One of the faster-growing small companies in Philadelphia this winter is Energy Plus, which sells electric power to 30,000 homeowners and small businesses in New York. It hopes to expand this year to Texas, next year to Pennsylvania, and to other "competitive electric market" states, says president Kevin Kleinschmidt.
The firm moved from a suite in the Bell Atlantic tower to the University City Science Center at 3711 Market St. in December and has since doubled employemnt, to 30 fulltime-equivalents, Kleinschmidt says. Gross revenues (electric power purchased) totalled $20 million last year; Kleinschmidt expects that to triple in 2009. "We became profitable before we signed the lease," he said.
Energy Plus buys power through a trading desk owned by one of the really large energy companies. "It's like foreign exchange," says Kleinschmidt. "The long-term fixed prices are higher than the current spot price. The seller has to buy hedges, which have gotten very expensive with credit being tight. Big users are still willing to pay a premium to lock in prices. But most customers, especially residences and small businesses, don't see a benefit for paying a higher price now, especially in a falling commodity-price environment."
Energy Plus tries to wean those small customers away from Con Ed and other big suppliers. They don't promise to be cheaper, just "competitive". But Energy Plus gets an edge, according to Kleinschmidt, because independent suppliers get a break from New York's sales tax, making it several percentage point cheaper (depending on where you are in the state) than the big utilities.
No such tax break in Texas. So Energy Plus has been trying to sweeten its product by doing credit card-style frequent-flyer deals with airlines. Not surprising since Kleinschmidt, a former Morgan Stanley stock analyst, used to work with his boss, chairman Richard W. Vague, at credit card lenders Juniper Bank and Barclaycard USA in Wilmington.
"I love Philadelphia," Kleinschmidt added. Energy Plus picked the Science Center because of the state and local tax breaks it enjoys in a Keystone Opportunity Zone, along with the nearby Cira Center and the Philadelphia Navy Yard site in South Philly. He also likes the proximity to Drexel and its co-op students: "We have three or four Drexel interns at all times. We enjoy them."
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