By Chrysa Smith

It’s been said that choice is the ultimate luxury. Since 1999, New Jersey businesses and residents have had the luxury of choosing which utility company from which to purchase gas, electricity, and heating fuel; but with choice often comes challenge. Along with their new options and the predicted benefits of a more competitive marketplace, New Jersey residents have also had to deal with the changes and questions raised by the state government’s deregulation of energy providers.

The Balance of Power

In 1999, the New Jersey Board of Public Utilities (NJBPU)—the governing body for electric, oil and natural gas services—introduced a bill to deregulate the state’s energy industry for residential customers. (New Jersey’s commercial energy market had been opened up earlier in what some say was an attempt to keep local corporations happy and committed to staying put.)

The goal of the Electric Discount and Energy Competition Act (EDECA) was to enable New Jersey energy consumers to shop around and chose the energy provider that best suited their budget and service requirements. The free-market rationale hinged on the prediction that enough healthy competition between providers would keep prices down while offering better service and reliability to customers. Under the auspices of the federal Department of Energy, New Jersey took measures to safeguard free market competition for electricity and gas, including the requirement for the NJBPU to “unplug” power stations with higher costs than other available energy sources.

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According to Betty Kennedy, public relations coordinator for Conectiv Power Delivery, an independent utility provider based in Carney’s Point, New Jersey. “Up till 1999, when the state voted to restructure the energy industry, each company had a specific service area.”

Conectiv—which services eight counties in southern New Jersey—claims that the deregulation has reduced their customer’s rates by 10.2 percent, saving them a cumulative $290 million during the years from 1999 to 2003.

But the story is a bit more complex. Conectiv, and the states other 21 licensed electric suppliers and 29 licensed natural gas suppliers are, as their names indicate, suppliers. They provide the hardware—the lines and cables—and once those are in place, they also provide the power that flows to New Jersey commercial and residential customers. That power may have been purchased from companies several states away, or it could come from oil, coal or renewable energy sources. Energy may even be bought and sold much like the stocks in an investment portfolio. If it’s important for a customer to know where the cool flow from their central air system comes from, or the juice that runs the building elevator, post-deregulation, that customer now has a voice.

According to Terry Moran, manager of Retail Choice for Public Service Electric & Gas (PSE&G) in Newark, New Jersey’s largest energy provider, “Since the transition period for New Jersey, the largest change is that we no longer own generation. We are now a pipes-and-wires company.”

Enter the ESCOs

Though the playing field has changed somewhat, the delivery companies—called Energy Service Companies, or ESCOs – have remained essentially the same. Since deregulation, it’s the transmission that has changed. Out-of-area transmission companies, called third-party suppliers, are now in competition with area companies who once dominated their own market.

“The restructuring act has allowed New Jersey to move forward to look for better prices in the state,” says Kennedy. “Our customers pay less than they did in ’99.” This has been accomplished, thanks in part to the annual Basic Generation Service, or BGS, auction. Each February, according to PSE&G spokesperson Karen Johnson, transmission companies gather together to offer energy packages to service providers. Suppliers can pick up an energy contract for a year or two, or more at wholesale auction.

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“For the customers that have chosen to stay with [us],” says Johnson, “we secure the power through the annual energy auction that allows them to buy in a wholesale [market], where prices are competitive. PSE&G is the utility that is part of the Public Service Enterprise Group (PSEG) parent company, who also owns PSEG Power—the unregulated generation side.”

And, says Kennedy, much like commodities of all kinds, the buying can be ‘locked in’ at a specific rate—called fixed pricing—or float with the market value through its natural cycle of ups and downs—called variable pricing.

