TXU Energy CEO Jim Burke's KEMA Executive Forum Remarks


TXU Energy Chief Executive Officer Jim Burke is delivering the keynote address today at KEMA?s 19th Executive Forum. His remarks as prepared, "Competition: Unleashing Possibilities," follow:

Good Morning. I'd like to welcome all of you to North Texas.

North Texas is my home and the home of dedicated TXU Energy employees who serve our customers and communities on a daily basis. I hope you enjoy our Texas hospitality during your stay.

As I thought about my remarks, I reflected on the word "change." Change is a word that we seem to be hearing a lot these days. Or, at least that seems to be the operative word this political season.

I know change is something everyone in this room understands and appreciates -- not only with respect to recent history, but also in thinking about what lies ahead for our industry.

To start, I want to highlight some of the recent changes at TXU Energy.

But, I'm really going to focus more broadly on the changes taking place in our industry -- and just why competition is so important to helping us meet the challenges faced by our customers and our communities.

It shouldn't come as a surprise that I, as someone who is focused on the demand (or customer) side of the supply and demand equation, view competition as the key to managing these changes. But, before I get too far down that road, let me talk about TXU Energy for just a second.

About this time last year I was scheduled to speak at this conference, but a funny thing happened on the way to the forum. KKR, TPG, and Goldman Sachs decided they wanted to change TXU Corp. from a publicly held company to private ownership.

Given its significance, it generated a lot of attention over the past year. This transformation affected a whole lot more than just the capital structure of the company. The truth is we did a lot of listening over the past year and made significant changes as a result of what we heard.

Today, what you once knew as TXU Corp. is Energy Future Holdings. Don Evans, former U.S. Secretary of Commerce, is Chairman of the Board. John Young, formerly with Exelon and Southern Company, is CEO of EFH.

The holding company is made up of three separate and distinct operating companies:

- Luminant -- the competitive generation company.
- Oncor -- the regulated poles and wires company.
- And, TXU Energy -- the competitive retail electric provider and the company I have the privilege of leading as we serve approximately 2 million customers throughout Texas.

Each company has a distinct:
- Name
- Board of directors
- CEO and management team
- And, in the next few weeks, separate headquarters

But, beyond these structural elements, TXU Energy took aggressive steps to re-position itself in the Texas marketplace.

For example:
- We started lowering prices last March, reaching a total 15 percent reduction by November for the majority of our residential customers and protected these prices at least until the end of 2008- a valuable commitment to customers in a time of rising fuel prices like we have today
- We are investing $100 million over five years to help develop new energy efficiency and conservation solutions for customers- efforts to help customers save money and help the environment by using less electricity.
- We are providing $150 million of financial assistance over the next five years to help reduce, and help pay, energy bills of at-risk customers- and we are proud to have the largest company-provided fuel fund in the country.
- Finally, we are establishing a Low Income Advisory Committee, which includes representation from leading consumer advocates. Working collaboratively, I am confident we will find effective, targeted solutions to help low income customers overcome some of the challenges they face.

These commitments - among others - accelerated the transformation of a company with deep roots in this community and in this state. And, we look forward to making even more changes as we move forward.

TXU Energy faces some real stiff competition. Many of you in the room today ensure that's the case. For us to be successful, we must manage through rapid changes, deliver more effective solutions and build stronger relationships with customers.

Currently, more than one million residential and small commercial customers in our traditional North Texas market are served by competitors- that's about 40 percent of the market- and that's a big change since January of 2002.

Now, that's not a trend I want to see continue. But, it has forced us to truly recognize the power of choice customers now have.Approximately 90 percent of residential customers across the major competitive areas of Texas are aware of their right to choose, and more than 80 percent of those customers support competition in the Texas electric market.

Simply put: if they want to pick another provider, they have that choice. If they want the lowest price, they have that choice. If they want all renewable power, they have that choice. And, if they want to lock in their price for months or even years, they have that choice, too.

Not only are they aware, not only do they favor competition, but also they are actively engaging in the market.

Consolidated data from electric retailers shows that four out of five Texas residential customers have made an active choice since the market opened in 2002. That is an incredible number, especially in comparison to any other U.S. market. Choice rates among commercial and industrial customers are even higher.

If customers do not like their current supplier, they can easily fire them and choose retailers who better suits their needs.

Equally important, customer satisfaction in competitive areas of the state, across all retailers, is fairly strong. On a 10-point scale the range of satisfied customers outnumbers dissatisfied approximately nine to one.

That said, satisfaction is not as strong as I'd like to see it. And, I suspect that reflects some of the changes that have been going in terms of energy prices across the board, including electricity.

While price has been the main basis for judging competitive markets across the country, including Texas, our ultimate mission is to bring innovation and customer benefits that are expected in every other competitive product or service category.

Ultimately customers - and the active role they now have in the market - will spur TXU Energy, and other retailers, to develop products and services that meet their needs. And, that is the key to competition - customers driving change in the marketplace as companies search for customer relevant solutions in an effort to succeed.

Other factors to consider about the Texas competitive market include the fact that there are about one hundred different offers available to residential customers here in the Lone Star state, some of them lower than prices available at the end of regulation in Texas.

And, this is despite the fact there has been a massive shift in energy prices across the board - a fact all of us in the room understand all too well. Prices for natural gas, a key fuel that drives wholesale prices in Texas, have more than tripled since competition began.

We have also seen massive investment in the state. More than one hundred retailers compete across all segments in Texas, more than $20 billion in new generation capacity, plus investments in transmission and distribution assets, and Texas now leads the nation in wind generation.

To sum up - using a variety of factors - it is my judgment that the Texas market has made tremendous progress in a relatively short time frame.

But, I can talk about facts and figures, I can talk about market achievements, and I can talk about all sorts of things until Im blue in the face. Unless cus