Deregulation FAQ.

May 24, 2010

As reported in NJ Electricity Review

New Jersey Electricity Review

Your Current Electric Provider
Since New Jersey restructured its electricity market, the incumbent providers (PSEG, JCPL, Atlantic City Electric (Conectiv), Rockland Electric) are now solely in the business of managing the lines and wires portion of your electricity service. They are not in the business of offering competitive supply prices. However, they have been given the responsibility to provide high default rates for those business consumers who have not chosen a competitive supplier.
 
Why should I get off of the Default Rate?

There is a misconception in New Jersey that your current provider will be upset if you choose another company to supply your energy. This could not be more untrue. The incumbent providers (PSEG, JCPL, ACE, Rockland) are regulated lines and wires companies whose revenues and profit margins are managed by the state. They do not receive profits for the supply portion of the bill and would rather see all of their customers receive supply service from alternative providers so that they can focus on the reliability and customer service of the power lines.

However, because deregulation is a fairly new concept, the New Jersey State Public Commission Board has mandated that the incumbent providers provide a default service for those customers who are slow to choose a competitive supplier. Due to recent market conditions, the fixed rates that are available in the competitive market are significantly lower than the high default rates, by as much as 15-30% .

 
What Does Deregulation Mean to Me?The deregulated energy market in New Jersey provides the opportunity for all businesses to experience huge savings in their energy spending. The hurdle is knowing when and how to see these savings. Fixed generation rates, bandwidth limitations, ancillary charges, congestion fees, and blend-and-extend price adjustment clauses are just a few elements worth understanding to realize your potential savings.
 
How Can I Save Money?In order to see the maximum savings it is essential to work with a firm who represents you, not the provider, and who are experts in all deregulated energy markets, electricity contract negotiations, and the natural gas market..

By representing your company or organization we will force several providers to compete for your business resulting in lower rates and more favorable contract concessions. We will provide you with a full savings analysis that will compare your current default rate versus the low fixed rates we are able to find. Once the contract is executed we will continue to monitor the market on your behalf and look for opportunities to renegotiate and lower the rate even further.

 

Should you like to know more about opportunities to save in the NJ deregulated natural gas and electric market email george@hbsadvantage.com

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PSEG Rates for 2010

May 24, 2010

As reported by Electricwatch.org

PSEG Electric Rates for 2010March 7, 2010

Basic Generations Service (BGS) rates for PSEG electric customers have been established for the new year.  BGS rates are the default rate for customers serviced by the utility PSEG who have not shopped for a competitive electricity supplier.  The new rates will go into effect on June 1.

PSEG default rates for the supply portion of the bill are divided into a summer term that begins June 1 and extends through the end of September, and the non summer term that begins October 1 and extends through the end of May 2011.  The default BGS rates include the entire Supply section on customer PSEG bills.  This is often an area of confusion to business customers who look into the benefits of competitive rate shopping.  The total price to compare takes into account the generation rate as well as capacity charges.  When customers just compare the per KWh rate on their current bill they are not getting an apples-to-apples comparison. 

In order to realize the actual price to compare, PSEG business customers should take their total supply charge and divide it by the total amount of KWh they consumed for the bill period.  This will result in a KWh rate that can be compared to offers from competitive suppliers.  This price to compare will include state taxes of 7%.  So if the competive rate does not include taxes (as will be stated on the contract) multiply the rate by 1.07 to get the true comparison rate.

The bottom line is that there are competitive electricity suppliers available for business customers serviced by PSEG.  Depending on the size of the customer and the type of electricity product chosen (fixed, variable, green energy, long term), savings can be as much as 25%.

Our Perspective:

Are you currently participating in the NJ Deregulated electric market? Current market rates are presenting great opportunity for savings.

Hutchinson Business Solutions is an independent energy management company. We have been providing savings for our clients in the deregulated natural gas and electric market since for over 10 years.

