Direct Energy, the Houston-based affiliate of U.K. utility Centrica Plc, is counting on the integration of electricity and technology for growth as it hedges to cut its exposure to volatile power markets.
Direct is focused on bundling traditional power services with devices that help customers use less energy, CEO Badar Khan said yesterday in an interview in Bloomberg’s Houston office, and will look at acquisitions that allow it to do that. Direct, the largest competitive retail energy supplier in North America with 3.5 million customers, plans a seven-city tour starting next month to add to that total.
“In the traditional utility space, there has not been a lot of disruption,” Khan said. “I think it’s coming now. I think it is coming in a way that’s going to be value-added for people paying electric bills and gas bills.”
Direct has expanded its service offerings to include rooftop solar panels and products that allow homeowners to monitor and control energy use with devices such as wireless, programmable thermostats and smart-phone controlled lights.
Last month, Direct Energy agreed to buy installer Astrum Solar Inc. for $54 million. The company has partnerships with home energy management providers including SmartThings, which was recently acquired by Samsung Electronics Co., and Google Inc.’s Nest Labs unit. More similar agreements are possible, Khan said.
Direct faces challenges in its power trading, especially in the Northeast, which needs more natural gas infrastructure to allow fuel to get to generation plants. Khan, 43, said the company wants to be able to hedge to avoid passing increased costs onto customers.
Khan, an 11-year veteran of Direct and CEO since April 2013, said market reforms are needed to provide incentives for generators to build and replace retiring coal plants. Parent company Centrica, based in Windsor, United Kingdom, said last month it would take a charge of $110 million on full-year earnings because of the arctic air blast known as the polar vortex that affected power supplies and markets in the U.S. last winter.
Direct, which sold its three gas-fired power plants in Texas to Blackstone Group LP for $685 million in January, isn’t interested in getting back into generation because of price volatility, Khan said.
Centrica shares rose 0.4 percent to 317.9 pence in London trading.
(An earlier version of this story corrected the currency of the polar vortex-related charge to $110 million from 110 million pounds in seventh paragraph.)