Buyer beware as there are many great sounding deals out there which don’t turn out to be the case! We are all hit with mailers, phone calls and probably emails as well from many so-called opportunities to save money on our residentail energy costs. I have to imagine that the same is true for most businesses. There are many energy brokers out there that are legitimate but…..also many that will pull the wool over your eyes in a heartbeat.
The biggest fallacy out there is that you can get a better quality of electricity or gas. I’m not sure how often anyone falls for this but there are energy brokers and consultants who may make this claim. The reality is that energy; both gas and electricity are commodities. There is no such thing as a “better quality” of these commodities as they are produced to national standards. The only thing that potentially can make one producer “different”, is in the area of the fuels used. Many environmentally conscience clients may opt to source their energy from a Green Energy provider. Typically you will pay a premium when your electricity is generated by solar, wind or other clean methods.
How to prevent your business from being taken advantage of in the energy marketplace
We learn in life to read the fine print on any contract in order to safeguard our interests. Many companies will have an attorney look over a contract especially since they are typically long, boring documents with lot’s of legalize. This can be an expensive proposition though. Here are some common things found in the contracts offered by many energy brokers:
- Advertising a very low price and it turns out to be a teaser which only lasts a few months. Often the rate jumps to something much higher than your current utility is charging you.
- Rates that don’t include everything. Energy rates are typically based on seven or eight different components. We often see a competitor advertising a rate and only in the fine print does the client find that it pertains to a single component of the total rate. Many businesses have been fooled by this ploy and get stuck with a much higher rate than they had before and they are now locked into a legally binding contract.
- There is something called a “Swing Tolerance” which may be included in the contract. In this scenario, if your usage deviates more than say 10% of your contracted amount you will pay a stiff penalty. You can actually wind up paying more, for less energy usage if you use too little and a rate adjustment takes effect due to this swing tolerance. If you use more, the usage that is outside of the “swing” percentage will also cost you plenty.
- A favorite trick is advertising the “price adder.” In this ploy, the advertisement states a very low rate compared to reality. Only the fine print will tell you that this is how much the broker is tacking on to the cost of your energy from a specific provider. You can wind up paying almost double what you should be paying.
There are other tricks out there employed by the unscrupulous in this industry as in any other industry but those listed above are the most common.
So how do you get the best energy rate possible while not being ripped off?
- Brokers who represent a single large energy producer will typically not employ any of these deceptive practices. What you will find is an extreme sense of urgency for them to close the deal because they know that much better prices are typically available and they don’t want you to find them.
- There are many energy brokers who will resell energy to you. This is never a good idea and I’ve seen the downside of this first-hand. A local laundramat had to pay my local gas company about $4000 because they delivered gas to her for the past year. The broker was buying the gas from the utility company. The broker went under and stiffed this gas company. Even though her laundramat was paying her broker, the utility company wound up with the legal right to charge her again. Make sure you wind up with a contract with the new energy provider and not a broker.
- There are reputable energy brokers out there who will find the lowest possible rate in your state and basically set you up and get you a contract with an alternate energy producer. Avion Energy has many advantages that I don’t believe can be duplicated by any other broker out there.
What else can go wrong?
There is another way that you can unknowingly wind up with a huge rate increase with almost any energy provider. This can occur at the expiration of your contract. Many businesses and even energy consultants and brokers make the false assumption that one of two things happen automatically at the end of your contract.
- You just revert back to buying energy from your delivering utility at whatever the prevailing rate is.
- Your contract rate is extended beyond the contract expiration date with your chozen energy provider.
Neither of these is necessarily the case although one may be. What actually happens is spelled out in the terms and conditions of your contract. Bare in mind that this industry revolves around future commitments to purchase or generate energy so it’s important for all the companies involved to plan ahead. That includes you.
Best way to prevent any surprise’s on your bill
Since the process of switching the energy provider takes two to three months, it’s important to review that contract three months prior to it’s expiration. There are a few different negative scenarios that you must avoid and a good broker will stay on top of this for you. Avion Energy begins notifiying all clients of the impending expiration, a full three months before and will stay on top of it. Avion Energy can always re-negotiate with all your potential energy providers and you can have a new contract in place prior to the expiration of your current contract. I can’t tell you what other brokers may or may not do; especially the smaller one’s that are out there.
There are a few basic rules that also apply to anyone in a deregulated state. Pennsylvania has recently become deregulated and Penn State University has published some bacic guidelines. Although aimed more at the residential market, these basics are applicable everywhere and for business as well.
Carefully study the offers from the various electricity-generation suppliers that you will be receiving. Find out exactly how much it would cost for your electricity (including all charges) to meet your electricity needs. Shop around with various electricity-generation suppliers before making a commitment.
Begin now to become more educated on the topic of deregulation of electricity generation so that you will be an informed shopper.
Don’t be swayed by free gifts and other “come-ons.” Beware of “wise men bearing gifts.” You may be receiving many offers with attractive signing bonuses. Be sure to evaluate the true value of these signing bonuses. Just how much is another toaster or a bird feeder worth to you? Or how valuable is a free month of electricity each year or a frequent flyer mile for each 100 kWh purchased? Insist on knowing how much electricity is going to cost you for your operation on a per kWh basis, including all the involved charges.
Don’t assume your local utility will provide you with the very best deal for electricity. But at the same time, certainly include your local utility company as one of the electricity generation suppliers that you will consider.
Don’t ignore deregulation. You need to figure out how to take advantage of the opportunities of deregulation.
Don’t expect to reap huge savings because of deregulation. On the other hand, don’t assume that deregulation is “small potatoes” and won’t make any difference in your operation. You actually could lose money because of deregulation if you do not become an informed shopper.
For the complete list which may or may not be applicable to your state, you can read more here
I feel that it’s very significant that after three years as a national master energy broker, Avion Energy can boast that over 99% of clients have utilized their services again, at the expiration of their initial contract.