With the passage of the Texas Electric Choice Act in 1999, the deregulated Texas energy market has given rise to a unique success story in Texas. That success story could expand into other states as well.
Just over a year old now, Stream Energy emerged out of the post-regulation Texas energy market as the fastest growing electricity company in the United States. Headquartered in Dallas, Stream Energy has the fifth highest customer enrollment in the Texas residential power sector. To date, they have over 135,000 customers and over $80 million in revenues.
Stream’s rise, though, did not come without serious challenges. According to a recent feature in D Magazine, Stream almost folded. The company’s biggest problem was that it had failed to estimate how strong the initial customer response would be, and as a result, nearly became overwhelmed with the power requirements of a larger than anticipated fan base. Stream’s marketing arm, Ignite, had what are called Independent Associates (IAs). The IAs would sign up people for Stream Energy – usually starting with people that they knew, including neighbors, friends, and family members. Additionally, the IAs would recruit new IAs, which leads to even more people switching over to Stream.
Company Executives eventually realized that the company wouldn’t have enough funds to purchase the power that increasing numbers of customers were demanding. This problem was complicated by the “floating” factor. Since Stream is only a retail electric provider and not an electricity generator, they simply enroll customers, manage their accounts, and procure their electricity. By the 30th day of every month, Stream pays customer bills to the Public Utilities Commission (PUC), which generates electricity for the power that Stream customers demand. Since many customers receive their bills in the middle of the month, Stream did not get paid for some of those bills by the time that the company had to pay the PUC.
Other challenges to Stream’s success have included natural disasters and market forces. Already rising natural gas prices rose further with the passing of Hurricanes Katrina and Rita. “The main challenge has been the run-up in the natural gas market,” said company founder and Chairman Rob Snyder, when asked by the DallasBlog about the challenges that Stream has faced.
Snyder said that there is a direct correlation between price increases in the gas and electric markets. “What happened to the natural gas market between August and January had never happened before in the history of this market,” said Snyder. “The wholesale electric market rose 100 percent.” Snyder also compared last year’s skyrocketing gas prices to a “1 in 50 year flood”, and said that it’s rare for gas prices to rise that much in such a short period.
The large number of switchovers to Stream has also been a challenge, according to Snyder, since no REP owns both its own transmission and generation line. While these switchovers have been a challenge, they have made Stream competitive with former monopolies in the state since many of the newly enrolled households have defected away in masse from firms like TXU Energy and Reliant, which charged premium prices for electricity. Also, Stream is competitive with the former monopolies despite the fact that they each have over a million customers. Because Stream had 135,000 customers as of January 2006, one might conclude that their closest rival competitor would Gexa Energy, which had 150,000 in January. But this isn’t the case, according to Snyder.
“We have more customers enrolled in a day than Gexa has enrolled in a week,” said Snyder. Stream’s rate of enrollments is high enough that the company is now competing with firms like TXU Energy and Reliant.
Snyder said that the biggest factor contributing to the success of Stream was the multilevel marketing approach to enrolling new customers. “Network marketing is the killer application,” said Snyder.
When asked if Stream had plans to expand outside of Texas, Snyder said that the company was beginning to explore its entry into other states, such as New York and California. Such plans, however, are only in their infant stage.
There are 13 states in the country that have deregulated markets. Eleven of those offer consumer choice, including Texas. Rob Snyder has taken advantage of that and started a major energy enterprise.
In the last four cycles, you could count on one hand the total number of Republican incumbents seeking re-election who got toppled in a primary. This cycle's GOP primary featured more incumbent defeats than the past three combined. Additionally, several GOP incumbents only narrowly won re-election.
So exactly what message did the voters send? Here's our take:
The GOP has not laid the groundwork for meaningful education reform.
When the standard-bearer falls, the standard always falls with it. Diane Patrick's victory over Rep. Kent Grusendorf (R-Arlington) can be seen as the biggest victory for teacher unions in the GOP primary. Several other GOP incumbents only narrowly survived challenges from school-lobby-backed challengers. Still others face runoffs.
As Grusendorf predicted, his loss will undoubtedly set back the cause of education reform. But why did this happen?
Grusendorf had the same problem as the Old Testament prophets: right message, but the people were in no mood to receive it.
