Energy suppliers offer three types of products for both electric and natural gas consisting of a fixed price, a variable price tied to an index, and a hybrid of partly fixed and partly variable. A qualified consultant should address the risks of each of these products with the customer and help assess which type is best suited for the customer’s specific needs.
In addition to this assessment, the consultant should educate the customer on the differences between each supplier’s agreement language. For example, a natural gas supplier may offer a fixed price but place certain restrictions on the volume of natural gas consumed by the customer. While this may not necessarily be a terrible thing, customers must be well-educated on differences like the above example, as they may or may not align with the business’s goals when selecting a supplier.
Another key item to consider is the timing of pricing requests and the importance of gathering price quotes simultaneously. The energy market moves up and down daily just like the stock market. A qualified consultant should be receiving price quotes on the same date/time from all suppliers they work with. The proper evaluation of prices is another critical step overlooked. For example, if Supplier A submits a price on Monday and Supplier B submits a price on Wednesday Supplier B’s price may appear less expensive. However, had Supplier A priced off the same market conditions on Wednesday Supplier A’s price may have been lower due to market movement. This is often the top consideration of customers, so it is imperative to get this step correct.
How are consultants compensated? Most consultant compensation is by adding a small fee to the purchase price borne by the customer. Some less reputable consultants may tell customers the service is free of charge. This is simply not true. Since the consultant determines the fee added to the purchase price there are a couple of key takeaways.
The first takeaway is the suppliers’ prices are the same on the day/time quotes are due regardless of which consultant requests pricing. For example, Supplier A’s electric price is $0.05000/kWh. If Consultant A adds $0.001/kWh, then the total price through Consultant A is $0.05100/kWh. If Consultant B adds $0.002/kWh, then the total price through Consultant B is $0.05200/kWh.
The second takeaway is this is exactly why suppliers will often refuse to price through more than one consultant as the suppliers’ prices may present inaccurately or unfairly to the customer. Customers should understand how their energy consultant is compensated before having the consultant solicit pricing. Attempting to have multiple consultants solicit quotes will result in poor supplier selection and additional complications that harm the end-using customer.
The market is heavily saturated with consultants, many of whom are highly reputable and can bring real value beyond simply soliciting and reviewing pricing for electric and natural gas. As an end-use customer take the time to properly understand how the consultant operates respective to the key items addressed above and you will be well on your way to establishing a valuable partnership that will bring results to your business’ energy expenditures.
Reach out to Renodis if you have questions.
