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TXU's Wilder worries more about
Wal-Mart as a competitor

... or Google or even Microsoft

Former utility monopolies aren't the biggest threat to existing retail power marketers, TXU CEO John Wilder told Goldman Sachs' Power & Utility Conference.
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[read more]        His biggest fear is some "mega-retailer" that customers associate with value -- such as Wal-Mart -- getting a "gleam in their eyes" and deciding to enter power marketing.
       Wal-Mart has hinted recently (RT, 3/6) it may be developing such a gleam. The chain is certainly eager to get into banking and that's much more profitable than energy right now, according to API ads in Washington newspapers.
       "Nobody" in the industry -- even former monopolies -- have a strong identity in the market when it comes to value or innovation, he argued.
       He worries about a big known brand -- it could be Wal-Mart, Microsoft or even Google -- coming in and eating up market share.
       It's "inevitable" that TXU and other incumbents are going to lose customers as full competition gets going, Wilder added.
       His goal -- and it's an optimistic one -- is to keep a steady market share.
       But he doesn't know if even that's achievable.
       Every marketer at the conference has big plans for growth.
       But everyone can't pick up customers, he noted, without some marketer losing them.
       Wilder expects greater competition once the price to beat ends.
       Full competition will create more stable margins, he explained -- promoting entry.
       But the margins won't be great.
       Wilder sees them at the low end of consumer products -- in the low double-digits or high single-digits.
       Wilder doesn't think owning generation guarantees retail success.
       In fact, owning generation could hinder success.
       Integrated companies can get sloppy when it comes to pricing affiliate sales and thus miss market signals, he noted.
       He's worked "very hard" to separate TXU's generation and retail arm to make sure the retail unit sees market signals.
       Jeff Weiser, co-president of First Choice Power, agreed.
       Risk management determines retail success, he observed.
       Buying generation won't make marketers better at managing risk and won't save them from bad decisions, Weiser argued.
       Retail has to stand on its own, he noted.
        Originally published in Restructuring Today on May 12, 2006

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