TXU planning to “lock in” customers

TXU Energy announced on Tuesday a plan to retain customers by offering bonuses and assurance that electricity rates won’t rise for three years.

But the retail arm of Dallas power company TXU Corp. didn’t indicate it will cut prices as Texas finishes deregulating the consumer electricity market at the end of the year

Source: Dallas Morning News | News for Dallas, Texas | Business

Gotta love TXU — if you’re a TXU shareholder. Let’s see — they told us that the rates had to go up because of the high cost of oil.  Now oil prices are falling, and prices of other oil based products such as gasoline are falling along with them, but the price of electricity is not coming down.

However, to placate customers that the company seems to believe are pretty dumb, TXU is offering to "lock in" the high rates you’re paying now (I say "you" because we switched to GEXA Energy a year ago and are paying about one and half cents less per kWh than TXU customers. Still way too high, but at least it’s something).

Consumers who have been faced with ever-rising rates may think the "lock in" sounds like a good deal. But it sounds to me a little like taking out a fixed rate mortgage loan back in the 1970s or 80s when interest rates were at their peak. I remember a friend of mine had a 30 year home loan with a 13% rate — and that was with good credit. I don’t think she would have been happy to have been "locked in" to that rate for the full 30 years, when interest rates started falling.

I guess the closest you can come to "refinancing" with TXU is to switch power companies. And it’s something I suspect more and more people will be doing if the other companies seize the opportunity to provide real competition in the north Texas market and lower their rates while TXU keeps their customers "locked in."

Investors think the "lock in" is a great idea. And for them, it probably is. Here’s a quote from the article:

"We think this is a smart, preemptive move by TXU which should help limit customer churn in 2007 while locking in many customers at high rates [my emphasis] for the next two to three years," Wachovia analysts said in a research note.

It’s time to start asking why north Texas consumers are paying TXU 15 cents per kWh for electricity when those in other states, and even in other parts of our own state, are paying far less. According to http://www.neo.state.ne.us/statshtml/115.htm, as of July 2006 the average rate for Texas was 10.83, while it’s 7.7 in Oklahoma, 7.39 in Arkansas, 7.43 in New Mexico and 8.32 in Louisiana, states that we border. In Idaho, it’s only 4.81.

Of course, I guess we should be glad we don’t live in Hawaii, where the average rate is shown as 21.9 cents.

About debshinder

Technology analyst and author, specializing in enterprise security. Author of or contributor to over 25 books, including "Scene of the Cybercrime." Fourteen-year Microsoft MVP, married to Microsoft FTE Tom Shinder, and proud mom of two wonderful grown-up human children and three amazing Japanese Chin pups. In my spare time, I love to travel - especially on cruise ships - and write about my grand adventures.
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