A Broadband-Savvy Energy Retailer Down in Texas

iThermostatimage1German utility Yello Strom (which we declared the world’s coolest utility last week) isn’t the only forward-thinking electricity provider to embrace the intertwining of energy and home broadband connections. While Yello Strom might be leading that revolution, energy company TXU Energy, based in Dallas, is also aggressively moving ahead on leveraging the home broadband connection to help customers manage and reduce energy consumption.

As an energy retailer, TXU Energy has to manage relationships with both energy distributors and consumers, and a couple months ago, the company launched the next generation of its connected thermostat — which benefits both groups. Dubbed iThermostat (first version released last year), the tool hooks into the customer’s home broadband connection and enables people to go online to program and monitor energy consumption related to their heating and cooling. The thermostat, which costs $75 for installation, also has a control function that enables the energy distributor to, say, turn off the air conditioner for a 10- to 15-minute cycle during crucial peak demand times.

TXU Energy’s iThermostat is one of those rare examples where an energy company designed and developed the energy management tool itself and is plugging it straight into the existing broadband network. TXU Energy’s director of product innovation, Chip Deaver, tells us that the main goal of the broadband-connected thermostat was simply to get customers to more easily program their thermostats via the web. While Deaver acknowledged that being at the mercy of a customer’s broadband connection could have its downside for devices that are designed to be on at all times, he said TXU Energy hasn’t had any complaints yet about shoddy broadband networks interfering with the iThermostat service.

TXU Energy offers its customers other connected energy management tools, like its energy dashboard device Power Monitor, which uses a powerline connection to display energy data from a meter (no broadband connection needed). The idea behind these products is to provide a stand-in for smart meters, which will take years to roll out to customers’ homes. Overall, TXU Energy has pledged to spend $100 million over five years on energy efficiency and demand-side management tools.

It’s not entirely clear how popular these tools are yet with customers — Deaver wouldn’t give numbers for deployments of the iThermostat or the Power Monitor, and would only say that these tools have been “successful,” but “there’s still a lot of work to be done.” Customers might be hard-pressed to pay $75 to have the device installed, but Deaver says the tools are already saving customers money.

It’s not a coincidence that innovation and competitive products are coming out of the Germany and Texas energy markets. Germany’s energy industry is a deregulated market and Texas became partially deregulated in 2002. In Texas, deregulation happened in sort of a mishmash: companies that sell electricity transmission and distribution like Oncor and CenterPoint Energy (s CNP) are still regulated, while the companies that manage the relationship with the customer, like TXU Energy, are deregulated. Deaver says TXU Energy has over 30 competitors, but it is the largest residential energy provider with 2.2 million customers.

Oncor and CenterPoint will actually be the firms that choose smart meter providers (Oncor’s going with Landis+Gyr) and will release the meters (a planned combined 800,000 rolled out by the end of the year) in Texas. TXU Energy is also developing products that will run over those smart meter networks. Like Yello Strom, TXU Energy was among the first providers to say it will offer Google’s (s GOOG) web-based energy tool PowerMeter to its customers.

But tools that leverage utility smart meters will have different characteristics than the broadband-connected iThermostat. Oncor is deploying an RF mesh network for its smart meter services, and customer smart meter energy data will likely have to run over that network back to Oncor’s back office, before being shown to the consumer either via the web or a connected energy dashboard. That whole process could take a good 24 hours to be collected from the RF network, processed, and shown in a handy graph back to the user. In that respect, the broadband is more useful to provide real-time energy feedback.

But a the end of the day, TXU Energy clearly needs to innovate and deliver new products if it wants to please (and keep) its customers. And, like Yello Strom, embracing broadband looks to be one of its key strategies.