Avoiding Energy Scams
Over the last few years, energy consumers and building owners have been confronted with several internet and phone scams. An “agent” will impersonate a utility company, or reaches out representing an unqualified Energy Supply Company (ESCO). These methods have been successful, in part, because these agents can be quite convincing and often use energy jargon to appear knowledgeable and reliable.
Identifying the Utility
A New York City client of Bright Power recently received a phone call from someone claiming to represent Con Ed, a local utility company. As our client describes, “We had past experience with Con Ed concerning overdue or misapplied payments. This made the extremely aggressive demand for a $2,000 cash payment to prevent a power shut off in less than an hour, actually sound plausible. Our first response was to seek the immediate and helpful assistance of Bright Power, who quickly investigated and confirmed the paid status of our accounts. The administrative assistant, who received the original call, confirmed thereafter that there was no shutoff pending with Con Ed.”
We were able to quickly identify the scam and avoid a $2,000 false charge. To help protect your business from these claims, here are a few basic red flags:
- Be wary of requests for Tax IDs, credit card numbers, utility account numbers or protected information.
- Question sudden or pressured monetary requests. Utilities and most reputable businesses do not operate this way.
- Verify employee IDs prior to providing information or payment. Con Ed employees, for example, are required to have company IDs accessible.
Buying With a Reputable ESCO
There are many trustworthy Energy Supply Companies (ESCOs) that Bright Power works with that prove to be valued business partners in controlling energy costs. On the other hand, there are many unreliable ESCOs and energy brokers that use tactics that inevitably cause consumers to pay more in the long run.
Recently, a Bright Power client was approached by an ESCO and convinced to sign up for “a great rate for three years” over the phone. The client asked us to review the contract after the fact, and we identified some major issues. Luckily, we were within the three day cancellation window and assisted our client in withdrawing from the costly supply contract. We then locked them into a better rate via a transparent and market-based bid process, resulting in a savings of $18,000 from the original phone contract.
Always be careful with any phone call from an unfamiliar ESCO or energy broker. Unscrupulous agents have been pushing clients to contract their accounts through recorded sales calls and rushed decisions. Some will even enroll the account without your consent, a practice also known as “slamming.”
Pressing pause on an energy purchasing strategy until you feel confident and knowledgeable in your direction will lend to a favorable outcome.
How to Protect Your Accounts
- Designate one or two of your employees, who are well informed, to discuss all energy matters with the utilities or ESCOs.
- Consider using experienced and reliable consultants or brokers that can provide guidance, support, and clarity in this jargon-filled and continuously changing energy supply world.
- Check out Con Ed’s #STOPSCAMS for more helpful information on protecting your energy accounts.
Top 3 Tips for Energy Purchasing Contracts
Real Estate executives are all too familiar with those “lowest price at the moment, buy it now” cold calls from energy brokers trying to sell supply contracts. What that broker or consultant (or property manager or supplier) may not be sharing with them, are the answers to key questions like: “what’s behind that price” and “how does the energy supply contract affect the management of my properties?” These are important questions, especially since energy supply contracts are often valued in the hundreds of thousands of dollars.
Below is a guide to helping you avoid common and costly mistakes before you sign your next energy supply contract.
Have a Plan
- Define your goals and purchasing strategy. Proactive energy procurement has numerous operational and financial benefits, which can be difficult to attain without clearly defined goals and strategy. Some questions to consider include: Are you more comfortable with the budget control provided by a fixed rate or are you looking to achieve the lowest rates with a risk-tolerant variable-rate product? Do you want each building or legal entity to have a customized strategy, or achieve economies of scale in aggregating your portfolio?
- Set your benchmark. Give yourself something to compare against. Do you want to beat last year’s rates, find a number that fits annual or long term budgets, or try to perform well against the utility supply rate? Pick one or two benchmarks for comparison, and then move forward using them. Over several years and contracts, these benchmarks will help put your costs and processes in context.
- Give yourself time. Since energy markets move on a daily basis and market fundamentals such as weather, supply and demand affect long term price changes, when you buy is as important as what you buy. You or your representative should be watching the markets, and advising when the time may be right. Begin the process 4 to 6 months in advance of the contract end date, and give yourself more flexibility.
Read the Contract and Ask Questions
Insider terminology can make energy contracts confusing and difficult to grasp. However, since the contract creates financial and operational obligations for your company; you should always know the impact of what you’re signing. Energy supply contracts not only identify price, building lists, and payment structure, but also provide instruction for a number of “what if” scenarios.
