Online Auctions

March 31, 2011

The deregulated energy market is causing a big buzz in this area. In the spring of 2010, NJ opened up deregulated opportunities to the residential market.

In January 2011, PA opened up the Peco territory to deregulation after a 5 year moratorium.

As the result, the market has been flooded with companies and individuals trying to capitalize on these opportunities.

Online Auction opportunities are now available. All you have to do is type buying deregulated energy online into your Google page and you will have multiple selections.

Also many companies have been promoting a Multi-level marketing approach to set up a grass roots effort in hopes of gaining penetration in the market.

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As more consumers have grown more comfortable with on line purchasing, it seemed natural that this avenue would be an effective marketing option.

The only problem we see is that when buying energy in the deregulated market, you are dealing with a commodity. This puts a whole new spin on the opportunity.

This week, we would like to take a look at on line auctions.

Below is a plus-minus list we have developed to help you make an objective decision about purchasing energy on line versus using an independent broker.

On Line Auctions:

Plus

  • Feel like you are getting a good deal by participating in an ecommerce transaction
  • Potentially lower price by doing the ecommerce transaction 
  • Potentially easier transaction since there is limited contact with 3rd party energy suppliers
  • Electricity is a commodity and customer’s management feels this is best process for doing transaction

 

Minus

  • Can be more challenging to negotiate terms & conditions  
  • Potentially less leverage with suppliers since there is no personal interaction
  • Difficult determining what factors are included in the price.
    •  Is it fully loaded? (contains 7% loss transmission and sales tax)
    •  Is it a fixed rate or variable rate?
  • How do you know when is the best time to buy
  • Online auctioneers are brokers approaching the same providers we would be using.
  • Many on line auction companies do not have any information on their website regarding the management of the company

 

Dealing with an Independent Broker (Hutchinson Business Solutions)

 

Plus   

  • We represent all the major 3rd party providers selling energy in deregulated sates
  • We offer personal service, individually marketing your account to these providers
  • We monitor market fluctuations and discuss timing with our clients
  • We offer fixed price solutions (Other options available for large volume users)
  • We make sure all prices received are fully loaded and are an apples to apples comparison to your local utility’s price to compare
  • Due to our business relationships, we bring leverage to the deal
  • We assist with customer’s legal team in negotiating the business terms of the contract as they may apply
  • We provide options, defining the best terms and conditions and service the account throughout the term of the contract, addressing issues as they arise
  • We have been advising customer risk management strategies in the deregulated markets for over 10 years.
  • Opportunity to outsource many of the tasks involved with the energy procurement process while retaining the control and final decisions on any potential transaction

 

Minus

  • The energy market is in a growth mode, many new faces and the information is sketchy.
  • You must be sure to deal with a reputable company who will represent your best interest
  • Many of the new companies are offering variable rates

 

At first glance you may think this overview is biased.

Yes, we are an independent broker. We take pride in the value we have brought to our clients in the deregulated market.

We have just seen too much abuse. The deregulated energy market is an unknown.

We take time to explain how the market works with each client. We want you to understand this concept and feel comfortable with your purchase.

Each account is unique. There is no one size fits all solution.

There are great opportunities for savings in the business market.

Know the facts!!!!

Look to ask the right questions.

Let HBS be your eyes and ears….

While you continue to do what you do best….

Run your day to day business.

To learn more about deregulated energy opportunitiews for your business email george@hbsadvantage.com

Visit us on the web www.hutchinsonbusinesssolutions.com

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The deregulated utility market has presented a great opportunity for savings over the last year. For the first time in 3 to 4 years, market prices have been less than the providers’ prices, aiding in a windfall to those looking to save money on utilities.

 If you have been tracking natural gas prices, you would see that the market has dropped close to 20% since the end of June 2010.

 Natural Gas

With the steady fall of natural gas prices, HBS has been advising clients to float the market index position to take advantage of the current market prices. If you are a PSEG customer and chose to float the wholesale market over the past 12 months, you would have realized a 17% savings. Not bad!!!  South Jersey Gas clients would have saved 8%.

