Electricity marketing company says NRG wrongfully fired it

For about 15 years, the Houston sales company 7 Point Group sold electricity door-to-door, at grocery stores and during special events on behalf of NRG, the largest electricity seller in Texas, with brands such as Reliant Energy, Green Mountain Energy and Pennywise Power.

Business was so good that this spring NRG and 7 Point executives sat down over a steak dinner to talk about growth strategies, recalled 7 Point’s president, Marco A. Romero III. But just a couple of weeks later, the long relationship came to a crashing end with a late night phone call from NRG telling Romero that he and his company were fired.

“It made no sense,” said Romero, who estimates his 300 or so agents were responsible about 70 percent of NRG’s outside sales.

Now, the one-time business partners are in the middle of a nasty breakup, fighting in court over non-compete agreements and whether 7 Point used confi-

dential NRG information to sell electricity for rival companies. For the moment, 7 Point has essentially shut down after a state district court in Harris County ordered the company to temporarily stop selling electricity in Harris County and most places in Texas. The 7 Point Group has appealed that ruling.

The legal dispute, now before the state’s Fourteenth Court of Appeals, will likely drag on for months, but it opens another window on Texas’ deregulated power markets and the fierce competition among electricity retailers to sign up customers. As with other mature markets, such as credit cards and cell phones, the way to grow is to poach customers from competitors, prompting aggressive tactics to lure those customers away.

In Texas, most of the selling of plans is done by marketing companies hired by power providers. The firms use armies of agents to pitch plans at grocery stores, sports events or door-to-door. Industry officials say good salespeople can make six-figure incomes.

NRG paid 7 Point as much as $325 in commissions for each new customer, according to court records. The 7 Point Group has several contracts with NRG, including one signed four years ago to sell power plans door-to-door in Texas and others to pitch NRG plans at retail stores and community events, according to court documents.

The contracts included noncompete clauses, meaning that neither 7 Point or its representatives who work as independent contractors could sell electricity on behalf of an NRG competitor for at least six months after the contract was terminated

They troubles began, according to NRG, when it discovered its business partner had opened an office in McAllen to sell power for rival companies Amigo Energy and Just Energy in meat markets and other stores in Houston, Dallas and the Rio Grande Valley. The 7 Point Group’s McAllen office operated under the name. E.P. Distributors, which NRG described as a “sham” operation in court papers, designed to hide 7 Point’s involvement.

“This vendor was circumventing our business rules and the terms of our contract,” NRG spokeswoman Pat Hammond said.

In April, NRG fired 7 Point and sued the company in state district court in Harris County, alleging its former business partner breached its contract. NRG also accused 7 Point of saddling the electricity retailer millions of dollars in bad debt when the sales team found a loophole in the Green Mountain enrollment process that let sales representatives to bypass a credit check, which could enable sales reps to sign up more customers and boost commissions, but leave Green Mountain with customers who didn’t pay bills.

Executives of the 7 Point Group scoff at that suggestion. They say they were following orders of NRG executives, whose compensation is tied to meeting sales goals, to sign up new customers as fast as possible after Hurricane Harvey, including those who might not typically qualify because of low credit scores.

“They did it to hit their bonuses,” 7 Point President Romero said in an interview. But now, “they’re throwing me under the bus to protect themselves.”

Romero also disputes the allegation his company took confidential information from NRG.

The 7 Point Group closed its local office last week. Not only are legal fees mounting, Romero said, but other companies are hiring away his carefully recruited sales team.