Our clients are finding savings from 10% to 25%. Should you like to know more email george@hbsadvantage.com . Local providers buy natural gas and electric on the open market at wholesale prices and then bill their clients retail.

We put our clients in a wholesale position! Many companies are finding deregulated utilities to be a great area for savings and increased cash flow.

As reported in Northeast Energy update by Direct Energy

PECO Completes Second of Four Electricity Purchases for 2011
In the second of four purchases for the electricity to serve customers beginning in January 2011, moderate wholesale market conditions resulted in lower electricity prices compared to the company’s last procurement in June 2009. 

The September 2009 purchases resulted in a retail energy price of 9.16 cents per kilowatt hour (kWh) for PECO’s residential customers.  When combined, the June and September purchases result in a retail price of 9.41 cents per kilowatt hour (kWh) for PECO’s residential customers—or about a 4 percent increase compared to current prices. 

For the first time, PECO also purchased electricity for 2011 for its small and mid-sized commercial customers.  This recent purchase resulted in a retail price of 9.79 cents per kWh, about the same as current prices for these customer classes.

Because energy prices fluctuate, PECO is buying the electricity needed in 2011 at four different times in an effort to reduce the risk of purchasing electricity all at once when market prices could be high.  PECO will complete the remaining two purchases in June 2010 and September 2010.  The results of all four purchases will determine the price in which PECO’s customers will pay for electricity beginning Jan. 1, 2011 when rate caps expire. 

PECO is estimating an overall increase of 10–15 percent for customers once all procurements have been made.

To find out more information your electric cost beginning in Jan 2011, email george@hbsadvantage.com

Peco Deregulation

May 24, 2010

As reported by Electricitywatchdog.org

Lower My PECO BillMay 10, 2010

PECO is trying to prepare their customers for increases in their electric rates in 2011 by unleashing multiple programs.  Recently, the PA Public Utilities Commission announced that Pennsylvania utility companies will be increasing the rates for electricity delivery service in 2011.  In addition, price caps will be expiring in 2011 in the PECO area – as well as Met-Ed, Penn Electric, and West Penn – which are expected to increase default generation rates by as much as 20%.

PECO is rolling out numerous programs to help customers cope with increases including the PECO Smart Home E-Audit, Smart Lighting Discounts, Smart Home Rebates, and Smart Appliance Recycling.  Alot of smart programs, but probably the smartest way consumers will be able to reduce their electricity bill is by shopping for an alternative supplier that will offer a reduced rate versus the PECO price to compare default rates. 

PECO will continue to deliver power to those customers who they are currently delivering to as well as continue to send invoices out.    The decision to choose an alternative electric genaration company will simply be a choice to pay less.  We will be providing contact information and rates for alternative providers as we get closer to 2011.

Our Perspective:

The caps will be lifted on electric prices in Peco territory as of Jan 2011. This will present many opportunities for savings for larger users in the dergulated energy market.

Currently, clients in the PPL terrirory are finding savings of about 2 cents per kwh. We are finding the price to compare in PPL territory to be about $.105 cents per kwh. Depending on their annual usages, we have been able to find opportunities to lock the electric supply prices in the low to mid $.08 cent per kwh area.

We are currently speaking with several clients in the Peco territory and have told them to wait for Peco to release their price to compare for 2011. This will help us to use this as a basis of the opportunity presented.  Sources have told us that this information will be available by the end of May or early June 2010.

Should you like to know more about opportunities for savings in the Peco electric deregulation market email george@hbsadvantage.com

Or visit us in the web www.hutchinsonbusinesssolutions.com

Government boards regulate the utility market price.  Although, the state utility regulator is required to pass market savings onto the consumer, local providers buy natural gas on the wholesale market and bill their customers’ retail. We put our clients in a wholesale position because brokers/marketers have the flexibility to buy gas when rates are lower and pass the savings onto their clients.

Comparing and deciding among the various offers.

