FAQ: What is Utility Consolidated Billing?

By Matt Souvannasing

December 12, 2019

Does your utility bill have a supplier name listed next to the energy charge?

Supplier on Utility Bill

Supplier on Utility Bill

If so, you likely fall into one of 3 scenarios:

  • You knowingly signed a contract with a third-party supplier and chose Utility Consolidated Billing (UCB) as your billing format (or it’s the supplier’s default format).
  • Your contract term expired, and you did not sign another contract. Based on the renewal language in your initial contract, you are still being serviced by the supplier on a month-to-month basis with the UCB billing format.
  • You may be part of a municipal aggregation program, in which your city or county has negotiated a rate with the supplier for your business (automatically set up on UCB).
    • This situation is not as likely. Depending on the rules of your local aggregation program, you might not be contractually obligated to the program and can secure your own supply option.

What is UCB?

Utility Consolidated Billing (UCB) is a billing format in which all energy charges — supply, market, delivery/utility, and taxes — are included on one bill from your local utility.

The supply charge is one of the line items listed on your invoice. When you pay your bill, the utility remits payment to the supplier for the supply (energy) portion of your bill.

UCB is common in states that don’t offer single supplier billing.

I didn’t sign a contract, and I’m not in an aggregation. What’s going on?

It’s possible that you’ve been slammed. Slamming is when someone else signed or authorized the execution of a supply agreement on your behalf without your knowledge or approval.

Slamming is more common in the residential or small commercial space. But it’s a good idea to review your bill regularly to confirm your current supply partner and contracted rate are correctly stated on your utility bill.

Who should I contact with questions?

If you’re not sure why a supplier is listed on your utility bill, one of the quickest ways to get answers is to reach out to that supplier and ask for a copy of your current contract.

If you have further questions, feel free to contact us.

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About the Author

Matt is an Energy Advisor specializing in retail and energy aggregation programs. He is passionate about helping first-time energy buyers understand the deregulated market and find the best solutions for their business. In his free time, Matt enjoys cooking and photography.

Matt can be reached at (630) 225-4557 or msouvannasing@naniaenergy.com.

Two-Minute Tuesday: Reverse Auction for Energy

December 10, 2019

Video Transcript

love buying things on eBay. It’s that thrill of the auction as those last seconds tick down and getting the product that I really wanted at a great price.

What if I told you that you can buy your gas and electricity commodity in an auction format as well? But instead of the price going higher like it does on eBay, the price goes down. It’s what we call a reverse auction. 

In this week’s Two-Minute Tuesday, we’re going to talk about what a reverse auction is for energy buying, if you’re a good fit, and what the benefits could be to your business as a result.

What is a reverse auction?

So what is a reverse auction? Just like we talked about, it’s like eBay in reverse. Instead of the price going higher for your electric or natural gas price, the price is actually going down as more bidders compete.

Take your current supplier or third party, like a Constellation or a Direct Energy. They all compete in an open platform online live for 20-30 minutes submitting multiple bids to win your business.

What are the benefits of a reverse auction?

The benefits to you are transparency in the process and a lower overall energy rate.

Am I a good fit for a reverse auction?

To find out if you’re a good fit for this, you may consider:

  • Do you need complete transparency in your purchasing or procurement process?
  • Are you a public entity where you want to see everything on a fair, open platform?
  • Or, are you a large business where energy is a large spend for you and you need the absolute lowest rate possible in the marketplace?

If so, this may be a route you want to consider.

So how about a real-life example?

We just ran a reverse auction for electricity for a large local school district a few months ago. Their overall rate at the end of the auction resulted in savings of $600,000 for their school district.

Think about how that kind of money and savings could help your operating budget. Then, reach out to your current broker or consultant and see if this is something that they offer. See what it could look like for your business and the savings you could attain as a result.

Thanks for watching our video! Leave your comments below, and check out this article on how you could benefit from a reverse auction.

FAQ: What are my energy bill format choices?

By AJ Brockman

When you sign a contract with a third-party supplier, your energy bill can come in one of three formats:

  1. Single Supplier Bill
  2. Utility Consolidated Bill
  3. Dual Bill

Let’s see what each of these billing formats looks like.

Single Supplier Bill

The name of this billing type varies by supplier, but the basic format is the same for all. Under this billing option, all your charges — supply, market, delivery (utility), and taxes — appear on one bill from your supplier.

