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What it takes to start selling electricity
Wondering if just anyone can start a company selling electricity? The answer is no.

Posted by Troy Donovan on 02/03/2014 at 7:59 PM

The TrueCost team is often asked, “Can anyone start their own company selling electricity?” The quick answer is no.

Taking a step back to understand why the question is being asked, we get the sense that some consumers may be skeptical about Retail Electric Providers (REPs); perhaps they are concerned with the possibility of being stuck with one that may go out of business.
Historically, there have been several failed electric companies that caused customers to be transferred to another REP, often at a higher electric rate. But the Texas electric market has taken steps to protect the consumer in the event a REP goes out of business.
The Public Utility Commission of Texas (PUCT) today requires a thorough application and certification process for becoming a REP.  Below are the highlights pertaining to minimum qualifications as of the publication date of this article. To learn more about the process in detail, follow this link to the PUCT rules.

1. A suitable business name and a Texas office open for normal business hours.

2. Must maintain either an investment-grade credit rating or a tangible net worth at or above $100 million or shareholders equity no less than $1 million along with a $500,000 standby letter of credit.

3. Must be able to cover 100% of customer deposits and/or advanced payments.

4. Technical and Managerial:

  • Systems and customer service processes must be proven and capable of meeting PUCT standards.
  • Management must collectively have experience of 15 years or greater in the competitive electricity or gas industry.  
  • Must have one principal with 5 years of experience in energy commodity risk management of a substantial energy portfolio.
  • Anyone who previously ran a failed REP that shifted its customers to the Provider of Last Resort may not directly run a REP nor have greater than 10% ownership.
While business closures can happen in the Texas market, in the past we have seen privately negotiated REP acquisitions in which customers' existing electric rates and terms were honored. The customers who were acquired were often allowed to update and extend with a new plan if they desired. In some situations, customers were allowed to leave without penalty. If you have concerns, you should discuss them with your current REP or a potential REP you're considering.
Even in situations where a REP abruptly ceases its business operations, it is important to know that our market structure ensures customers will continue to receive service through a back-up REP, called a Provider of Last Resort (POLR). In this scenario, it is recommended that you take an active role in the process and exercise your right to choose a plan that works for you and not simply roll onto a plan as designated by the POLR. There are no guarantees the rates or plan terms from your previous provider will be honored by the POLR. However, it is common that your POLR will offer the opportunity to sign up for one of their current offers.

Make it your practice to check our Electricity Price Trends to find out what a fair market electric price is and to compare multiple electric plans from more than 20 REPs. If you're out of contract and free to choose, we think myTrueCost.com is the better way to choose electric plans. 

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