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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 providers paid, according to data from the U.S. Energy Information Administration.

That figure doesn’t include the impact of credits provided to solar customers, which reduces their costs, according to a person with knowledge of the company who wasn’t authorized to speak on the record.

Although there have been “bad actors” in the residential power field, there have also been “great retailers with innovative products,” James Bride, an energy consultant, said in an interview. “Realizing the potential there depends on ethical company behavior.”

Nothing found in online reviews, interviews with current and former customers and conversations with watchdogs contradicts Rhythm’s claims of fair dealings and good service.

“Goldman Sachs invests in numerous industries across our private funds on behalf of clients,” a spokeswoman for the New York-based bank said in response to this article. “Many of those companies operate businesses that serve retail customers. This is not new.”

Goldman’s record of dealings with the American consumer is checkered: The bank was accused of profiting off the 2008 housing bubble by betting against subprime securities. Years later, the bank named its consumer effort Marcus in part to distance itself from that memory. But the consumer division was dragged down by ballooning losses, a talent exodus and unwanted regulatory attention.

Goldman CEO David Solomon has now hitched his fortunes to the bank’s asset management division, calling it the “growth engine” after the retail banking bust. As part of that effort, Goldman aims to raise more client money for private equity funds to help his goal of generating $10 billion in fees this year.

Private equity firms have transformed the energy landscape in the nation’s largest power markets. For instance, in the PJM zone including Pennsylvania, New Jersey and Maryland, private capital owns about 60% of the fossil fuel generators and enjoy less regulatory oversight than legacy utilities, according to an August report from the Institute for Energy Economics and Financial Analysis.

“Ownership status is important,” the report’s author Dennis Wamsted wrote. “Utilities are overseen by state regulators who have a vested interest in keeping costs for ratepayers in check; private capital is largely free from that oversight.”

Rhythm, which buys energy on wholesale markets and sells it to consumers, first appeared in headlines in November, after its application to the Federal Energy Regulatory Commission surfaced.

The move made Goldman Sachs, via its private equity arm, one of the first Wall Street firms involved in selling retail energy contracts to households, according to Tyson Slocum, energy and climate director of consumer watchdog Public Citizen.

Slocum noted that Goldman’s trading arm deals in energy contracts and owns, along with other creditors, a fleet of fossil fuel generators along the Northeast corridor, while a separate division formed a solar power firm named MN8 Energy. The possibility of influence over retail sales, energy generation and trading in power contracts could lead to abuses, he said.

“Goldman knows how to execute, they own and operate energy assets and they’re involved in the futures and physical market,” Slocum said. “They’ll be able to manage this well. Will the customers do as well? I’m not convinced.”

Goldman has “strict information barriers between its public and private businesses” that prevent such self-dealing, the company spokeswoman said.

In a statement provided to CNBC, Rhythm CEO P.J. Popovic said his firm “has never purchased power from Goldman Sachs or any Goldman Sachs owned or affiliated power generation asset, nor has Rhythm ever purchased physical or financial power from Goldman Sachs or any of its affiliates in the commodity markets.”

Rhythm operates “autonomously” from West Street Capital Partners, the Goldman Sachs private equity fund that is listed in federal filings as an owner, according to the person who wasn’t authorized to speak on the record for the company.

Still, Goldman Sachs has been involved with Rhythm since the year it was founded in 2020, and the bank has placed at least one director on Rhythm’s board, a typical arrangement in the private equity industry, according to this person.

Private equity funds can exert influence on portfolio companies in a number of ways, including by hiring and firing of CEOs and signing off on acquisitions and company sales, according to Columbia Business School finance professor Michael Ewens.

But the main focus of Goldman Sachs managers — ensuring a profitable result for investors of West Street Capital Partners and boosting the odds they will participate in future rounds — should instill discipline in its stewardship of companies, Ewens added.

“People tend to think a lot of bad things about private equity, but Goldman is always going to have one overriding concern,” Ewens said. “Will somebody buy this company for more than they paid for it five years from now?”