Ambit Energy buys Commerce Energy

Why buy Another Electric Company?

Commerce Energy selling their business to Ambit Energy is a good thing. There are many electric companies in Texas right now struggling to stay in business and there have been dramatic changes on how some electric providers now compete for new business. A few electric companies have even stopped taking on new customers as they determine how to hedge the electricity they sell. Electric prices in Texas are so volatile it requires an electric company to have a lot of capital on hand and a disciplined fundamentally strong commodities trading desk. Ambit Energy is an MLM electric company which sells electricity through a large direct sales force. The sales force they have has to pay in each year (correction: only a one time $400 payment needs to be made) in order to qualify to continue to sell for Ambit as well as receive commissions. If you decide to join up with Ambit Energy to sell their electric service you will have to pay around $200 – $300 depending on the promotion they may have going on. This added money paid into Ambit just to sell the electric service helps keep a company like Ambit profitable with little risk and exposure to the volatile Texas electric market (these payemnts are fed back in to their sales force through bonuses and fast start commissions). Since it is risky to sell electricity in Texas as a new Texas electric provider it makes since to attempt to market and sell in the most affordable unrisky way possible. Ambit Energy has accomplished this and basically rode on the coat tales of Ignite Energy which started the MLM direct selling of electricity in Texas. Now Ignite Energy has seen a steady drop in enthusiasm while Ambit has become the name most heard when it comes to selling electricity as a home based business opportunity. Commerce Energy may have found themselves becoming unprofitable due to any number of factors. They may have not had enough capital for selling long term contracts because of skyrocketing electric prices, they enrolled too many credit risk customers who then defaulted on their electric bill, or some other reason, we really don’t know why they sold but Ambit is smart to buy them up and I will tell you why.

High Customer Churn Rate in the Deregulated Utility Service Markets

Ambit Energy, just like, Ignite, Excel telecom, Amway and similar companies like them many times experience a high customer churn rate as their followers who are also their customers and sales agents become dispassionate about the product or service they sell. They drop out of the company after a few years and do not attempt to resign their family and friends they may have asked to help them with their home based business opportunity. This is not always the case with this type of direct sales company but many times it is especially in the utility services industry. By Ambit buying up traditional seasoned electric providers during their succesfull period it may help them stay in business for the long haul. Without an outside marketing effort through tradional channels it may be hard for Ambit to keep the electric service customers in Texas they currently have.

MLM and Texas Electric Companies

Some of the other MLM work from home opportunities in the Texas electric service market are with Ignite Energy, Green Mountain Energy, Zurvita Energy, Affordable Energy, and Cirro Energy. New Age Power Brokers is a slightly different take as they are more of an affiliate program than an MLM company offering brokering opportunities to sell for Glacial Energy. Green Mountain Energy, Affordable Energy and Cirro Energy are tradional electric companies that have toyed with MLM marketing to try and increase their market share after seeing the huge success that Ignite Energy had when they started back in 2002. There are sources that claim Ignite Energy had at their peak close to 400,000 electric service customers.

Cirro Energy

Cirro Energy Appears To Be The Lowest

Many people have called me quoting Cirro Energy who offers what seems to be a low fixed rate for 12 months and 24 months. After examining the terms of service I found that the rate is a variable rate. What ends up happening is a customer signs a contract that locks them into the rate for 12 or 24 months and they have no guarantee what the rate will do. This protects Cirro Energy if the rate goes up or down but not the customer. Cirro still makes their retail margin on the rate but the customer cannot get out of the contract without penalty if the rate were to go up. The purpose of signing a contract is to lock in for a period of time against future electric rate price volatility. By Cirro offering a variable rate for a term you must sign and lock into I believe they may be knowingly or unknowingly confusing the customer to thinking they are signing into a fixed rate. Stay away from this rate product as it is not a fixed rate and Cirro can change the rate without notice at any time.

I have added a company in the chart below to compare with Cirro Energy called Startex Power. They have a very low fixed electric rate in comparison with some of the other retail electric providers. You will do much better to lock in at this low fixed rate then to get in on a variable rate that can go up on you. If you would like to participate in a low variable rate Startex offers one that has a promo rate the first month in the 9 cent range and then follows the natural gas and Texas spot price market after that. Historically you would pay about 12 – 12.5 cents on their variable rate but you are not locked into a contract. I would only recommend this rate product for those who don’t want to be locked into a contract. Otherwise, you should get on a fixed rate product for a 12 or 24 month term with Startex.

Retail Electric Provider Product Name 1000 kWh 1500 kWh Fixed or Variable Term
Startex Power Star Seasonal Saver 1 Year Plan 11.1 11.1 Fixed 12
Startex Power Star “Fall Frenzy” 8 Month Plan 10.4 10.4 Fixed 8
Cirro Energy Smart PassSM 12 10.9 10.8 Variable 12
Cirro Energy Smart SaverSM 24 12.2 12.2 Variable 24

Learn more about Texas Electricity

Cirro Energy, Customer Confusion Over Variable Electric Rate

Power To Choose had Cirro Energy listed on their website with a Residential Electricity Rate for 12 months at 12.3 cents\kwh back in June of 2007. This tied with Spark Energy who also had a 12.3 cents per kwh energy rate. After looking closer I noticed that you can only qualify for the 12.3 cents\kwh rate with Cirro if you are using more then 500 kwh a month in electricity. Since then Cirro Energy was advertising only a variable 12 month rate on Power to Choose but would show it as a 12 month term. Mind you I had multiple people call me to complain about Cirro because they thought they had signed up for a 12 month fixed rate not noticing they were being locked into a rate that can change at will by Cirro Energy for any reason the energy company decides. I received enough of these calls to realize that most people who signed up with Cirro seemed to be under the impression that their electric rate was locked in for 12 months.

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Another bad aspect to the Cirro Energy residential electricity rate was the early termination penalty. Back in June of 2007 they would charge an electric customer 1 months average electricity bill if you were to cancel. This could be $200 – $500 for some residential customers who use a lot of energy. On a more positive note an apartment customer might only have to pay $50 – $75 to cancel since they do not use as much energy. Since June of 2007 Cirro’s early termination penalty is more in line with other electric providers. They now offer both a fixed rate and a variable electric rate.

In comparison to Cirro Energy, Startex Power has a competitive electric rate worth looking at. They have standard fixed rate terms without monthly service charges. Another electric rate plan that is good for those looking for a guaranteed no deposit plan is with Bounce Energy.  The electric rate is not dependent upon the amount of electricity used  unless you are using under 500 kWh a month. Most people do not use under that but if you do there is a $4.95 monthly fee.

Cirro Energy has announced as of August 2008 that they are being bought out by a large electric company named Dominion Retail with over 1.7 million residential and commercial electric service customers throughout the USA. My guess is that the churn rate of electric service customers has been increasing and electric companies like Cirro are looking to sell out. After reaching critical mass it actually does make sense to sell out. I wonder if this sell out is foreshadowing what is to come in the Texas retail electricity market?

Remember telecom long distance deregulation? AT&T, MCI, and Sprint. The market became pretty thin and volume ended up making or breaking these companies. Once the companies got too big and their customers started jumping ship to the next best provider they couldn’t justify the size of their companies infrastructure any longer. These companies began losing money and selling off and downsizing.

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