Not a Flawless System

While the provision of greater choice and potentially lower costs seems appealing, the program has not been without its problems. According to a report published by The New Jersey Public Interest Research Group’s Citizen Lobby and Law & Policy Center in Trenton, “New Jersey pays 50 percent more than the national average for our electricity. And energy providers, for the most part, are offering the same old fossil-fuel and nuclear-generated electricity.” For the programs first four years, the rates were frozen for electric utilities, and some customers actually saw savings of 10 percent on their electric bills. Yet now, as pricing caps come off kilowatt rates, it remains to be seen what the full affect will be.

“One of the biggest fallacies of deregulation,” says Janet Garofalow, assistant vice president and manager of sales and marketing for Castle Power LLC—a Harrison, New York-based fuel oil and natural gas service provider with a satellite office in Englewood—”is that we can’t guarantee that we can save our customers money in comparison to the utility commodity cost when they fix a price at a certain time. We can’t predict what the market will do going forward.”

Garofalow goes on to explain that to a large extent, the market is controlled by the weather. “In the winter, one reason for gas prices rising is the cost of transportation for the gas, due to increased demand. In the winter of 2002, when we never wore a winter coat, pricing came down.” To a large extent, the energy market is a gamble in commodities futures—where knowledge of the market and good planning come into play.

Maneuvering Through the Maze

One of the biggest attractions to third-party energy suppliers has been the advent of aggregation. And it may just be one of the largest benefits to multiple dwelling communities sharing real estate management companies. According to Alyssa Weinberger, director of regulatory affairs for Hess Energy Marketing in Woodbridge, “Buying bulk would be advantageous. With an aggregation of individual customers into larger groups, you can get better deals.”

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Hess—along with several other suppliers who deal with commercial and industrial customers—have done just this for multiple dwelling communities, and even area school districts, in order to reduce costs. Management companies should be aware of these and other options for energy conservation under current energy systems.

Most ESCOs and third party suppliers will tell you that their marketing efforts have not been anything like those of the deregulated phone companies, and that the resulting switching of suppliers—at least on the residential side—has been marginal. Right now, the BPU estimates that third party suppliers represent less than six percent of service to gas customers and fewer than 3.5 percent for electric supply switchers.

According to Johnson, PSE&G currently has 1.6 million gas customers and two million electric customers. “Some have both gas and electric,” says Johnson. “We serve about 75 percent of the state’s population on a north-south diagonal that follows the New Jersey Turnpike.”

“The percentage of customers who have changed is not large,” adds Moran. “On the electric side, most of those who have switched have been the largest customers. We roughly have about 18 percent of our [megawatt] load switched. For gas, we have roughly 30,000 customers who have switched to third party suppliers.”

If you think your association might benefit from joining that percentage, all it takes to make a change is a phone call and a signed contract—which some suppliers say can be done by a board member. Yet, in this transition period, and in the age of all too common legal proceedings, having the input of an informed accountant and an attorney review would be prudent. Especially in the case of buying power for entire communities, the stakes are high, contracts are involved and costs of litigation even greater.

“You need a service provider who you can go to and ask questions,” Garofalow adds, “Although [the energy business] isn’t rocket science, it is complex.” Before your board even thinks of making any changes in your utility provider, it makes sense to be sure that the people responsible for the purchase of energy understand the terms, the bills and the contracts.

According to Moran, “Billing can be done in a few different ways. For Basic Generation Services (BGS), all charges can be contained in one utility bill. Third party suppliers have a variety of options that are set forth in their contracts.”

Like a fixed mortgage, a fixed rate is fairly straightforward, and can be budgeted for accordingly. For a variable rate, it helps to know the index to which the rate is tied. According to Weinberger, “Some large customers have been put on hourly pricing versus a fixed rate—the advantage being that you pay for what you really use, with the ability to see where spikes are.”

Eric Hartsfield, a spokesperson for the NJBPU, indicates there are many options. “In the case of a condo, you may have one company providing service for the common/general areas, while another may provide service to the individual unit owners.”

Other Considerations

It also helps to be informed about the latest programs from providers that may benefit your community down the road.

