How It Works
As of today, there are 14 states in America that have given businesses the option to buy their electricity on the open market. And they are:
California (Natural Gas) – Connecticut – Delaware – Illinois – Maine – Maryland – Massachusetts – Michigan (Existing Grandfathered In) – New Jersey – New York – Ohio – Pennsylvania – Texas – Rhode Island
One of our first jobs is to qualify your company and see if your business will benefit from this new relationship. We will look at both your gas & electric usage to pair you up with the best possible energy provider. Once we see that this is a positive move for your company, we’ll expedite your information into the provider’s data base for quoting purposes.
If your company has the credit worthiness, your wholesale provider will buy large amounts of power for you and lock in those less expensive rates for you for up to 3 years. You’ll get one bill each month based upon how much power you’ve used, but at a lower cost per kilowatt than what you’re paying now. The utility company still gets paid for the power lines, transformers (delivery systems) as before, but that’s just a small portion of your bill. The cost per KWh (kilowatt-hour) is the biggest part of your bill and that’s what your new wholesale provider purchases on your behalf.
If you & your neighborhood experience a power outage, you’ll still be calling your existing utility company, as you always have. You’re still their clients and they still earn money from you. Outside of the fact that you’ll be getting detailed consolidated billing from this new partner and saving money on your utilities, things don’t change much when you make the switch.
While it’s a pretty simple procedure, getting to the point where you decide to buy your electricity from a direct marketer vs. a public utility company or broker can vary slightly from state to state. But basically we will ask you to provide us with the following;
- The physical addresses of any and all locations your business operates in any given deregulated state.
- We’ll need all account numbers and meter numbers from the utility company for each location.
- We’ll need the legal name of your business that the bills are directed to.
- Most states require that you fill out a 1 or 2-page Letter of Authorization (LOA). This paperwork is given to the utility company(s) you’re currently serviced by so the company we choose for you can look at your usage data over the last 12 months. This gives your new provider an idea how much power they will want to go to the open market and buy futures of that commodity for you.
- After they analyze your usage, they will advise us what kind of savings you might expect. For example, let’s say your company uses 2,000,000 Kilowatt hours (KWh) of electricity per year and the current price you’re paying is 7.8 cents per KWh. That equates to an annual expenditure of $156,000. If your new provider can buy that power for 1 ½ cents less per KWh, you just saved $30,000 a year and can count on budget certainty for that item.
- Once you agree this is the right thing for your company, you will be contacted directly to discuss how you will work together in the future. You will team up together to set your goals and strategy then enter into contract with them so they can procure your power.
- If the open market is high for any reason, you’ll probably still be paying less than what you were paying the big utility company, but your new provider will go short and buy your power on the “spot market” and index you for the time being until the market dips again. They will call you to discuss “trigger points” where they will advise when to go long.
Remember, you don’t pay this provider for 1, 2 or 3 years worth of power in advance. They just bill you based on what you use like you always have done, but now at lower rates. How much lower?
It depends on a few variables which include what state you’re in, which utility company you’re currently being serviced by, market conditions, etc., but we have found most businesses are saving between 10-25%.
While this might sound too good to be true, this opportunity is not available for all businesses to take advantage of. Your company must have a good credit rating because your new energy company is buying expensive futures contracts on your behalf.