Tuesday, June 7, 2011

How NOT to Buy Electricity... Lessons from the Field

This post describes an experience I had when I was talking with a prospective client about our business.

I was talking with a small business owner in the West Village of New York City last week.  He had recently opened a new gym in the neighborhood.  The facility has been open less than a year.  We were reviewing The Megawatt Hour.  We discussed business requirements and how he wanted to manage his electricity purchases.  He caught on right away to the challenges and opportunities connected to buying electricity and power.  

A few minutes in to our conversation, one of his colleagues greeted someone who walked in the door.  Within seconds, the employee directed the visitor to us.  The visitor was orderly and tidily-dressed with a messenger bag slung over his shoulder.  Our business owner had his 3-ring binder open to copies of his electricity bills.  Our new visitor saw the binder and said 
Oh, I see you're reviewing your Con Edison bills.. I am here to follow-up on a customer service message that is printed on your bill.  See?  Right here.  
Our visitor, we'll call him Nick, started to draw the binder away from our business owner, whom I'll call Charlie.  Nick gestured to the box under the supply cost bill detail.  The note from Con Edison reads: 
Your total electricity supply cost for this bill is 8.5 cents/kWh.  You can compare this price with those offered by energy services companies (ESCOs).  For a list of ESCOs, visit PowerYourWay.com or call.
This same message appears on every Con Edison utility bill-- no matter whether you are a residential, small commercial, or large commercial client.  I knew that Nick was not from Con Edison, but he did not openly reveal who he represented until pressed, when he finally said that he was with an ESCO (one that shall remain nameless).  

Misleading piece of information #1 - our visitor did not represent Con Edison.  It sure sounded as if he did when he walked in the door. 

Finally, when pressed, our visitor showed an id card with the supplier (ESCO's) name on it.  He seemed somewhat concerned about pulling his id out of his pocket-- it struck me that there might have been more than one id for more than one company in his pocket. 

Our business owner said that he had received a price from another supplier.  Nick really wanted to know what that price was.  He also didn't care to spend much time explaining what Charlie's options were.  He told Charlie that the best thing Charlie could do was get a rate that was fixed and reliable very month.  He went on to quote that his supplier was the 7th largest energy company in the world, and that the daily customer service statistics showed that this company had a daily approval rating of 95%. 

Misleading piece of information #2 - While this information about the ESCO may be interesting to some, these facts are irrelevant.  This information does nothing to help our business owner make an informed decision about price and product.  

Nick, the visitor, insisted that he had the best price available in the marketplace at 10.4 cents/kWh.  He said that our business owner would not be able to beat that price, which was pre-printed on a contract that Nick pulled out of his messenger bag.  I asked how our business owner would know that this was the best price in the market?  Nick directed Charlie to the Power Your Way site, which lists 53 companies and their websites.  So our business owner was free to go and contact all those suppliers and get pricing from them.  Nick stood by his ESCO's price.  Also, when asked why prices didn't change daily, along with the market, Nick explained that the prices for supply were set in the winter and didn't change.  As a side note, the pre-printed fixed price on the contract from the ESCO was actually 10.49 cents/kWh.  (While that is a detail, Nick's short-hard to a price of 10.4 cents further eroded his credibility.)       

Misleading piece of information #3 - Electricity markets are as volatile (sometimes more so) than the stock market as you can see in this forward curve chart.  

If a price is set and pre-printed on a contract, you're not getting a good price, guaranteed.  The ESCO is going to put a large premium on any pre-printed fixed price to make sure they take NO market risk when they sign new customers.  It is a guarantee of a non-competitive price.  

Nick urged our business owner to sign a contract.  'Let's get started now' sort of approach.  The conversation ended with a savvy Charlie saying that he was not prepared to sign anything right then and there, but if Nick would leave his card he would give him a call.  Nick said 
I don't have a card.  If I had a card it would mean I was selling something.  I am here on a customer service call.  
Misleading piece of information #4 -  The proverb "If it walks like a duck, quacks like a duck, looks like a duck, it must be a duck" proverb leaped to mind.  It is hardly worth pointing out, but... if someone is going to ask you to sign a contract, then he's selling you something.  The reason Nick didn't have a card is because he's a hired gun contractor sales person.  He doesn't work for the ESCO in question, he is a contract sales person who may sell electricity one day and telecom another.  

I came away from this experience disheartened by the approaches that ESCOs are taking to bringing new customers in to the retail experience.  While I couldn't imagine customers going for this type of sales approach, some people must fall for it or our friend Nick wouldn't be out there pounding the pavement.  I also felt a level of embarrassment for the industry to which I've devoted my career.  We must do better.  Most of all, I felt certain that the approach to acquiring and serving clients that I had witnessed in the West Village will not prevail in the end.  Customers won't stand for it.