Taking the guess out of gas

September 29, 2006

After many years in the wholesale natural gas business, it bothered Jeff Mayer that consumers couldn't get the same fixed-price protection that was available to large industrial and commercial buyers.

That pet peeve turned into a business idea. Today, Mayer's company, MXenergy, a Stamford-based supplier of natural gas and electricity to customers in deregulated markets, is one of the fastest growing energy suppliers in the country.

"Our business is to give the relatively small consumers the same protection from energy volatility as a large industrial buyer," said Mayer, the firm's president and chief executive officer.

MXenergy's most popular offering enables residential and small businesses to lock in one rate for up to three years. It's a concept that seems to have caught on quickly.

"Customers intuitively understand energy volatility," Mayer said. "They experience it at the gas pump and they see it in their home heating and cooling bills."

"Last year, energy prices hit an all-time high. In some parts of the country, customers are paying four times more than what they were paying a few years earlier," he said.

Those same consumers are also familiar with the concept of locking into a fixed price. Almost 80 percent of homeowners have a fixed-rate mortgage, Mayer said.

Offering people the peace of mind of having a fixed energy bill each month has allowed MXenergy to pick up more than a half-million customers since the company launched in 1999.

MXenergy started as a small home-based business but today employs about 220 people around the country and serves customers in 12 states and Canada. Along with the Stamford headquarters, which employs about 60 people, MXenergy also has offices in Texas, Maryland and New Jersey.

Most of MXenergy's sales involve natural gas, but it does have a small electricity business with about 20,000 customers in New York and Massachusetts, Mayer said.

Last month, the company, which is ranked on Inc. Magazine's list of the 500 fastest growing privately held U.S. businesses, acquired the assets of Shell Energy Services -- a subsidiary of Shell Oil Co. that provides natural gas services to consumers in Ohio and Georgia.

While Mayer declines to discuss the firm's future growth strategies, he said most of its expansion has been organic rather than by acquisition.

That will likely continue, he said, as there are more than 30 million homeowners in the Northeast who use natural gas.

Statistics from the Energy Information Administration show that as of last December, 22 states offered residents and businesses the ability to choose a natural gas supplier.

Marketers began deregulated sales by focusing on larger customers, and today about 90 percent of large volume gas consumers can buy from a competitive source, said Paul Wilkinson, vice president of policy analysis for the American Gas Association.

As deregulation matured, sales spread to the smaller volume market, said Wilkinson, adding that about 60 percent of residential and small commercial users now have the ability to choose a supplier.

MXenergy doesn't offer services in Connecticut, where homeowners don't have the freedom to purchase gas from independent providers. And as far as offering electricity, Mayer said it's difficult to offer a long-term fixed price to customers here.

"To do so would entail a great deal of cost and price risk -- particularly in Fairfield County, which is a heavily congested corner of the power grid and where no one can predict future price movement," he said.

Mayer doesn't promise that consumers can save money by choosing MXenergy, only that they can find stability.

"My crystal ball is broken," he said. "I am not projecting prices will go up. Nobody knows. But what I do know is that energy is an important component of people's budgets."

"I also know that we have an energy supply crisis that isn't going away soon," he said.

Copyright © 2006, Southern Connecticut Newspapers, Inc.