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TXU Energy Lays Off 20% of Workforce, Top Reliant Exec Resigns

TXU Energy, the largest retail electric provider (REP) in Texas, announced last week it will lay off about 20% of its workforce, or 65 employees, in an effort to trim costs. The news follows the resignation in late November by a top executive at Reliant Energy Inc., the state's second largest REP.

TXU, headquartered in Dallas, provides electricity to about 2.4 million residential and commercial customers, mostly in North Texas. Long-term, TXU has set a growth goal of 3-5%, but the business has continued to report losses, including in 3Q2005. Some of the losses have been related to higher fuel costs -- natural gas prices have more than doubled in the past year, and under pressure from Texas regulators, have only incrementally been passing the costs down to consumers.

The Texas Public Utility Commission approved a 24% rate increase for TXU, with half taking effect in November and the rest to take effect in January. However, the company has not been able to pass along the rising wholesale gas prices quickly enough, according to spokesman Chris Schein. TXU also has been trying to expand its service into the Houston area, and it has had to make compromises to ensure its current customers do not switch services. To cut down on the switching, TXU recently began offering price guarantees for up to two years for its North Texas residential customers.

Most of TXU's downsizing was in marketing, administrative and contract positions.

In related news, Jim Robb, who had run the retail marketing arm for Houston-based Reliant Energy, resigned Nov. 23. On an interim basis, CEO Joel V. Staff has assumed Robb's responsibilities. Robb, who had been with Reliant since 2003, will continue to work as a consultant, according to the company.

Reliant spokeswoman Pat Hammond said Robb had made a "significant" contribution in helping the company expand into the Texas retail marketplace. Reliant currently has about 1.9 million residential and commercial customers, with most in the Houston area.

Besides the changes at TXU and Reliant, another Houston-based retailer, Utility Choice Electric in November informed its customers it would no longer serve them after it defaulted on payments to its wholesale power provider. Austin, TX-based Green Mountain Energy, which serves about 100,000 customers in Texas, also laid off workers earlier this year after it was forced to leave its largest market in Ohio. Other top REPs in Texas include Direct Energy, which serves about 900,000 customers in the state, followed by First Choice, with 200,000, and Gexa, which serves about 100,000.

Houston-based consultant The Legacy Group said Thursday commercial customers could see their rates double "as their retail electric providers close down." It said "thousands" of customers are receiving letters from their new electric companies, informing them that their service has been switched and, as a result, their old rates may no longer be protected. Legacy CEO John Elder said, "With the electricity market at an all-time high, these businesses are now vulnerable and need and deserve options rather than being switched without their consent. After all, these customers may be forced to pay twice as much for their energy, significant deposits, plus adhere to terms and conditions that may not be in their companies' best interests."

However, ERCOT, which acts as a watchdog over the state's deregulated market, could not confirm how many customers could see their service switched. It also did not think rates would "double" if switching occurred.

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