Goldman Sachs-backed electricity firm to reach more Americans’ homes

Goldman Sachs abandoned an ill-fated push into consumer banking in late 2022, but an investment in a Texas energy retailer means its reach into American homes is about to grow.

Rhythm Energy, a Houston-based electricity provider overseen and owned by a Goldman Sachs private equity fund, has won approval from federal authorities to expand from its home market into the more than dozen states where deregulated power firms operate, CNBC has learned.

That covers energy networks, mostly in the Northeast, that provide electricity for 190 million Americans, according to federal data.

The idea that a Goldman-linked company aims to make waves by providing an essential service to Americans could invite scrutiny on the bank and its efforts to grow revenue though so-called alternative investments. It also gets Goldman into an industry, albeit through an intermediary, that critics have called a hotbed of consumer abuse.

A wave of energy deregulation that began in the 1990s gave rise to a new group of retailers promising savings versus existing utilities. State attorneys general, consumer groups and industry watchdogs have alleged that some of these retailers use deceptive marketing and billing practices to saddle customers with higher costs. One estimate is that customers paid $19.2 billion more than they needed to in deregulated states over a decade.

Rhythm, which calls itself the biggest independent green energy provider in Texas, positions itself as an honest company in a field of less scrupulous players. The startup, which began offering retail energy plans to Texans in 2021, avoids the teaser rates and hidden fees of rivals, it has said.

“While some of our competitors like to charge up to 18 hidden fees, we’re proud to charge exactly 0,” Rhythm says on its website.

But Rhythm’s Texas customers paid an average rate of 18 cents per kilowatt hour in 2022, five cents per hour more than what customers of the state’s regulated…