“We recommend that dual-fuel boilers be put in if possible and if it makes economic sense to the customer,” says Garofalow—providing the option of burning natural gas or alternate fuel as the state of the market may dictate. Programs like the New Jersey Clean Energy Program (www.njcleanenergy.com) offer multiple promotions that provide cash incentives for changing systems that are cleaner or more efficient. So, when a community looks at their energy costs, they might consider replacement time for heat pumps, air conditioning systems and boilers in addition to their bills. If timing is right, there could be savings all around.

Information is out there, however, in the form of conferences, customer awareness programs and directly from the BPU (www.bpu.state.nj.us). The more informed the management company, condo or co-op board, the easier it will be to maneuver through this kilowatt maze without it becoming a drain on an association’s time and budget.

To find out more about saving opportunities in the NJ deregulated utility market email george@hbsadvantage.com or call 856-857-1230.

Chrysa Smith is a freelance writer and a frequent contributor to The New Jersey Cooperator.

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

The Deregulated Electricity Market will SAVE your company money…but only if YOU act.

Just as deregulating the airline industry resulted in more competition and lower airfares, and the deregulation of the telephone industry resulted in slashing service costs, the deregulation of the nation’s electric utilities will result in utility companies competing for your business with better service and lower prices. While it’s not yet truly practical for the average household to utilize this deregulated environment, the “mid-size” to “large” electricity consumers (small to large businesses) are now able to drastically cut their electricity costs through “aggregators” (companies that buy large volumes of electricity at wholesale rates on behalf of their clients).

A Brief History of
Utility Deregulation

Before deregulation, you were ‘held hostage’ by one telephone company monopoly. You had to pay the rates that they decided were ‘fair’ (though they had to receive approval from the government). The phone company owned the wires, switches, even your actual phone which you had to rent from the phone company (you were not allowed to own a phone of your choice and connect it to “their” system.

Then the phone company monopoly was broken up by the U.S. Justice Department and the FTC, and allowed the entry of competition. The competition began with long distance phone calls, and companies like MCI and Sprint set up their own switching systems and wires and leased the use of the old phone company’s lines (this latter part was mandated by government decree to insure competition). Long distance rates started dropping, first by a little, then drastically. Today a long-distance call can cost as little as a penny (sometimes even less), whereas that same phone call 30 years ago would have cost 20 or 30 cents (or more) per minute. The End Result? Consumers of telephone service now have multiple choices for service providers, and the cost of telephone services (especially long distance, but also local service) have dropped dramatically, saving consumers tens of millions of dollars.

THE SAME SITUATION IS OCCURING TODAY WITH
ANOTHER UTILITY: THE ELECTRIC COMPANY.

In the interest of providing the public with the lowest possible rates and a selection of service options, the U.S. electric utility industry is now in the process of being deregulated. This allows power plants to compete for your business, and as we all know, competition breeds savings for consumers. It also changes the electrical utility industry into two distinct types of services: The companies that transmit power from the electrical generating station to your home or business (they own the poles, transformers, wires, etc…these are called “the distributors”); and the companies who actually operate power plants (“the generators”) and feed electricity into the distributors’ power grids. Of course, some companies are both generators and distributors. Still, deregulation allows you to choose who actually generates the power you consume, and you are free to choose the company that generates electricity in the most cost-effective manner and therefore can sell it to you at the best price.

In 1978, Congress passed the Public Utility Regulatory Policies Act which laid the groundwork for deregulation and competition by opening wholesale power markets to nonutility producers of electricity. Congress voted to promote greater competition in the bulk power market with the passage of the Energy Policy Act of 1992. The Federal Energy Regulatory Commission (FERC) implemented the intent of the Act in 1996 with Orders 888 and 889, with the stated objective to “remove impediments to competition in wholesale trade and to bring more efficient, lower cost power to the Nation’s electricity customers.” The FERC orders required open and equal access to jurisdictional utilities’ transmission lines for all electricity producers, thus facilitating the States’ restructuring of the electric power industry to allow customers direct access to retail power generation.

