Energy Deregulation Tutorial

The energy deregulation industry was born with the enactment of the Federal Energy Policy Act of 1992 which incentivized states to provide greater competition in the bulk power market.

From then it took almost a decade but by the early 2000’s, states like New York, New Jersey, Pennsylvania, Ohio, Illinois, and a dozen others had opened up competition for electricity and natural gas.  For the first time in history, consumers were able to pick a different energy supply company than the ones they had been forced to deal with for years.   For most deregulated states, this resulted in consumer savings of millions of dollars in retail utility costs every year, while providing utility companies new markets for their excess capacity.

Even better for consumers was the fact that taking advantage of deregulation required no changes to their power delivery systems or wiring and has no impact on the reliability or safety of the electricity.  Purchasing power from a different source is purely a consumer economic decision which your utility is required to honor with your new provider.  Power is still delivered by your traditional utility company at the reduced cost.  Even the billing still comes from your traditional utility company, only the cost of the energy is different.

Energy Deliver Under Deregualtion is unchanged

Energy is still delivered from your utility but at the reduced price of your new supplier. These contracts between suppliers are transparent to consumers and are a by-product of the unique nature of supply/demand management on the electrical grid.

What does that mean for you? If you live in a deregulated state, you now have the power to choose energy providers based on what matters most to you, whether that’s price, contract terms, service, or even the availability of green options.

Corporate Energy Savings

According to the Energy Information Administration, a typical U.S. residence in 2010 used 11,496 kWh of power.  Usage profiles for businesses, hotels, and factories can be thousands of times this amount.  Due to the scale of these usages, competing energy supply companies are highly motivated to offer pricing and contract profiles based on the quantity and profile of usage your business represents. Energy Supply Companies (ESCO’s) view your facilities usage data, “load profile” and thus determine how aggressively to offer their pricing.  In general the more power your facility uses in a year, the more the ESCO’s are willing to further cut their profit margin to offer you better pricing.  The problem historically however, is that consumers were not well placed to know or understand the pricing of more than a few alternate providers at a time.  The first time a business switched to an alternate energy provider, savings seemed significant when compared to traditional utility costs, but customers entering into their second or third round of energy contracts began to bottom out or even increase their energy costs on subsequent contracts.

Enter Energy Consultants and “Reverse Auctions”

Energy-Deregulation-Reverse-Auction In order to stimulate competition among the growing number of out of state utility companies eligible to deliver energy into a given state, energy consultants (sometimes referred to as energy brokers) appeared.  These consultants would typically represent two or three utility companies and attempt to steer clients to the most favorable terms, providing some improvement in competition but typically suffering from a limited group of suppliers, and a process that hid the pricing structure from each bidder, and the customer.  This structure put deal making in the hands of the broker and did not always motivate suppliers to bid aggressively nor provide transparency to potential business clients.

These drawbacks to traditional energy brokering are what drove Premiere Energy Auctions to create a unique version of supply auctions known as “Reverse Open Auctions”.   The characteristics of the reverse auction process as practiced by Premiere, insure the integrity and competitiveness of the process for both consumers, and suppliers.

Auction Details
  • The network of suppliers Premiere has licensed  to bid for your business is greatly expanded; typically 10 – 20 energy suppliers will bid on an average sized business depending on what state you are in.
  • The auction process is “open” because of a technology platform that allows suppliers to see exactly who is bidding and what each supplier has offered. It is the “open” part of the process which encourages suppliers to drive down their initial bids in order to win business, providing much lower prices and better terms to end consumers.
  • The auction process is completely transparent to consumers and suppliers.
  • Premiere holds no allegiance to any supplier.  Just as important as securing the lowest bid is that we negotiate your contract terms 100% on your behalf.
  • Premiere has established the payment of an auction fee from our suppliers.  There is no cost to client businesses to run an auction.

Final Thoughts

Here at Premiere Energy Auctions, we are true energy consultants with deep and broad knowledge of the energy industry.  Every member of our team is qualified to advise you on the best way to structure your energy contracts and discuss your strategic energy plan.  We are not a multi-level marketing organization. We are trained, experienced professionals doing this work ourselves.

If you are serious about looking into your strategic energy plan, we think there is no better partner to have than Premiere.  There is no cost to you to have us review your energy usage profile and run an auction on your behalf.

For information on the availability of our Reverse Open Auction services in your state, please call a Premiere Energy Auctions consultant at

 

At Premiere, we do energy right.
Call us today (862) 210-8770