Four Alamo City businessmen joining forces as power-brokers

James Aldridge

Four Hispanic entrepreneurs have launched a new power-brokerage firm in San Antonio that will compete for electric utility customers once the state opens the power market to competition next year.

Texen Power Co. LLC is the resulting firm. It has been approved by the Public Utility Commission (PUC) to compete in the market as a power broker, or aggregator -- a firm that acts as an agent for ratepayers to find them the lowest-cost power. 

It's a new breed of company that has come on the scene as a result of the electric restructuring legislation that the Texas Legislature passed in 1999. That law mandated electric utilities to open their markets to competition on Jan. 1, 2002 -- for areas of the state served by investor-owned utilities.

Communities such as San Antonio, which owns its electric utility, are insulated from opening their markets to competition, unless their governing boards decide to opt-in.

City Public Service is the municipally owned utility serving the San Antonio area.

Unless city leaders in San Antonio make that decision, all of Texen's customers will be located outside the Alamo City, says Luis de la Garza, a partner in Texen Power.

"We've been certified by the Public Utility Commission to be an aggregator. We're trying to find better rates for residential and commercial customers," de la Garza says. "We're looking throughout the state for accounts." 

Texen Power is doing most of its marketing through the Internet and through its four partners, so far. In time, company officials anticipate adding new employees to handle growth, although an exact number has not been identified. 

The company will earn a percentage of the funds paid by customers to retail electric providers in exchange for finding its customers lower rates. De la Garza says the company's fees will be based on the amount of money they save for their customers. 

Aggregators, by design, do not own any power generating facilities. 

Texen Power is gearing up to market its services primarily in Houston, Dallas and the Rio Grande Valley. Once competition is officially introduced for the first time in Texas in these regions next January, customers will be able to choose a power company other than such incumbent firms as TXU and Reliant Energy. 

City Public Service spokeswoman Betty Williams says City Council has opted not to participate in competition immediately. 

"We don't know at what point in time they will decide they will opt-in to competition. Therefore, we will not be utilizing the services of an aggregator," Williams says. 

However, that could be an option in the future if utility and city leaders decide to compete for new customers outside San Antonio, she adds. 

Start-up 

Texen Power was founded by Patricia Pliego Stout, John D. Gonzalez, Marco A. Arredondo and de la Garza, business people who met through their involvement with the San Antonio Hispanic Chamber of Commerce and the Texas Association of Mexican American Chambers of Commerce. 

Of the four principals, two have extensive backgrounds in energy. Arredondo is a former engineer with Central Power & Light in Corpus Christi. He owns Marco A. Arredondo Inc., a firm that provides utility rate consulting on behalf of ratepayers. 

De la Garza is a former corporate attorney and executive with Valero Energy Corp. and PG&E Gas Transmission Texas. He is now a partner with the San Antonio office of law firm of Holland & Knight LLP. 

Gonzalez is president of JDG Associates Inc. in San Antonio, a firm that assists companies in developing affirmative action and Equal Employment Opportunity policies and procedures. Stout is president of Alamo Travel Group, a leading local travel agency. 

In addition to competing for residential and commercial customers, Texen also will negotiate power supply agreements for nonprofit organizations, neighborhood associations and business organizations, according to de la Garza. 

Competitive advantage 

These aggregator firms were created with the intent of serving large pools of residential customers or small businesses that were not expected to benefit from competition because of their size. 

Texen Power is in the process of gearing up for the state's pilot program for competition, which officially begins June 1. Company officials declined to reveal which customers have already signed up with Texen. 

Terry Hadley, a spokesman for the PUC -- the state agency that regulates the power industry -- says there have been 34 companies that have registered as aggregators, thus far. Twenty-six firms have registered with the PUC as retail electric providers. 

Hadley says the Legislature created this category of firms in order to help small- and medium-sized customers negotiate the cheapest power rates. The thinking among lawmakers was that large power users, because of the sheer volume of electricity they consume, would be able to obtain the best rates. 

Shannon McClendon, president of power-aggregator Current Access LC, which is based in Dripping Springs, Texas, just west of Austin, says her firm has had a difficult time attracting potential customers, so far. 

The key component to electric utility restructuring is a PUC rule mandating a 6 percent rate reduction on Jan. 1, 2001, for residential customers in order to jump start competition. 

McClendon says the key issue in the coming months leading up to full-scale competition will be the PUC's ability to set clear-cut rules defining the full nature of competition. For example, the PUC has yet to adopt rules and rate structures for transmission-line access charges, which will still remain regulated, she notes. 

"I'm not seeing a whole lot of business opportunities, at least just yet," she says. But once these issues are resolved, "we'll see more competition."

Copyright 2001 American City Business Journals Inc.