Energy Bill Format: Single Supplier

Single Supplier Bill

To pay this bill, send your payment to the supplier. The supplier will then remit the utility portion to your local utility.

Utility Consolidated Bill

With this billing type, all charges — supply, market, delivery (utility), and taxes — are on one bill issued by your local utility.

Energy Bill Format: Utility Consolidated

Utility Consolidated Bill

Make your payment directly to the utility, and the utility will pay your supplier its share.

Dual Bill

This billing option is exactly what it sounds like. Each month, you’ll receive two invoices — one from your supplier with your supply charges, and one from your local utility with its charges. Market charges will appear on either the supplier’s bill or the utility’s bill.

 

Energy Bill Format: Dual Bill

Dual Bill – Supplier Portion

Energy Bill Format: Dual Bill

Dual Bill – Utility Portion

 

With dual billing, make sure you pay both invoices each month.

Can I choose my energy bill format?

Sometimes. Your ability to choose your billing type depends on:

  • The state you live in
  • The commodity (electric or gas)
  • The supplier

Some suppliers give you the option to choose your billing type for both commodities. Others have a set billing option that you can’t change. If you prefer one billing type over the others, make sure your chosen supplier can provide it.

Is one billing option better than the others?

The short answer is no. There are no premiums associated with any of these 3 billing types.

Some clients prefer one bill from either the supplier or their local utility that includes all charges because they only have to keep track of one invoice each month. However, we recommend choosing the billing type you’re most comfortable with.

A quick note: When switching suppliers, it’s a good idea to keep your current billing type. This helps avoid billing delays and other billing issues.

Have more energy bill questions?

Check out this video about your energy bill components. And feel free to comment below or reach out to us with your questions.

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Two-Minute Tuesday: On-Bill Financing

November 26, 2019

Video Transcript

So you’ve decided to do an energy efficiency project. Now, how are you going to pay for it? In today’s Two-Minute Tuesday, we’re going to review on-bill financing as a way to pay for your energy efficiency project.

What is On-Bill Financing?

Under on-bill financing, your energy supplier will pay for the cost of your efficiency project. You will sign a supply agreement with that supplier for some defined period that will include a monthly fee that the supplier will use to help pay back the cost of the efficiency project.

Here’s an example of how this works:

Company A is currently spending $50,000 per month on electricity, using 1,000 MWh at $50/MWh.

Current State

Company A negotiates a 3-year agreement to fund a lighting efficiency project. Once the efficiency project is completed, the energy usage reduces 10% to 900 MWh. This customer pays a monthly financing fee of $5,000 on their invoice. As you can see, their monthly spend on electricity stays at $50,000 during the term of the agreement.

During Project

Once the 3 years are up, the financing fee is eliminated from their bill, and the customer’s monthly electricity spend is reduced by 10%.

After Project

Benefits

So what are the advantages of on-bill financing? Well, most on-bill financing programs are considered “off balance sheet,” so getting internal company approval for these types of programs is often easier than for traditional funding.

Secondly, many clients declare the monthly fee on their bill as an operating expense since it is included on your monthly energy invoice. So there may be some tax advantages* to capitalize on from this financing.

Consider on-bill financing for your energy efficiency project.

In short, supplier on-bill financing for efficiency projects is another way to pay for your energy efficiency project. There are many advantages of this option that aren’t provided by other forms of funding.

Thank you for watching our video, and be sure to catch December’s Ask An Advisor video in which we showcase a client who used on-bill financing to fund their lighting efficiency project.

**DISCLAIMER**

Nania Energy Advisors is not a licensed tax professional, and this article does not constitute tax advice. Tax exemption benefits are unique to each business. Any action you take to manage your exemption status after reading this should be verified with a licensed tax professional before implementation. Nania Energy Advisors assumes no liability.

 

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Pros & Cons of a Partial Fixed Product

By Calvin Cornish, CEM

November 25, 2019 – If you’ve seen our recent Risk Management video, you know that a Fixed All-In product isn’t your only purchasing option for your electricity.

The chart below shows you the 5 components that make up your electricity supply charges.

Components of Electric Cost

Anytime you lock less than all these components, you have chosen a Partial Fixed (also called Pass-Through) product. Any component not included in your fixed rate is “passed through” to you at its actual cost each month.

