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. The customer should receive help from a qualified energy consultant to address the risks of each product and assess which type suits their specific needs best.
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. 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. While this may not necessarily be a terrible thing, it is important for customers to be aware of these differences.
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. Another critical step that people overlook is properly evaluating prices. 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.
Regardless of the consultant’s request, suppliers fix their prices. 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 the compensation of the energy consultant before allowing them to solicit pricing. Having many consultants obtain quotes harms the customer by causing complications and poor supplier selection.
The market has many reputable energy consultants who bring value beyond pricing. As a customer, understand how they operate. This will help to establish a valuable partnership and save on energy costs.
Reach out to Renodis if you have questions.
