NRG buys competitor Stream
$300M deal is latest acquisition by state’s biggest power sellers, a trend that analysts fear could cut rivals and drive prices higher
NRG Energy said Monday it would pay $300 million in cash to buy the retail power and natural gas business of the Dallas company Stream Energy, continuing the consolidation in the Texas retail power market.
NRG, the state’s bigger retail electricity provider, already controls more than 30 percent of state’s market. That share will almost certainly grow with the addition of 600,000 residential customers from Stream, a company that uses a strategy known as multilevel marketing, in which customers are paid commissions to recruit other customers.
The acquisition is the latest in a string of acquisitions by the state’s biggest power sellers, a trend that some analysts worry could reduce competition and lead to higher prices.
The top three retail power companies — NRG, of Houston and Princeton, N.J., Vistra Energy of Irving and Direct Energy, a unit of the British company Centrica — hold at least two-thirds of the state’s deregulated power market.
Now that concentration is likely closer to 70 percent.
NRG last year paid $219 million for Xoom Energy, another multilevel marketing company that sold electricity and natural gas in 19 states and Canada in a deal that added 300,000 customers to NRG. Also last year NRG bought the fast-growing Discount Power from Volterra Energy Holdings for an undisclosed price, a sale that brought in another 225,000 customers for NRG.
Stream, which has operations in nine states, was the sixth largest retail electric provider in Texas in 2017, according to the Energy Department.
Of the top six power retailers, three will be owned by NRG, pending regulatory approval for the Stream sale.
“Stream Energy’s retail energy business provides NRG an attractive opportunity to increase our national retail leadership position and potential for growth,” said Mauricio Gutierrez, NRG’s president and chief executive officer.
NRG isn’t the only big company on a buying binge. Earlier this year, Vistra Energy, whose bestknown brand is TXU, bought Connecticut power provider Crius Energy in a $328 million deal that would make Vistra the nation’s biggest seller of residential electricity and expand its market share in Texas. Crius owns several brands that sell power in Texas, including TriEagle Energy, Energy Rewards and Viridian Energy.
Before the deal, Vistra controlled about 23 percent of the Texas power market.
Direct Energy, which holds about 10 percent of the market, bought the retail electricity business of Source Power & Gas in Sugar Land. Source Power had 4,000 commercial and industrial customers in seven states, including Texas.
Trent Crow, a former JP Morgan energy trader and founder of Houston-based Real Simple Energy, a website that searches for the cheapest electricity plans, said the increased concentration in the retail market means dominant players have less incentive to be competitive on price.
“Why would they?” he asked.
Double inflation
Electricity prices in the Houston area are nearly 4 percent higher this spring than they were a year ago, rising about twice as fast as the overall rate of inflation, according to the Labor Department. Higher prices for power likely reflect concern among electricity traders that tight power supplies will drive prices higher this summer. Recent changes by the Public Utility Commission, which would boost prices during times of peak demand, have caused some power companies, including NRG, to add more generation capacity.
The Stream Energy sale, which must be approved by regulators, is expected to close in the third quarter.