May 16, 2008 admin

Pre Buy Electric of Texas, Bankrupt, Yes No?!

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Today Pre Buy Electric of Texas has Gone Bankrupt or Have They?

Wow, Texas electricity rates are at a 3 year high right now and with electric companies breaking fixed rate contracts on their customers it is no surprise that Pre Buy Power also known as Pre Buy Electric has gone out of business and had all 9,000 electric customers transferred off their electric service and onto a higher electric rate managed by the government which is called the POLR rate. In Houston, Reliant Energy provides the temporary back up rate until the consumer decides to shop for a competitive offer. You don’t want to stay on the POLR rate to long as it is just a back up and much higher then try some other competitive offers with reputable electric providers out there.

This electric provider was not operating their business correctly as far as the hedging of their energy, risk management and the credit risk of their customers. Having your customers pre purchase their energy definitely helps as positive insurance you will receive payment from your customer base but then speculating on the energy market without hedging your energy leaves your electric company to really high levels of exposure to market volatility. The energy provider was forced into bankruptcy (according to PreBuy company associate they have not yet filed for bankruptcy) by ERCOT (The Electric Reliability Council of Texas) because they were not able to meet their power payment obligations. PreBuy Electric customers were switched to the Provider of Last Resort (POLR) over the weekend by ERCOT so they would not be without electric service. In the Dallas area the POLR company is TXU Energy and in Houston it is Reliant. The POLR electric rate is a higher inflated rate and is only temporary. A PreBuy customer on the POLR rate is encouraged to sign up with a competitive electric provider ASAP to avoid paying a higher then the average electric bill they may be used to.

We are asked quite frequently for a recommendation of an electric provider like Pre Buy Electric Company that will let you into an energy contract with no or a low deposit and the best one right now is a Texas electric company by the name of Bounce Energy. Bounce guarantees you can sign up on their “no or low deposit plan” to assist low income low credit score customers, Click Here and Check Rates and Sign up Now. If you have decent credit history some providers are more lenient then others. In rare circumstances some electric companies will allow someone else to personal guarantee your residential electric contract but that is very rare. The pre buy energy option is one way to avoid a deposit and besides Pre Buy Electric Company I know of no one else who offers this arrangement. Some Texas electric providers offer lower deposits then others and some consider one credit score passable while another one will want a deposit. We recommend Startex Power for those needing a low rate with a relatively low deposit if they even end up requiring one. For a guaranteed no deposit electricity choice we recommend going with Bounce Energy.

The Irony of PreBuy Going Bye Bye

I was talking to my brother today about PreBuy who sells Texas prepaid electric service and how ironic it is that they have their customers prepay for their electric service but they themselves had bad execution of some sort and went bankrupt because of it. An unhedged energy price is basically like never locking in on a set price so you are completely exposed as to whatever the market may do. Ouch they got hit, and so did a few other electric providers who tried to sell electricity without hedging their bets. The PUCT came down on a couple of these companies but Prebuy was one of those electric providers that just couldn’t eat the loss. Riverway Power and National Power Company found themselves in a similar situation and the word is still out on if they will be able to stay in business since the PUCT would not allow them to pass the loss on to the customer.

No Credit, No Problem Appears to be the Mode of Operation

The way Pre Buy Power has setup their business model is to let energy customers into an agreement by having them prepay for electricity. The problem once again is that they were selling unhedged energy to credit risk customers. It takes a smart cookie to run a Texas retail electric provider as you have to have well trained energy trading experts who know how to buy and hedge natural gas futures while maintaining a healthy risk management policy. Some electric providers like Pre Buy Power can make a bundle by betting that the market will go their way while selling unhedged energy and these electric companies could potentially make a lot of profit for years and years. The problem is that when companies like Pre Buy Electric leave themselves exposed with no risk management policy firmly in place they will eventually get burned. Unfortunately Pre Buy Power has sold their last energy contract unless they restructure and go at it again.

Pre Buy Electric Company Website Still Shows Open for Business?

We checked to see if (prebuyelectric.com) was still open for business or atleast had some type of news worthy information but everything appears to be business as normal as far as the site goes. I tried calling every number available on the site but could not get through. All indications is that the company doesn’t have plans to start back up anytime soon. If you need an alternative electric company to Pre Buy Electric Company that offers a low deposit then we recommend Bounce Energy of Texas. Bounce usually lets you in at a reasonable deposit if you have bad credit. If you pay on time for the term of your contract they may let you renew with no deposit at all. As far as Prepaid electric service in Texas we know of know other company besides PreBuy that offers this option.

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About the Author

admin Donny started ElectricityBid.com back in 2007 from his parents basement and has since married his wife Melody and had three sons, John Adam (7) and Noah (4) and our new 20 month old son. He enjoys tech related things, softball, kickboxing, going to the gym, excursions and activities together with his wife Melody. Our service allows you to shop and compare commercial and residential electric rates and providers. Would you take the time today to try our service and see how you like it. Thank you! and God Bless You!