In the new deregulated industry, buying natural gas is like getting a home loan. You can select between:

  • Contract terms of 1 to 5 years
  • Lock in at a fixed rate for an extended period of time
  • Choose variable rates and rely on an experienced gas manager to get you the lowest price

Why switch?

Most consumers switch to brokers/marketers to save money.  Together you can determine your comfort level.

Ø    Security – if the utility price makes you feel more secure, choose an option that offers a percentage less than the utility for guaranteed savings.

Ø    Lowest Price – if you want to have a knowledgeable gas company managing your gas supply, select the variable rate and let a gas supplier manage it for you.

Ø    Fixed Price – if you think prices are going to continue to rise and you want to be sure of your bills, choose a fixed price.

Regulated rates are not fixed rates.

Each province or state has an agency that regulates utility rates. Utilities can and do apply changes to rates.  They are not allowed to offer fixed contracts. By signing up with an energy marketer you can avoid these unexpected rate changes. We competitively tender your natural gas needs to deregulated natural gas marketers.

If you choose to buy from a gas broker/ marketer, your gas service won’t change.

You will continue to receive a bill from your distributing utility authority indicating their regulated delivery charge (about half of your bill) and a gas supply charge that goes to the gas supplier. If you also have rental equipment or a service contract, these will appear on your bill, as usual.

It’s important to remember these cost splits when comparing prices. The suppliers, brokers and/or marketers are offering rates on only half of your bill. As previously stated, the distribution charge and monthly service charge is fixed.  It is strictly regulated by an Energy Board or Public Service Commission. As a result, when a promotional message claims a 10% saving, it is ONLY referring to that 10% controlled by all energy brokers.

You do the math.

To qualify in the deregulated market, your company must spend a minimum of $5,000.00/ month ($60,000.00/year) on natural gas. Half of that monthly fee ($2,500.00) is a regulated transportation and delivery charge. The remainder is the gas supply charge.

A gas marketer offering a 10% savings is offering a savings of $250.00/ month, 10% of the $2,500.00 gas supply charge. Your annual savings would be $3,000.00.

Saving is parity to how much you spend. The above example applies only to minimum qualifications.  The more you use, the more you save.

Hutchinson Business Solutions (HBS) is an independent energy management consultant. We have been providing deregulated energy solutions to our clients for over 10 years. HBS clients are saving from 10% to 20% on their natural gas supply bills.

Large market swings offer you big savings.

If you have been following market prices for natural gas, over the past couple of years, you have probably noticed the large market swings. ie: In 2008, PSEG prices ranged from $1.07 per therm in February to $1.64 per therm in July. In 2009, prices dropped and we saw $.889 cents per therm in January with a low of $.496 cents a therm in September.  With so much market fluctuation, we have been advising our clients to float their accounts, based on the market index.  In this way, our clients can save anywhere between, 8% up to 20%, depending on whom their local provider is.

Choosing to float the market index does not preclude you “locking in” on a fixed price at any time during the term of the contract. Conversely, if you choose a fixed price, you are unable to change to a float when market prices go down.

Want to learn more about opportunities to save in the deregulated natural gas market email george@hbsadvantage.com or call 856-857-1230.

Visit us on the web www.hutchinsonbusinesssolutions.com

Finding cost effective business telecoom service is a challenge that your business may not be able to undertake because it is not your core business. However, most business owner’s can save money with a little research into which business telecom services are best for their situation.

A competent and informed business telecommunications consultant is vital to assist your business make the right decision every time. Whether you are an existing business, a franchise, or a new business you need to ensure that your telecommunication needs are not only met, but met at a cost effective rate. There are many business telecommunications sales representatives out there who will only try to sell you the plan that gives them the highest commission. A wrong decision will see your business locked into expensive contracts for mobile, fixed line and data services that do not meet your needs.