- What if I sell a building? Every contract has an Early Termination Fee (ETF). If you know a building will be sold during the contract term, exclude the building or ensure the new owner can assume the contract. Alternatively, a short-term and well-timed fixed rate could add value by lowering operating costs before the sale.
- What if there’s a large change in energy usage at a building? Energy contracts can contain provisions that impose penalties when usage changes outside of a specified range, such as due to efficiency upgrades, installation of new equipment or a period when the account will be off line.
- What happens upon contract expiration? Most energy supply contracts typically continue indefinitely with the supplier after a contract expires, but the rate and terms post-expiration can be hidden and unpredictable. These post-expiration terms should, at least, be made clear to you. In practice, you and your broker or consultant should be developing a new plan for renewal months ahead of expiration.
- Which accounts are included? As obvious as this sounds, it very often it isn’t clear. A contract addendum should include account numbers, service address, rate class and annual usage.
- What is the swing or bandwidth? In the cold winters of 2014 and 2015, many Northeast retail energy buyers were hurt with high usages and extra charges. Having a negotiated “swing provision” provides insurance that the supplier will provide the correct amount of energy at the agreed upon rate structure.
Avoid Racing to the Bottom
When someone jumps out and tries to “beat a price” that’s your cue to step back and closely evaluate. Those “great deals” often come at a hidden price and can create an uneven playing field. Many times, what is falsely advertised as the “lowest price” isn’t actually favorable, as suppliers or brokers will add hidden fees and pass along unnecessary risk to the customer in the contract fine print. A trusted “lowest price” is the one which results from your designed process. If you can develop a plan and achieve your benchmarks, you can comfortably execute agreements for your organization on your final RFP contracting day.
In summary, there’s a lot to think about when you’re buying energy. And there are, unfortunately, a lot of people in the energy business who profit on not sharing complete information with their customers. So remember to take the time to: create and execute a plan, read the contract and ask questions, and don’t just jump at what someone says is a great price. Of course, Bright Power’s Energy Procurement Team has a wealth of experience in these areas and is always here to help you.
Attention NYS Electric Customers:
Beginning April 1, 2017, New York State Zero Emission Credit (ZEC) charges will be assessed to all NYS customers’ electric bills. The purpose of these charges is to help NYS meet clean air goals set by the Clean Energy Standard (CES). ZEC costs will support cleaner electric generation by purchasing Renewable Energy Credits (RECs) and by keeping certain nuclear generation plants in service. These initiatives support the two NYS goals of reducing Greenhouse Gas Emissions by 40% and of requiring 50% of electric generation to be from renewable sources by 2030.
ZEC charges represent a cost increase of $.003 to $.005/kwh to the electric supply cost for all retail (ESCO) and utility supply customers. This adds approximately 2% to a typical Con Edison electric customer’s bill, when you factor in both supply and delivery charges.
New York State Steps into a Leadership Role
In the last year, the establishment of the CES has helped reinforce NYS as leader in supporting clean air, renewable energy, and slowing climate change. As we enter into a time of uncertain environmental leadership from the federal government, New York continues to move toward a future of energy largely being produced through clean and renewable methods. At Bright Power, we feel these initiatives are in sync with the long term needs of our customers and our planet.
A few months ago I moved into a new apartment. When I got my first electric bill, I was shocked. I’m pretty good about turning off the lights in unoccupied rooms and I always make a habit of unplugging any unused appliances to minimize vampire load. I work at Bright Power! There’s no way I could be an energy hog. If you can’t trust the data, there’s no way to tell whether or not your efforts are making a difference, and I couldn’t trust this data.
After some innocuous investigating on my end, I found that the utility could not get access to the meter room in my building and, as a result, was estimating my usage for that month by applying the previous tenant’s consumption history to my account. Time to shut it down. I immediately called the utility company to schedule a second meter reading for the following month.
When the next month rolled around, I received my new electric bill in the mail with a second estimated meter reading. Wait…didn’t I just fix this?! Time to kick it up a notch. I decided to submit my own meter reading to the utility. When it was verified by the utility, I learned that the previous tenant was being significantly over-billed for electricity no one was actually using, and so was I.
Please learn from my mistake! Reliable and accurate data is crucial for measuring energy performance in any type of building. This is just one small example of a larger problem the energy industry faces every day.