Texas consumer groups filed a petition with the state’s Public Utility Commission (PUC) Thursday asking for an investigation of NewPower’s financial status. Because of its sagging financial health, NewPower announced it would no longer sign up new customers from Texas and other parts of the country, but instead concentrate on its current ones. NewPower is the state’s leading retail provider of customers that switched from incumbent utilities after Texas deregulated January 1. It currently has more than 70,000 of the 200,000 Texas customers who have switched.

The petition asks the PUC to “investigate whether NewPower has the financial and technical resources” to serve its Texas customers, and “take steps to notify NewPower customers of the company’s circumstances and ensure that customers can change to other electricity providers without incurring additional fees and charges.” The consumers groups are concerned that NewPower customers would be switched to a provider of last resort (POLR), which would have higher prices.

“If I were a NewPower customer, I’d be very concerned and would be seriously considering other providers,” said Janee Briesemeister, a senior policy analyst with the Austin, TX-based Consumers Union, one of the organizations that filed the petition.

However, the PUC responded that it was “closely monitoring the company,” and said customers should not be concerned at this point. Spokesman Terry Hadley said the PUC is “concerned but confident” that NewPower customers “will not suffer any undue harm.” The PUC has been monitoring NewPower’s situation, and is “engaged in an ongoing dialogue.” NewPower has “more than enough resources to operate into the third quarter,” Hadley said, and commissioners are “very confident that NewPower is viable.”

Notifying customers at this point would be an “overreaction,” said Hadley because the PUC cannot assume the company is in danger of going out of business. For example, Hadley said that NewPower may sell its customer assets to another company. However, even if the company ceased to operate in the state, Hadley said its customers would only move to a POLR for “a few weeks” before they would be able to sign up with a competitive provider. He acknowledged that POLR switching was a situation “we haven’t gone through.”

NewPower spokeswoman Gael Doar said that customers should not be concerned about the company going out of business. The company made a decision to not sign up new customers because it wants to conserve its cash, and needs to focus “on the customers we have now.” She said that the company is “in a position where we’re looking at all our options,” including selling some of the assets.

In a statement, CEO H. Eugene Lockhart said, “I emphatically reject the notion that we are not capable of continuing to reliably serve our customers. We are confident that we have sufficient financial resources to operate through the second quarter and into the third quarter of 2002. NewPower fully intends to meet all of its obligations to its customers.”

NewPower Holdings Inc., parent of The New Power Co. of which NewPower is a subsidiary, said the petition “misrepresents the company’s financial and operational status. NewPower is extremely disappointed that the consumer groups did not even attempt to verify their facts with the company prior to filing their petition so that their misinterpretations, misunderstandings and erroneous conclusions could have been avoided. Contrary to their claims, NewPower’s Texas customers are not at risk of losing service because of our financial position.”

The company said, “NewPower is currently reviewing all of its options, which include a sale of a portion of its assets and business and a continuation on a more limited scale in a smaller number of markets without the expected need for additional financing.”

The petition was prompted by Purchase, NY-based NewPower’s 10-K filing with the Securities and Exchange Commission, which indicated that the termination of its merger agreement with UK-based Centrica Plc in late March, and the “unlikely opportunity for additional financing” could lead to a possible liquidation. “There is a substantial chance that this may lead to no positive value for our stockholders after our liabilities are satisfied or otherwise addressed,” it said in its annual report..

The company, which was founded by a consortium that included bankrupt Enron Corp., AOL and IBM, but after a fast start and plans to become the largest retail provider in the country, sales slumped. Centrica, which has been growing its North American base, made a $130 million offer to purchase the company earlier this year, but cancelled the deal in late March because of liability problems stemming from NewPower’s former association with Enron (see NGI, April 1). NewPower was an Enron subsidiary for less than two months when it was originally formed. It was also delisted from the New York Stock Exchange in April.

“It’s shocking to me that NewPower could file a 10-K report that discloses such a precarious financial situation, yet they don’t file the same report with the PUC,” said Briesemeister. Texas companies have to certify that they are financially viable to operate. “It indicates the rules on certification aren’t strong enough and should be revisited.”

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