Green Mountain Energy Gets A $24M Jolt

Hoping to dazzle power consumers by providing them with the option to buy cleaner electricity, Green Mountain Energy Co. recently lit up a $24 million round of fresh equity financing.

The new money came from the company’s four existing investors: BP, Maverick Capital, the Wyly Family and Nuon, the largest utility company in the Netherlands. Green Mountain has raised more than $200 million to date.

Currently, the Austin, Texas-based company provides less-polluting electricity generated by alternative sources such as wind, solar power, water, geothermal, biomass and cleaner-burning natural gas in six states, including California, Connecticut, New Jersey, Ohio, Pennsylvania and Texas. Beginning this month, it also will provide “green” energy for the two largest utility providers in Oregon.

Green Mountain sells energy directly to consumers in deregulated markets such as Connecticut and New Jersey, but that isn’t its only avenue of revenue. In markets where energy consumption is regulated, the company partners with incumbent utilities to offer electricity as a renewable electricity choice for customers. Thus, Green Mountain has the capability to market products, provide customer service and obtain and/or supply green energy resources.

The company also sells electricity through an aggregation approach, whereby it serves as the primary energy provider to large groups of customers that reside in particular geographic regions such as Northeast Ohio. Green Mountain serves hundreds of thousands of customers in that region alone.

Although the company’s pricing scheme differs from market to market, it is competitive with local utilities, says Rick Post, Green Mountain’s chief financial officer. “We charge a premium to what’s available from the local utility,” he adds. “The premium is $5 to $10 per month [per household].”

As to why consumers might choose Green Mountain over traditional power providers like Public Service Electric and Gas (PSE&G) or ConEdison, Post says the company is targeting customers who understand that electricity generation is the dirtiest industry in America and, thus, are more likely to purchase their power from an environmentally conscious provider.

“We’re targeting anyone who cares about clean air,” he adds.

From the outset, the company has been built on the notion of harnessing the power of consumer choice to change the way power is made. Although it would appear at first blush that cleaning up the environment would be the last thing on consumers’ minds as they select a power provider, Green Mountain has managed to sign on about a half a million customers since its inception in 1997.

To that end, Green Mountain plans to use the proceeds from its latest financing to continue growing the company, concentrating specifically on customer acquisitions.

First, it must wrestle with incumbent utility providers and other retail electricity providers, however, who still command a large portion of the market share. For example, PSE&G has a total of 3.5 million customers, 1.9 million of which are electricity consumers, and ConEdison distributes electricity to 3 million customers in New York’s five boroughs and Westchester County.

Still, Post is confident Green Mountain can succeed, as he claims that the company has no major competitors providing cleaner electricity on a national level.

Green Mountain has no immediate plans to raise additional capital, and future financings will depend upon its ability to generate revenue.

Robyn Kurdek can be contacted