Comments (11)

  1. Randell Dean

    There was a time when only entity that could own electric futures was someone who had end users of that electricity. Now anyone can jump in and speculate on energy futures and drive the power up. Since January temperatures have been basically the same as 2007, but natural gas prices and electric rates are through the roof. Large Hedge Funds and other Speculators continue to drive these prices record levels and the consumer continues to pay higher and higher electric prices to heat and cool our homes. Rumor has it that there is a Hedge Fund in Houston, that controls natural gas futures. Sound like Enron? Funny, rumor also has it the fund is run by a former and very talented trader who is also an ex-employee of Enron. Lord help us all.

  2. yogulick

    Just to let people know, I work for prebuy and i can say that we have not declared bankrupt. That is miscommunication. The owners of Prebuy are family oriented and everyone that works there is like family. Yes the customers have been switched by ercot, but not because they are bankrupt. They tried something that had never been done before. Prebuying electricity, and for over 8000+ customers, People should not have to go without electricity just because they dont have great credtit or 300 to 600.00 for deposits just laying around. Our world has changed and everyone isnt equal. The world is set up for the people who have but built on the backs of people who dont have. Maybe the people who are so busy talking trash about our company should think about the politians that have allowed our gas prices, electricity and anything else that people cant live without to soar to astronomical prices than maybe we could still be Prebuy. We may have lost the battle but we have not lost the war. Thank you.

  3. tovaric

    I'm not sure what not hedging has to do with Pre-Buy going under. In a pre-paid contract, how is it you're obligated on a fixed term?

    Deregulation has been littered with predatory companies that have attempted to make money in the pre-paid space with little regard for long term viability.

    You can't blame not hedging for Pre-Buy's collapse. It's poor execution yet again.

    Where do these companies keep getting the funding to do this.

  4. Jorge

    Etricity is another company that has gone out of business because of POOR EXECUTION

  5. Linne Kerns

    I paid for Electricity for the month of June before I found out Pre-Buy went out of business. I called and after an hour on hold I was told my money would be returned. I also would be refunded my deposit. Now I have to pay another deposit to yet another company and I have yet to have this money refunded. I cannot afford to lose the $266 which I paid for June and I have a $210 deposit. I also was overcharged each month I had the insurance since I used only half of what I paid for. When will this money be returned–EVER? They owe me about $800. I need $250 for the next company and I don't have it. Please contact me as I am tired of getting a busy signal all the time when I call now.

  6. Linne Kerns

    I paid for Electricity for the month of Jume before I found out Pre-Buy went out of business. I called and after an hour on hold I was told my money would be returned. I also would be refunded my deposit. Now I have to pay another deposit to yet another company and I have yet to have this money refunded. I cannot afford to lose the $266 which I paid for June and I have a $210 deposit. I also was overcharged each month I had the electricity since I used only half of what I paid for. When will this money be returned–EVER? They owe me about $800. I need $250 for the next company and I don't have it. Please contact me as I am tired of getting a busy signal all the time when I call now.

  7. Steve D

    hey yogulick!

    Congratulations! That is officially THE most pathetic argument I have ever read in my entire life. Blame the politicians because you didn’t pre-buy anything and instead played the speculative market. “Gee, we’re not really bankrupt, we’re just screwing our customers because we love them like family and we are a family business! And besides, if you can’t screw family, who can you screw?”

    Go slither back into your snake hole you disgusting boot-licking company shill!

  8. Rob

    I'm surprised to hear that Pre Buy had 9000 customers. Me and the few I heard from that tried PreBuy were really ripped by the dishonest bosses at PreBuy.
    I gave up trying to get them to "true-up" my account and switched my service.
    They didn't actually have you pre-buy your electricity; that's impossible, since no one knows how much power you will consume the next month. They had me post a large monthly deposit each month to get power for the next month. If you overpaid, the credit was carried to the next bill, but you were still charged the same high deposit each month. After a few months, I had used less than half of the electricity I had paid for.
    Their agreement said that after six months of service, a customer could request a "true-up", and have their account reconciled and get a refund or credit of any over-payments.
    The problem was getting them to actually perform the reconciliations and credit you with the overpayment. They told me it would be done within 30 days of my request. After 30 days, they told me there was no record of my first request, so I would have to request another true-up and wait 30 days. They owed me hundreds of dollars they had overcharged me each month, but they kept coming up with new excuses to not pay or credit my account.
    I gave up on the PreBuy thieves and switched.
    Someone someday soon will file a class-action suit to get PreBuy to return all the money they have stolen from customers.

  9. Rob

    The problem with having a dishonest family running a family business is that the inbreeding causes all the familymembers to treat customers badly and, as a family, conspire to rip off as many people as you can before you get caught. Then, whichever family member was greedy enough to be the boss will be sent to jail by the other family members who will testify against him.

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