Bottom line – the GOP leadership's education message isn't selling back home.
The lion's share of the blame for this lies at the feet of Govs. George W. Bush and Rick Perry. They've been traveling around the nation touting a Texas "miracle" in public education.
The truth is that, while Texas has shown some improvement in the inner-cities in the early grades, there are still serious problems with the Texas public school system.
The true dropout rate in Texas public schools is frightening. College entrance test scores are among the lowest in the nation. And the Texas Education Agency sets ridiculously low standards to pass state exams and for schools to earn an "Acceptable" rating. After all, the lower the standard, the more children meet it and the easier it is for politicians to talk about "improvement" in the public school system.
But it's awfully hard to say out of one side of one's mouth that the system needs reform, while out of the other side come boasts about how great everything is.
Meaningful education reform will not occur until the state's top elected leadership is honest with voters about how serious the problems are in the school system. Only then will voters be ready to provide the cover needed to take on the established special-interest groups that run the public education system.
The election result is ambiguous for vouchers.
In terms of number of votes, the primary was a net wash on the voucher issue. Two supporters of vouchers – Kent Grusendorf and Elvira Reyna lost. Two opponents of vouchers – Roy Blake and Carter Casteel also lost. The GOP has lost a couple of votes on this issue, but that occurred in two special elections where Democrats gained seats, not the primary.
This year's result is a setback for school choice, but not necessarily a fatal one. If voucher proponents want their proposal passed, they need to reassure rural voters that it won't kill the local districts. They also need to address concerns about financial accountability and lay the groundwork for the argument that more education reform is needed.
Pay attention to the Republican base.
During the last two regular legislative sessions, the concerns of the GOP base and middle-class suburban and rural voters have been almost an afterthought. The priorities of the House leadership have often been ideas with significant numbers of lobbyists hired to press it or with major GOP donors attached to it.
In this election cycle, money did not determine the result. In race after race, message trumped trade association support and campaign war chest.
GOP voters want property taxes limited and both illegal immigration and border security addressed. These need to be leadership priorities in the upcoming sessions.
One factor in Grusendorf's defeat may have been conservative divisions over education reform. Support for the elected State Board of Education is important to many key social conservative groups. House Bill 2 included a proposal to allow the Permament School Fund's textbook monies – an endowment set aside for the purchase of textbooks and support of public schools – to be used to buy computer hardware. This idea made some social conservatives and board members uneasy.
Even though Grusendorf is more conservative than Patrick and has a solid record on pro-life and other issues important to social conservatives, some conservative voters stayed home this race because of the electronic textbook idea. "It was a resounding loss, and though educrats are attributing it to school finance, Grusendorf may have overplayed his hand in his support for laptops to replace textbooks," said Peggy Venable, Texas director of Americans for Prosperity. "That was seen by fiscal conservatives as an attempt to usurp the authority of the elected State Board of Education and to use the Permanent School Fund for technology. It is ironic that what has been dubbed as the 'Apple issue' would be what likely encouraged conservatives to 'sit this one out.'"
The electronic textbook proposal is pushed by lobbyists for Apple and Dell computer companies. But it has created divisions within the Republican base and undermined GOP support for education reform.
The GOP leadership creates divisions within the GOP base at its own peril.
It's the taxes, stupid.
While the Republican message on education needs some work, one thing is clear from this election – voters want property taxes controlled – now. The failure of the Legislature to lower local property taxes was a major theme in Diane Patrick's win over Grusendorf.
But another Patrick – Sen.-elect Dan Patrick (R-Houston) – showed just how powerful this issue is. He literally built a political movement around the idea of limited the growth of property tax appraisals, and this election he became the Kingmaker in Houston GOP politics, not just in his race, but others as well.
Voters in Harris County have had it with high property taxes, runaway spending, and politicians who make excuses for them. The GOP leadership should take heed.
The problem, of course, is the House leadership surrendered the tax issue to the Democrats in March 2005 when they rammed through the House an income-tax-in-disguise (under the euphemism of a "payroll tax" or "choice plan"). The question now is, can candidates friendly to the GOP leadership reclaim the tax issue? It's powerful. And it wins elections.
This was not a good election night for tort reform, but it wasn't disastrous either.