When speaking to our clients, we still offer an option to fix the price for a 12-month period, however it doesn’t make too much sense to fix a price that is actually higher than the price to compare that the clients have been paying over the last 12 months. Why is the price higher? Because the future market still shows that prices will go up.

Some clients may choose to fix the price for they want certainty in their cost. They do not want to be effected by market fluctuations. However if you lock the price, you are unable to change the price should the market continue to go down. By floating the market index, you can take advantage of the lower price and should the market turn and start to shoot up, you will have the option to lock in a price at a later option.

Electric

The electric market is directly affected by the natural gas market prices for 30% of electricity is generated by natural gas. So natural gas is commonly used as a market indicator. With the current fall of natural gas prices, electric prices continue to fall and have become even more competitive.

The electric market is completely different than the natural gas market. While natural gas prices change monthly with the local provider based on market conditions, the electric prices are fixed from June till May.

Every February, the state holds an auction for those selling electricity in New Jersey. The local providers buy electricity on the open market and blend the results with the electric it has purchased over the last 2 years. So the current market prices that the local providers charge are based on a blended price from purchasing electric over the last 3 years. They take these results and then present a proposal to the BPU (Board of Public Utilities), as to the summer rates (June till Sept) and winter rates (Oct to May) they wish to charge. Both the summer rates and winter rates have defined on-peak and off peak pricing.

As a result each account is charged differently based on their usage. A company with more off peak usage will actually be paying less than a company whose prime usage is during the daytime when on-peak charges are used.

Fixing your electric cost in the deregulated market offers a flat rate pricing no matter when you use it. This has offered a great savings opportunity due to the current market downturn. HBS clients are realizing saving from 10% to 20% on current flat rate pricing.

Should you like to know more about saving in the deregulated utility market, email george@hbsadvantage.com or call 856-857-1230.

On August 1 1999, New Jersey implemented electric deregulation in its state, opening its borders to competition and lower electricity prices. Electricity can be provided more cheaply in New Jersey where there is a number of competitive suppliers in the marketplace. Electric consumers need not change their electric supplier (it is the same electricity) and they only need to choose their electric provider. These electric providers buy electricity in bulk at competitive prices and redistribute savings to their customers.

Deregulated Electric and Gas

Natural Gas and Electric competition has substantially benefited industrial electric and gas consumers in the states of New Jersey, New York, Pennsylvania and Delaware.

Hutchinson Business Solutions (HBS) is an independent broker representing all the major deregulated providers in this area. We will provide a free cost analysis of your commercial / industrial annual electricity and natural gas supply expense. 

Your local providers purchase natural gas and electric in the wholesale market and then sells it to their customers at retail prices. HBS puts our clients in a wholesale position and the savings will fall to your bottom line.

To obtain your free analysis on your commercial, industrial or business electricity email your contact information to george@hbsadvantage.com.

In these hard economic times, Why Pay More!

Contact us today. HBS provides corporate utility financial solutions

 

 Did you know that Electric and Gas are no longer monopolies and due to deregulation you have a choice of who supplies your business with Electric and Gas services? 
Maybe you do know because you have been getting annoying sales calls telling you to switch but you think it is a scam.
Hutchinson Business Solutions (HBS) is an independent energy management solutions provider. Our clients are savings from 10% to 40% on their natural gas and electric supply cost.  You can save thousands and perhaps tens of thousands of dollars depending on how much energy you use.
 
Power to Choose
Thanks to a national energy deregulation bill passed in 1999, organizations in roughly two dozen states (CT, NY, NJ and PA included) can now manage and control their energy costs in ways never before thought possible. Before deregulation you had no choice. You did not need to pay attention to the energy markets and you simply paid the bill like everyone else. But today you have the power to choose your supplier! The savings will not come to you by default; you must actively make a choice. In a deregulated market you must decide who to buy from, when to buy, what type of service agreement, how long to contract or whether you should consider a market based (variable) rate. If you do not choose a new supplier the local utility by default will remain the supplier of your energy at the highest market rate permitted.
 