As a result of the Federal and State initiatives, the electric power industry is transitioning from highly regulated, local monopolies which provided their customers with a total package of all electric services and moving towards competitive companies that provide the electricity while utilities continue to provide transmission or distribution services. States are moving away from regulations that set rates for electricity and toward oversight of an increasingly deregulated industry in which prices are determined by competitive markets. (source: United States Department of Energy)

So how do you get electricity from “Power Company A” when your existing power company is “Power Company Z”?  Envision this example: Suppose your town is served by “Power Company Z”…this is the company that owns and maintains all the wires in your town, and they also happen to have a power generating station as well. This power company also is connected via larger regional or national power grids to 3 other power generating companies (let’s call them “Generator A, B, and C”). 25% of the power users in your town buy their power from Generator A, 25% from Generator B, 25% from Generator C, and the remaining 25% continue to buy from the distributing company “Power Company Z”. If you are one of the 25% that decides to buy your power from “Generator A”, then your distributor “Power Company Z” is required to buy 25% of their overall power from Generator A, 25% from Generator B, and 25% from Generator C. That means that the actual “juice” delivered to your business at any given moment could actually be a combination of electricity from up to 4 different providers, but the end result is the same…YOU, the CONSUMER, dictates which power company provides your share of the total power distributed and used, and you pay for your energy at Power Company A’s rates.

Of course it’s entirely possible that a power distributor has no actual power generating facility, OR that everybody in their service area chooses to buy their power from a source OTHER than the distributing company. The distributing company can not be expected to maintain the poles, towers, lines, transformers, etc. for nothing. Under the new deregulated industry, you will in effect receive two bills: One to pay for the actual amount of electricity used, and another for the delivery of the energy to your business. In actuality, your monthly power bill is consolidated into one payment, but it’s easy to see how much you are paying for electricity and how much for delivery.

In the end the competition between power generating companies will lower your bill by 15 to 20%, based on the experience of electricity users in states where deregulation has already been in place for several years. In the near future this competition will also allow you to make significant social and environmental choices. You may choose, for example, to obtain your electricity from a generating company that produces electricity at a slightly lower level of savings, but uses a cleaner fuel source than another generating company. You might even choose to take a firm environmental stand of receiving very little in savings but purchasing your electricity only from a very “green” power source, such as a producer who uses hydro, solar or wind turbines to generate electricity.

In the past, you could only buy electricity from your local utility, at the rates they set. Today, you have the freedom to buy from a variety of utilities that compete on price and quality for your business.

Deregulated Energy FAQ

February 1, 2010

Deregulated energy markets throughout the United States can mean substantial cost savings for businesses aware of the opportunities. Hutchinson Business Solutions makes benefiting from deregulation easy by answering your questions and showing you how our expertise in deregulated energy markets, coupled with our world-class list of energy providers, can help control costs, stabilize energy expenditures and increase profits for your company.

Q: Will the reliability of my electric or natural gas service change with deregulation?
A: No. Regardless of which energy provider we help you choose, your electricity and natural gas will continue to be delivered safely and reliably by the local utility company, a company still regulated by the Public Utility Commission.


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Q: What happens if I have an emergency or power outage?
A: Because your local wires company is still responsible for the maintenance and repair of the poles and wires, you will call them in the event of an emergency or outage at the number provided on your bill.

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Q: What has stayed the same in electric and natural gas service with deregulation?
A: Your current Transmission and Distribution Utility, continues to deliver electricity and natural gas to your business. Your local utility company still responds to service interruptions and continues to maintain the poles, wires and pipelines. You will continue to receive the same reliable service you are used to with your local utility company, regardless of which energy provider you receive service from.

It’s helpful to think of electricity and natural gas deregulation like the deregulation that occurred several years ago in the long-distance telephone service market. Consumers now have the power to choose the long-distance carrier of their own liking. However, regardless of which long-distance carrier they choose, their phone lines are still provided and serviced by the same local phone company.