Many businesses purchase telecommunications on the phone from an unknown sales person and are pressured to sign by way of a recorded verbal contract. Not surprisingly when this decision is pressured the end result is often less than ideal, it could be expensive, and it could cripple your business. The quality of the service provided and the quality of the telecommunications management team is imperative to your success.

Whilst many business decisions need to be made quickly, your telecommunications need to be right, they need to be suitable for your business now and throughout the consequential contracted period. You need to find a telecommunications consultant you can trust and ask them the following questions to ensure that they have the best interests of your organization at heart and are capable of supporting your telecommunications needs.

1. Can the business telecommunications consultant provide you with an independent analysis of your current bills against the plan they recommend, and other comparable plans in the marketplace?

Many times the customer has been “sold” a service which has not been quantified in an analytical manner. We know that communication costs are an ever increasing cost to doing business and we respect that it is difficult for any organisation to employ or train a staff member to work though this minefield.

The key to having complete understanding of your telephone bills and your telephone spending patterns is in the professional telephone bill analysis

2. Can the business telecommunications consultant provide you with testimonials from companies that are of comparable size to your organisation?

Testimonials are vital. You need to be sure that the business telecommunications consultant you are dealing with is from a reputable company with many happy clients.

3. Can the business telecommunications consultant arrange for the seamless transfer of your services should you need to change carriers?

Once your business telecommunications consultant has identified the business telecommunication rates and services that are best for you and these are accepted by your business can they arrange for the transfer of your telecommunication services to the contract selected by yourselves? Professional business telecommunications consultants should ensure that you are not inconvenienced.

4. What kind of ongoing support does your business telecommunications consultant provide?

A good business telecommunications consultant will not only sign you up to a long term contract, but will keep you advised of better deals available in the market place, and proactively and constantly negotiate better deals for you, the customer.

Finding cost effective business telecommunications services is a challenge that your business may not be able to undertake because it is not your core business. However, most business owner’s can save money with a little research into what business telecommunication services are on offer.

Our Perspective:

Hutchinson Business Solutions (HBS) is an independent voice and data consultant. We have strategic partnerships with over 50 of the major voice and data providers serving the commercial market. Our clients are finding savings from 10% to 50% by shopping their account.

We allow our clients to continue their core competancy of running their daily business.  Our expertise is found in our ability to validate the existing configuration and define which providers will not only bring savings but also enhance the capabilities of the system thru servicing the account.

Should you like to know more about opportunities to save money on your business voice and data accounts, email george@hbsadvantage.com or call 856-857-1230.

Dave Gardner
Published: April 7, 2010

Age-old questions about the proper role of government are lighting up Harrisburg as the state debates its role in the deregulated market for electricity.

Pennsylvania House Bill 1909, introduced by State Rep. Camille “Bud” George (D-Clearfield), seeks to create an independent Commonwealth Energy Procurement and Development Agency to purchase and sell electricity.

Supporters claim the process would lower rates for electricity and spur development of new generation sources within the state. Opponents charge that Harrisburg has no business becoming directly involved with electric generation.

“What we are proposing is necessary to create real price competition and to build more generation capacity through large contracts,” says George, who has been a vocal opponent of electric price deregulation. “Regional electric pricing is now a reality for consumers and business, yet all of the power comes off the PJM grid. This is a negative for those customers who aren’t located in lower pricing areas.”

According to George, Pennsylvania’s recent deregulation has already proven to be a flawed system because true competition between electric suppliers has not materialized.

He also charges that the public was misinformed about the real consequences of deregulation, and claims that PPL Corporation bought electric plants outside of the state with the money they collected from increased rates. 

“This money should stay in Pennsylvania,” says George. He predicts that the long-term consequences of deregulation will be ongoing rate increases, and that this will force industry to leave Pennsylvania. George also predicts that, through his plan, one cent per kilowatt hour of savings across the board would create a total savings of billions of dollar throughout the state. “We must also help develop new plants for baseline generation,” he adds.