What was deregulated?
Simply put the supply portion of your electric bill. The utilities sold off their power plants, and now only own the transmission and distribution wires. They also serve as a ‘backstop’ for power supply to customers who do not shop for electricity. With the move to competition the utilities have separated their service into two parts:
  • Regulated distribution of power, which is still only provided by the utility, and
  • Supply (called BGS) of the electric commodity (open to competition)
Customers who choose an alternate energy provider still have their power delivered to them by their local utility, and will therefore contact their utility for any outage issues. Depending on your utility market after you choose a new supplier you may still get one bill from the utility with two company names on it or you may receive two separate bills; one from the utility for the delivery and the other from the new supplier.
Types of programs
 
If you have not chosen an alternate supplier you are paying a month-to-month variable rate based on filed tariffs. This is usually the most expensive type of rate that you can have since it is based upon the demand of the month in which you were billed. Like everything else in life if you wait until the last minute to buy it you usually pay more. If you choose a new supplier you have the option of remaining on a month-to-month variable rate or choosing to lock in today’s low rates for up to three years in most markets. Energy costs are at or near their all-time lows so it makes sense to lock in for as long as you can to hedge rising energy costs and inflation.
 
 
Types of Sales People
First you need to know if you are speaking with a direct sales person for one supplier or an independent broker that represents multiple suppliers. HBS in an independent energy broker that will present independent and unbiased recommendations for the best program that suits your needs. We offer a free analysis of your current natural gas and electric cost and we receive a small commission from the energy supplier so there is zero cost to you the customer. 
 
How does it work?
To begin, all we need  is a copy of your latest natural gas and electric bill from your local provider. You will also be asked to sign a letter of authorization which permits us to pull the annual usage from these providers. With this information HBS can go out to the deregulated market and get competitive bids for your energy needs. We will then present you with the best options and you choose to activate your savings.
 
If you activate your savings by choosing a new supplier there is no cost to switch. You get the same power, same delivery company, same poles, same wires and same meter. There will be no interruption or downtime of service. The only change will be a new bill in 45 – 60 days from a new supplier.
 
Today’s Economy is difficult at best and you owe it to your business to see if you can save your company money. You have nothing to lose and big savings to gain. 
For more information email george@hbsadvantage.com or call 856-857-1230

 

By REBECCA SMITH  as reported in Wall Street Journal

Slack demand for electricity across the U.S. is leading to some of the sharpest reductions in power prices in recent years, offering a break for consumers and businesses who just a year ago were getting crunched by massive electricity bills.

On Friday, the nation’s largest wholesale power market serving parts of 13 states east of the Rockies is expected to report that electricity demand fell 4.4% in the first half of the year. That helped to push down spot market prices by 40% during the first half of this year.

[Electricity Prices Plummet]

Wholesale electricity — power furnished to utilities and other big energy users — cost an average of $40 a megawatt hour in the region, down from $66.40 a year earlier. The price declines in this market, which extends from Delaware to Michigan, come on top of a 2.7% drop in energy use in 2008 over 2007.

The falloff in demand represents a reversal of what has been one of the steadiest trends in business. For decades, the utility sector could rely on a gradual increase in electricity demand. In 45 of the past 58 years, year-over-year growth exceeded 2%. In fact, there only have been five years since 1950 in which electricity demand has dropped in absolute terms.

But this year is shaping up to have the sharpest falloff in more than half a century, and coming on top of declines in 2008, could be the first period of consecutive annual declines since at least 1950.

Dramatic price reductions don’t immediately mean lower power bills for all consumers. That’s because many customers pay prices based on long-term contracts. But lower prices will have a softening effect over time.

In California and Texas, a combination of cheap natural gas and lower industrial demand is putting pressure on prices.