The loss of Sen. Frank Madla (D-San Antonio) shows that Democratic primary voters in districts with significant inner-city territory expect their representatives to vote against tort reform and other key elements of the GOP leadership's agenda. After this loss, it will be next to impossible for Texans for Lawsuit Reform (TLR) to get any support from Democrats representing majority-minority districts.
Additionally, pro-tort reform business interests poured hundreds of thousands dollars into Rep. Joe Nixon's campaign for the Texas Senate, yet Nixon got only 8.7 percent of the vote. And Lee Parsley, who did legal work for TLR, finished fourth in a four-way race for the Austin Court of Appeals.
It wasn't a good night for key tort reform leaders. However, TLR support helped re-elect Rep. Betty Brown (R-Kaufman), despite a tough trial-lawyer-funded challenge from Wade Gent. And the other three GOP candidates who openly accepted support from the plaintiffs' bar – Dan Corbin, John Devine, and Drew Moulton – all lost. Nixon tried to connect Dan Patrick to the plaintiffs' bar, but Patrick denied such a connection and publicly expressed support for tort reform.
The message from this election – GOP primary voters are not comfortable with the plaintiffs' bar, but tort reform alone is not enough to win an election. A good message is a requirement, and money can be beat by the right candidate with the right issues.
Perry's hand has been strengthened on tax issues
Appraisal and revenue caps, which Perry has endorsed, won overwhelmingly in GOP ballot referenda. Those two issues floundered during the legislative session. But the referenda, combined with Dan Patrick's impressive showing in Houston, shows GOP primary voters are dead serious about this issue. Lt. Gov. David Dewhurst's future statewide political ambitions could ride on whether or not the Senate takes action on rising local property taxes.
Perry has floated the idea of doing the special session on taxes only. With the biggest proponent of education reform losing a GOP primary, the focus on the special session could well shift to the tax issue, particularly if votes are lacking for meaningful education reform.
The GOP has to be careful, however. One of the lessons of this primary is that voters want the school finance issue solved. Any tax bill that passes must be a permanent fix, not a stopgap, or there will be more electoral problems for the GOP.
Now comes the real fun – trying to get a consensus within the Republican Party on the tax issue. We'll know more about the long-term implications of the tax issue after the John Sharp commission releases its report, and the major GOP players react to it.
What about the leadership?
The final question remaining from the primary is what does all this mean for House Speaker Tom Craddick? Throughout his tenure, Craddick has been more concerned with result than style. But he has pressured members to support legislative proposals that cause problems for them back home. The fear of a well-funded opponent – and the need for leadership protection – is one reason GOP members have caved in to unpopular leadership proposals.
Now that several well-funded candidates have lost, will members continue to vote for proposals they know will endanger their re-election campaigns? Or will they succeed in demanding a new style of leadership from Craddick?
That's an open question that will probably only get answered once the Legislature convenes for a school finance special session.
Now that the hue and cry of posturing politicians and people who don't understand basic business fundamentals (but I repeat myself) has passed, there's this story today about hometown Exxon-Mobile, which is, surprise surprise, investing its "windfall" back into more of the same long-term strategery that earned them profits in the first place.
As some campaigns gear up for runoffs, there are two Republican races worth taking a look at.
The race for the judicial seat in the Criminal Appeals Court Place 8 will be between incumbent Charles Holcomb and State Representative Terry Keel. Holcomb pulled in 45 percent of the vote to Keel’s 30 percent. Robert Francis, a state district judge from Dallas, went out with 24 percent.
The race is interesting because Keel reported to the Republican Party of Texas (RPT) that the voter petitions of Holcomb and Francis had problems. Holcomb and Francis were taken off the ballot until the Texas Supreme Court ordered that the two candidates be put back on the ballot, stating that the candidates were not given time to fix the errors on their petitions. According to the Houston Chronicle, the candidates had turned their petitions in seven days before the deadline.
Congressional District 30 in south Dallas will have a runoff between local business consultant Amir Omar and litigation attorney Wilson Aurbach. District 30 is held by 14 year incumbent Eddie Bernice Johnson and is heavily Democratic. Some observers have joked that it’s the type of district that will end up being “80-20” in favor of the Democrats come November.
The runoff may have been caused by Fred Wood unexpectedly pulling in 19 percent of the vote in the primary. Aurbach and Omar pulled in 44 percent and 36 percent of the vote respectively.