Financial risk?

George Lewis, spokesperson for PPL Corporation, calls the George plan a very large commitment for Harrisburg to assume that would put the state at financial risk. He says this type of risk should only be carried by private investors.

“No perfect electrical model exists, but increasing competition through the free market is the best way to provide competitive prices in Pennsylvania,” says Lewis. “The state will be subject to the same forces PPL and the others companies must deal with, such as unstable fuel prices and environmental regulations.”

Lewis says it is hard to envision how a state agency could generate substantial savings and build and run power plants better than experienced private firms can. He also questions if Harrisburg could ever recover its cost of investment, and says that all decisions by the government authority would be taxpayer financed.

Tyrone J. Christy, vice chair of the Pennsylvania Public Utility Commission (PUC), says the bill is designed to introduce real competition in the state’s electric generation market. He adds that the plan would offer long-term contracts for private investment, thereby enabling investors to take commitments to lenders.

“Our new deregulated market, which is really under PJM control, is doing well with reliability but not with competitive pricing,” says Christy.

He explains that generation prices in the state are now based on the peak natural gas generation price. However, 90 percent of Pennsylvania’s base load is still generated by coal and nuclear power, which Christy calls cheap generation.

Because the generation pricing is based on gas prices during peak periods, profits for the majority of generation are substantial. 

Christy also voices concerns that prices for generation will increase as the American economy improves. He states that market forces will allow new plants to be built only if pricing gets “ugly,” despite the fact that electricity is an essential service.

“Can we wait for market volatility to fix this?” questions Christy. “It is now necessary to build nuclear plants, which cost big dollars, but no one will do this without long-term commitments.”

Christy also takes issue with the impact of deregulated pricing on Pennsylvania’s industrial customers. He says the business plans of these companies were based on cheap affordable power, but these firms have received the biggest price increases since deregulation.

“Yes, I want generation to be profitable, but our industrial base is now paying for huge generation profits,” says Christy. “Are we doing the right thing to retain and attract industry with deregulation? The fact is Pennsylvania is not desirable for industry.”

Disguised promotion?

Robert F. Powelson, commissioner with the Pennsylvania Public Utility Commission (PUC), calls the bill a disguised attempt to promote select rate payers.

“We want 1996 prices in 2010, but the collateral risk inherent in the state becoming active in the electric market will fall on the taxpayers,” says Powelson. “Risk that can produce mistakes should be taken only by private investors.” 

Powelson urges Pennsylvania’s citizens to embrace the competitive market and to pursue tactics in electric conservation. He points to data that indicate 25 percent of the state’s electric users have already switched suppliers, and adds that attempts at regulation in Georgia and Florida eventually produced huge price increases.

“In my view, this bill in Harrisburg is a bad piece of legislation,” says Powelson. “There is no evidence to support claims of price conspiracy here, and if the state were to build generation plants it would be a high risk matter.”

According to Powelson, a mature free market model is now working in Texas, where more than 100 suppliers are making product offerings that include fixed rates, variable rates, and green generation. Additionally, with natural gas prices depressed and additional gas beginning to flow from the Marcellus Shale, power prices in Pennsylvania may drop.

Ray Dotter, spokesperson for PJM, emphasizes that fuel prices are the key to electric generation rates. He states that generation therefore involves fixing risk at a set point. “Prices for contracts also depend on timing,” says Dotter. “Some of Pennsylvania’s local utilities have been criticized for buying contracts at peak times, and that certainly can create trouble. Pricing is cost based and this goes back to fuel costs. Who will actually bear the risk, because fuel costs are an unknown?”

New parameters

Gene Barr, vice president of government and public affairs with the Pennsylvania Chamber of Business and Industry, questions if big government can do a better job of buying energy than the private sector. These concerns are amplified by the fact that the deregulated market is evolving with many new parameters.

