A pioneering firm in California's ill-fated competitive retail electricity market, Costa Mesa, CA-based Commerce Energy Group Inc., hired an investment banking unit with the Royal Bank of Canada (RBC) earlier in September to assess the national energy retailer's options for selling or partnering with another firm in the industry. A letter and subsequent financial filing by Commerce's largest shareholder prompted the action.
Commerce issued a one-paragraph announcement Sept. 18, confirming that it had hired RBC Capital Markets Corp. to provide "general and strategic advisory services" to the energy company's board, looking at the broad category of "strategic alternatives for enhancing stockholder value."
David Zeff, of Zeff Capital Partners, in August filed with the federal Securities and Exchange Commission (SEC) urging that the company pursue being sold off. Zeff is the largest stockholder of Commerce Energy, holding about 10% of the outstanding shares, according to a Commerce spokesperson.
Commerce currently has slightly more than 200,000 electricity and natural gas retail customers in 10 states, including its core of 54,000 customers in California that it cannot add to with the current state restrictions in effect regarding direct access electricity deals. Texas is Commerce's major market for electricity, and its Maryland and Ohio operations are ranked second and third for electric and gas service, respectively, the spokesperson said.
The other six states in which Commerce is active are Pennsylvania, Michigan, New Jersey, Nevada, Georgia and Florida.
In its Aug. 13 SEC filing, Commerce described a letter three days earlier that Zeff had sent to Commerce Chairman Robert Perkins, in which he submitted a nominee to serve on the board, asked for Perkins' resignation from the board, and urged "careful consideration of the sale of the company." Zeff holds approximately 10.7% of Commerce common stock.
Earlier this year, Commerce said it expected to receive $6.5 million as part of its share of a settlement with Santa Clara, CA-based APX Inc. by FERC. Under a different name, Commerce was one of the first independent retailers to enter California's restructured electricity market in the late 1990s.
In the settlement period in question -- 2000 through June 20, 2001 -- Commerce Energy bought, sold and scheduled power in California's wholesale energy markets using APX's services. Later, Commerce became involved in various proceedings at the Federal Energy Regulatory Commission (FERC). The cases involved the now-defunct California Power Exchange and the California Independent System Operator.
Commerce was one of the 30 settling parties filing a settlement agreement with FERC last Jan. 5 that was subsequently approved March 1.
In September last year, Commerce closed a $4 million acquisition of 300 commercial/industrial (C/I) natural gas customer accounts from Houston Energy Services Co. (HESCO). The customers have accounts in California, Florida, Nevada, Kentucky and Texas with an estimated collective load of 12 Bcf/year, effectively tripling Commerce's natural gas sales volumes.
As part of the purchase, Commerce concurrently finalized an agreement for a "multi-year, strategic supply relationship" with Sumitomo Corp.'s Newport Beach, CA-based subsidiary Pacific Summit Energy LLC to become the exclusive supplier of natural gas for the acquired C/I customers. Pacific Summit is Commerce's current gas supplier, and is a leading integrated trading and investing firm and a major distributor of energy commodities.
In addition at the time, Commerce Energy signed an agreement with Houston-based, Advanta Energy Corp. to provide marketing services to the existing and acquired C/I customer segment as well as expanding that segment in the future.
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