Shopping Energy Suppliers
I’m grateful for the opportunity to write a guest post on this blog and I hope you all enjoy it. First of all, I’ll start with an introduction… My name is Mike Healy and I’m the founder of Velocity Energy Group. We’ll call it VEG for shorthand going forward. At VEG we work with commercial and industrial companies to develop advanced procurement strategies for electricity and natural gas. In Layman’s terms: we help companies shop prices and manage risk for their energy.
Before we go any further… let me know if any of these questions have ever popped in your head…
What are the differences between energy suppliers? Isn’t it just a commodity?
Will my power go out if I switch providers?
Are these companies competing against the utility company? Are they buying power from the utility?
What is the difference between a direct salesperson, a consultant, and a broker?
How did all these guys get my number? I get 10 cold calls a week from energy companies!
Are there contracts involved?
Sound familiar? Energy deregulation is somewhat new in Illinois and I hear these questions a lot from clients. So what is energy deregulation and how does it work?
Energy deregulation means businesses and residents of Illinois now have the option to shop and compare suppliers for their electricity and natural gas. When energy was regulated by the state, you got a bill from the utility company and that was that. No options. No other suppliers.
So what does this all mean? Let’s look at your power bill to figure out the advantage of exploring alternative suppliers. Your bill has two parts supply and delivery.
Comed is and forever will be the delivery/utility company (depending where in IL you live). They own all the poles & wires, they read your meter each month, and they are the ones you call if your power goes out in a storm. They collect their fees for owning and maintaining that infrastructure.
On the supply portion of your bill ( which is the pricing for the commodity) your rate per kwh, you now can shop around alternative suppliers. You can collect bids from different companies and make sure your getting the best pricing. A lot of times their pricing can be 10%-30% lower than the utility.
Seems pretty simple right? The only tricky part is that energy pricing now moves on the open market and can change each day (pricing is based on the NYMEX futures market). Energy is bought, sold, and traded just like a stock. Example: You go to the gas station today to fill up your car and then next week you go again and the price of gasoline is 10 cents a gallon higher? What gives? Well energy pricing is based on a lot of things…. supply, demand, weather, government, economics, geo-political events, speculation… etc… basically it’s very volatile!
So when shopping around alternative suppliers for your electricity and natural gas, it’s not only important to find the best price, but also to purchase in an advantageous time in the market. (finding the cheapest of 3 bids when the market is at a ten year high isn’t a sound strategy). That’s where VEG shines. That’s where we provide the most value. We work with companies to develop a risk management strategy in conjunction with the best pricing. When we sit down with clients we figure out their risk tolerance, their goals, and which supplier fits in with their strategy.