Barr also points out that the deregulated telecommunications market is an example of free market success. Before deregulation, costs for long-distance were much higher than they are today and popular cell phone technology had not been deployed.

“Should we entrust energy to the government?” asks Barr. “Government is notorious for making choices with political motivation.”

Our Perspective:

Deregulation was started back in 1998 to help introduce competition to the utility market. In the first couple of years we found opportunity for savings with the mid to large commercial and industrial clients. However, the market turned around 2005/06 and the commodity prices increased.  As a result, it made more sense in some instances to go back to the local providers.

In the meantime, PA put a moritorium on electricity and kept the prices well below market prices. In Jan 2010, PPL openned up the deregulated market and in Jan 2011, Peco will be entering the deregulated market.

The electric commodity market prices are the lowest they have been in the last 4 years. With the openning of the PA market to deregulation, we are currently finding great opportunities for savings in the PPL territory. The price to compare in PPL is currently around $.105 cents per kwh. We are finding opportunities in the mid $.08 cent per kwh depending on the size and usage  of the client. Although this may end up being a higher price that has been paid in the past due to the moritorium on pricing. With the lifting of the moritorium, the local providers will be increasing their prices and as shown, we are finding opportunities to save on electric pricing in the future.

Peco has been buying electric on the open market for the last 6 to 9 months preparing for the intoduction of deregulation in Jan 2011. We are currently waiting for Peco to release their price to compare. It is scheduled to be released by the end of May 2010. Many of the Peco clients are preparing for this transition. Our recommendation is that if you are shopping, do not jump to make a decision until Peco releases their price to compare. This will serve as a basis of comparison to make an objective decision.

Should you like to know more about opportunities for utility savings in the NJ and PA market, email george@hbsadvantage.com or call 856-857-1230.

Positive Feedback

May 11, 2010

Our last couple of articles focused on savings in the deregulated utility markets; specifically, energy or voice and data.  We have received a great deal of feedback not only from our clients but many prospective clients, as well.

 The deregulated price of both gas and electric is the lowest it has been in 4 years.  Over the past year, we have seen commodity prices continue to fall; opening up a great opportunity for savings.  But only if you qualify!

What is the qualifier?

 Your monthly natural gas and/or electric supply cost must be a minimum of $5,000.00 each.  When you look at your utility bill, you will note that the price for each utility is made up of 2 factors:

 Delivery….This part of the bill is state regulated and is the charge for bringing both natural gas and electric from the providers’ hub to your location. This price makes up approximately 30% of your overall gas and electric cost. You will see that delivery charges are listed under each utility.

 Supply…. This part of the bill is deregulated and is the only area where you can shop to find savings.  But to shop intelligently, you need to know the factors that affect supply costs.

Buyer Beware…

 If you are not aware of how the price is determined, it may look like a great deal. Once you sign a contract and receive the invoice from the new provider, you will find that the cost is always higher than what the “professional” consultant told you.  And when you inquire why there is a price discrepancy, they will tell you what the consultant did not. 

 All electric supply charges must include a 7% NJ state sales tax and 7% loss allowance.

 Don’t be fooled!   Many “new to the market” Energy Management Consultants either do not know or will not tell you! 

 If you are bidding on electric in the state of NJ, the BPU states that the price to compare (PTC) must contain 3 factors:

  • Supply cost
  • 7% loss allowance
  • 7% sales tax 

 In order to shop your account with multiple providers, these 3 factors should be included to make an apple to apples comparison.

 Hutchinson Business Solutions is an independent energy management consultant. We have been involved in the deregulated utility market for the last 10 years and have strategic partnerships with all the major providers selling energy in NJ and PA.

 Our expertise is in allowing our clients to continue to perform their core competency while we provide smart solutions for smart business.

 Should you like to know more about the opportunities for savings in the deregulated utility market email george@hbsadvantage.com or

call 856-857-1230.

Visit us on the web www.hutchinsonbusinesssolutions.com