lights out for them too.