In the Houston pricing zone, which has many power-gobbling refineries and chemical plants, the spot market price was $61.82 in June, versus $129.48 a megawatt hour a year earlier. Power demand in Texas is down 3.2% so far this year due to business contraction and reductions in employment which are causing many households to economize.

Just a year ago, many businesses and residential customers were reeling from electricity prices on the spot market that had spiked to historic highs, driven by high fuel prices and hot summer weather. Some businesses curtailed their operations because electricity and natural gas were too pricey.

[Electricity Prices Plummet]

But the flagging economy has resulted in a slump in demand that has jolted some energy markets. American Electric Power Co. and Southern Co., for example, both reported double-digit drops in industrial electricity use for the past quarter.

Meanwhile, natural gas, which strongly influences electricity prices, has fallen below $4 per million BTUs, or British thermal units. That’s down from $12 at last year’s peak.

For many businesses, the cost of electricity represents one of the few bright spots in a dismal economy. Andy Morgan, president of Pickard China Inc. in Antioch, Ill., which makes fine china, figures his electricity cost is down 30% to 40%.

Last year, when everything was spiking, he looked at different options — including negotiating a fixed-price contract for energy with a supplier. He says he held off and now he’s happy he did.

“We’ve definitely reaped savings,” says Mr. Morgan, adding that “especially in a down economy, you’ll take whatever you can get. That’s one of the few blessings during this storm.”

Slowdowns at major industrial companies such as Alcoa Inc. help account for the decline in electricity usage this year. The recession and drop in consumer demand for products that contain aluminum has caused the company to idle 20% of its smelting capacity world-wide this year.

In the U.S. the company has cut production at smelters, which are traditionally big energy users, in New York, Tennessee and Texas. Kevin Lowery, a company spokesman, said he did not believe that Alcoa has saved much money thus far because the company primarily purchases electricity through 25- to 35-year contracts.

Steel Dynamics Inc. is benefiting from lower pricing. The company operates five steel mills, with four purchasing electricity at spot market prices in Indiana, Virginia and West Virginia. The benefit, though, is smaller than it might be because the steelmaker is producing less steel this year.

“We’re producing fewer tons, but every ton we produce we seek to minimize the costs and electricity is one of those,” said Fred Warner, a company spokesman. Its mills are running at 50% capacity this year, down from 85% capacity last year.

Some wonder whether the deregulated markets of the Eastern U.S., Midwest, Texas and California will be especially hard hit if demand comes roaring back. That’s because utilities in these markets no longer are required to build new resources. It’s left up to the power generators to determine when the market conditions are ripe.

“There’s more supply than demand and prices are really low so it doesn’t make sense to build anything,” says John Shelk, president of the Electric Power Supply Association in Washington, D.C., a group that represents power generators.

Many electricity markets throughout the country have implemented demand reduction programs that give consumers a further incentive to reduce power use. The 13-state PJM Interconnection market has been one of the most aggressive — and has seen one of the steepest price drops.

A new report from the region’s official market monitor found a strong correlation between falling prices and an increase in demand-reduction programs. In the PJM market, energy users can collect money through an auction process for pledging to cut energy use in future periods.

In May, PJM conducted an auction to ensure it will have the resources it believes it will need in 2012-13. About 6% of the winning bids came from those who pledged to cut energy use by a total of 8,000 megawatts in that future period.

Our Perspective:

For those companies faced ith rising utility prices over the past 4 years, there is finally relief in the deregulated market. Prices have fallen due to the decrease in demand.

If you look at you electric bill over the past 12 months you will see that your price to compare for electric supply was most likely over .12 cents per kWh. Current market rates will allow you to lock you supply price in the dregulated market somewhere in the .10+ cent per kWh area. This could provide a 11/2 to 2 cents per kwh savings over the next year or two.

Our clients are finding substantial savings which fall to the bottomline.

Would you like to know more? Give us a call 856-857-1230 or email george@hbsadvantage.com . Contact us for a free evaluation You will be surprised by the savings it will provide.

—Timothy Aeppel, Sharon Terlep and Kris Maher contributed to this article.