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Q: What has changed in electric and natural gas service with deregulation?
A: You can now choose to buy your energy from a different provider than the original provider for your area. These companies are called retail energy providers. Additionally, your bill now looks different than bills you have received in the past, but each retail energy provider provides the same standard information.

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Q: Does everyone have the option to choose a new electricity or natural gas provider?
A: Unfortunately not. City-owned utilities and member-owned electric cooperatives have the option of giving their customers a choice of providers, or keeping things the same.

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Q: Why use an energy procurement advisor?
A: The answer is simple: we save you time and money. Staying in-tune daily with energy markets, providers and new opportunities is a full-time job. With Hutchinson Business Solutions (HBS Energy Management) you can capitalize on the benefits offered by deregulation without committing significant time and resources to understanding the complexity of the markets.

We get to know your business and your specific energy needs. Then we negotiate with energy providers on your behalf to get the best rates and options. After you have an agreement with a provider, we continue to service your business, and in case your needs change we are there to renegotiate new agreements that fit those needs. We do all the work. You receive all the benefits, including no out of pocket costs!

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Q: Will I notice a change of service when I switch my energy provider?
A: No. No matter which energy provider you choose, your energy will continue to be delivered safely and reliably by the local utility company, a company still regulated by the Public Utility Commission.

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Q: What happens if my energy provider stops serving customers?
A: If this were to take place, you would not be without energy. Your energy provider must give you advance notice to give you time to select a new provider. However, if you do not choose a new energy provider, your service will automatically be switched to another provider for your area. In this case, your energy rate may increase, so it’s in your best interest to find a new provider if yours stops serving you.

Hutchinson Business Solutions has been an independent broker in the deregulated natural gas and electric market for over 10 years.  Your local provider buys natural gas and electric wholesale and then sells it to you the customer retail. We put our clients in a wholesale position.

To learn more about deregulated natural gas and electric opportunities you may email george@hbsadvantage.com or call 856-857-1230. Our clients are saving from 10% to 40% on their supply cost. Your savings fall to the bottom line.

Come to think of it

June 16, 2009

Has the recent turndown in the economy had an effect on your business?

What steps have you taken to tighten the belt?

Did you reduce the workforce? 

Did you reduce or drop employee benefits? 

In difficult times you may find you have to think outside the box. Reducing the workforce and employee benefits are obvious choices. 

There are diamonds in the rough out there! 

Where you ask? If you only knew!

 Most companies budget for expenses and never really drill down to see if there are opportunities for savings.

 Deregulated Energy: Natural Gas and Electric

 Is your company paying more than $5000 a month on natural gas or electric for your building! 

The deregulated Gas and electric market is the lowest it has been in the last 3 to 4 years. 

Our clients are saving from 15% to 30% on natural gas. 

 

Just in the last week, we saved a client over $45,000 by locking in their Natural gas for the next 12 months.

 

Our electric clients are saving from 6% to 15%

 

Just last week, a client saved over $94,000 by locking in their electric for the next 12 months.

 

How much do you think your company may qualify to save?

The local provider buys gas and electric in the wholesale marker and sells it to you retail.

We put our clients in the wholesale position.

 The savings is yours and falls to the bottom line!

 Voice and Data:

Here is the real sleeper. Many companies feel they wear a safety blanket for they have Verizon or ATT as their provider.

You are paying a premium for that blanket!

Deregulation allows third party providers to use the Verizon / ATT platform and deliver voice to their clients at a discount.

 Our clients are saving from 15% to 40% on their monthly Voice and Data Billing. 

What is 25% of your bill?

 Come to think of it, we haven’t looked at these costs recently?

 Call Hutchinson Business Solutions 856-857-1230. There is no fee for our services!

 Or you can email george@hbsadvantage.com

 

Let the savings begin!!!!!