In the wake of energy deregulation, companies like the Texas-based Choose Energy and Chicago start-up Power2Switch moved quickly to fill an ensuing market need. With their new and unprecedented powers to choose their electricity providers, consumers had a bevy of questions: Who would be cheapest? How do I switch? Does the electricity turn off in the meantime?
Last week, Choose Energy, which allows consumers to compare retail electricity plans and helps them enroll online, announced that it had acquired Chicago-based Power2Switch, demonstrating how competition among electricity rate comparison services is shaping up, fueled by venture capital investments. Just this March, Choose Energy raised $4 million in Series-A funding from Kleiner Perkins and Stephens Capital. Back in 2011, Power2Switch raised $1.2 million from OCA Ventures, Hyde Park Angels, New World Ventures and i2A.
Choose Energy President Jay Webster told Crains Chicago Business the five-year-old company is in “expansion mode” and the acquisition will allow the company to establish itself in the Midwest, where Power2Switch has been establishing a presence since its founding in 2010 out of the University of Chicago’s Booth School of Business. Currently, Choose Energy operates in eight states with a goal to enter all 19 deregulated energy states and 22 deregulated natural gas states. So far, Choose Energy has helped about 100,000 consumers save on energy bills, the company reports.
In conjunction with the deal, Power2Switch senior software engineer Jake Lumetta and Vice President of Marketing Suzanne El-Moursi will make the move to Choose Energy, the only Power2Switch employees that will join Choose Energy’s team.
In a market where energy supplies are beginning to roll out incentives like points or airline miles, Choose Energy hopes to provide consumers transparency when it comes to switching suppliers. In any given market, the company deals with about 30 suppliers that they vet and from whom they receive commissions when consumers switch plans. Surprisingly, says one company official, pricing is not the biggest factor for consumers when they switch plans. Renewable energy is a big priority—in fact, 40 percent of people who use Choose Energy’s website choose a 100 percent renewable plan, and they found that many consumers are willing to pay a premium for it. (Although, much of the company’s experience to date has been in Texas, where Choose Energy was founded in 2008, and where the cost of wind is comparatively very low.)
Choose Energy faces its biggest competition from another Texas-based company, SaveOnEnergy, which received $2.4 million in funding in 2008 from a group of oil and gas executives, as well as ShopMyPower, which launched in 2012. However, Choose Energy doesn’t have its sights set on any imminent acquisitions, says President Jay Webster, as he feels the main competition isn’t a pure play on energy deregulation.
Utilities like Centerpoint Energy have even entered the transparency game, having launched a website, myTruecost.com, in 2012 that allows consumers in the state to compare rates (the states of Illinois, Pennsylvania, and Michigan have launched similar websites.)