The Aurbach and Omar campaigns have had different things to say about each other. The Aurbach campaign has criticized Omar’s campaign tactics and lack of a voting history in Dallas County. Omar has stressed that, in order to have a chance at beating Eddie Bernice Johnson, the Republican candidate in the general election has to be able to campaign full-time, and he has pledged to do so if he is the Republican on the ballot in November. He has implied that this would be impossible for Aurbach, who works as a litigation attorney.
On election night, Aurbach told the Dallasblog that he views the 44 percent that he received in the primary as a victory and that he looks forward to carrying the victory through the runoff in April.
Omar has repeatedly pledged to wage a positive campaign and to refrain from negative attacks on his opponents.
Bill Parcells is at one end of the rope. Jerry Jones is on the other end of the rope. The prize is Terrell Owens, who a source tells DallasBlog.com is the reason for the Cowboys' front-office tug-of-war. Read all about it exclusively from Mike Fisher by clicking onto the "School of Fish.''
Some people were “saving themselves” for Kinky or Carole, but does Tuesday’s abysmal 9 percent primary turnout say more about the state of politics today? Yes.
No competition, no vote. That’s what Texas had in the statewide races – no competition. And that’s a by-product of total Republican control in this state. Competitive top-of-the-ticket races bring out voters. That’s not going to happen when you have these forces at play:
Overwhelming control by one party with incumbents running and little intra-party jockeying for open seats.
A depressed Democratic party.
A primary that comes on the heels of the first March winds.
Texans probably aren’t aware that this state held the first primary in the nation this year. The March 7 date realistically gives primary candidates two months of all-out campaigning after the holiday season. Nobody pays attention before then. It’s not enough time for a challenger to mount a winning campaign in a statewide contest. The result this year was that Carole Keeton Strayhorn saw she couldn’t overcome Gov. Rick Perry in that amount of time and opted to run as an independent.
There’s another reason for the low turnout. Despite a few competitive legislative races that produced voters, a sense of “Why Vote?” is pervasive. In other words, what difference does it make? Money and the powerful control politics today, so what difference does my measly little vote make? People seem to have thrown up their hands.
The DMN story today about the primary drawing the lowest turnout in decades – at least since before 1986 – includes a comment from Austin political consultant Bill Miller about voter “disillusionment.” Discontented voters withhold their votes, he said. [see www.dallasnews.com] And that suggests a risky environment for incumbents. Voters could take it out on the incumbents in November but, again, if there’s no real competition, they could just repeat what happened in the primary and not show up.
There is, however, another warning sign for Republicans: Their primary drew only five percent while the Democrat primary drew four percent. In an overwhelmingly red state, that figure should send a signal to Republicans that voters are losing interest.
When this country is risking lives, international prestige and the milk money on establishing democracy in other countries, it’s disheartening to see the effects of so little of it at home.
Rep. Tom DeLayThe Tom DeLay congressional race is the key Texas race for the nation to watch in November, according to the Washington Post’s online political guru Chris Cilizza. While DeLay, the former House majority leader, cruised to victory in the primary, he faces Democrat Nick Lampson, a former congressman undercut by redistricting, in the general election. DeLay quickly pivoted off his primary win, Cilizza writes, to attack Lampson, the Democrat, as the candidate of “liberal activists like Barbra Streisand, George Soros and Nancy Pelosi.” Further complicating the situation for DeLay, who is awaiting trial on charges he illegally funneled corporate donations to GOP candidates for the Texas House in 2002, is former Republican Rep. Steve Stockman, who plans to run as an independent.
See other key races and an interactive map at washingtonpost.com
Less than four months after 9/11 only 38% of all Americans in an ABC/Washington Poll found that Islam had more violent extremists than other religions. Today that same poll found that number had risen to 58%. After five years of watching Iraq, Iran, Afghanistan and France Americans have a more unfavorable view of Islam now (48%) than shortly after 9/11 (39%). When asked “Do you think mainstream Islam encourages violence against non-Muslims, or is it a peaceful religion 33% Americans today answer “yes” versus only 14% five years ago (54% said “no”) Still, overall 59% of Americans say they a “good basic understanding of the teachings and beliefs of Islam.”