Clients typically pass through capacity and transmission (yellow and light blue above) because they’re the next largest costs behind energy and are not directly related to your monthly usage.

Why would you choose a Pass-Through Product?

The pros and cons of a partial fixed product mostly center around risk and its effect on price.

Pass-Through Product: PROS

  1. Reduced risk. Including capacity and transmission as part of your fixed rate converts those flat demand charges ($/day) into usage-based charges ($/kWh). As a result, you could end up paying higher costs for your demand charges.
  2. Avoid risk premiums. If you fix your cap and trans components, suppliers include a risk premium as part of your rate to protect themselves from underpayment. These risk premiums increase your monthly cost.
  3. Take advantage of improved efficiency. If you undergo an efficiency project that improves your load profile, you could lower your capacity and transmission charges. You won’t see that decrease if you’ve fixed them as part of your rate.

Pass-Through Product: CONS

  1. Uncertainty around PLC tags. A large factor in your demand charges is your facility’s usage during the grid’s peak usage periods. There is always a risk that a couple of bad days can result in higher numbers.
  2. Demand charges could increase. By not including capacity and transmission in your rate, you run the risk of these costs actually increasing if your efficiency declines. The type of facility matters — residential and commercial buildings are less likely to see decreased efficiency than industrial manufacturers.
  3. Billing complexity. Passing through components adds line items to your bill. A single cost per kWh will always be a cleaner billing option.

Who’s a good fit for a pass-through product?

If you identify with any of the qualifiers below, you could benefit from a pass-through product:

  • Clients looking for budget accuracy and have a low risk tolerance
  • Anyone with plans to improve efficiency in the next 1-2 years
  • Clients with annual usage that varies notably and has a higher chance of decreasing than increasing
  • Anyone involved in a buying group
    • You want to limit the socialization of demand charges. Otherwise, you could end up paying for the costs of less-efficient buildings.

What should you expect when passing through components?

  • The costs for any passed-through components will vary throughout the term of your contract.
  • On you electric bill, you’ll see the published tariffed rates for your pass-through pieces.
  • You won’t have any hedging premiums on your passed-through components.

Is a partial fixed product right for you?

The list of qualifiers above is by no means exhaustive. The real answer is unique to you based on your risk level, usage profile, and the nature of your business.

If you’d like to learn more, take our Risk Tolerance Survey or contact us to be paired with an energy advisor.

 

Learn about other electricity products:

About the Author

Calvin is a Certified Energy Manager and has served as a Senior Strategic Energy Advisor at Nania Energy since 2010. He specializes in preparing property management boards to make informed decisions on energy efficiency through proper industry education. His clients include apartment complexes, condominium associations, and senior living facilities. In his free time, Calvin enjoys music and coaching youth sports.

Calvin can be reached at (630) 225-4554 or ccornish@naniaenergy.com.

 

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What is a Fixed All-In Product?

Video Transcript

Hi! I’m Mike, and I’m a Senior Energy Advisor here at Nania Energy. Whether you’re new to energy buying or you’ve been buying for quite a while, you’ve probably heard of a “Fully Fixed” or “Fixed All-In” product.

In today’s video, we’re going to do a deep dive into what a fixed product is, the pros and cons of choosing a fixed product, and why it’s such a common choice among energy buyers.

What is a Fixed All-In Product?

Your energy supply charges are made up of five pieces of the pie shown here.

  • Energy by far is the biggest. These charges are at least 50% of the pie. Energy Components Chart
  • Next is Capacity. Capacity relates directly to when you use energy and how you use energy during peak times over the course of a year.
  • Next is Transmission. Transmission are the charges of the energy going across the wires from the grid to the place where the power is being used.
  • Up next is Losses. Losses is a small portion of your bill, but that’s related to the loss of energy over the wires that the utility gets to recoup charges for.
  • Lastly is Ancillaries. Ancillaries make up a small portion, just like losses. Those are miscellaneous charges — anywhere between 30 and 50 different charges — that are put into a catch-all bucket.

So, with a Fully-Fixed product, we’re locking all 5 pieces* of the pie into one rate.

*Note: Depending on the market, all or some of these components may apply. For example, in Texas capacity/reliability costs are included in the energy component rather than separately charged for.

Pros & Cons of a Fixed All-In Product

Now that you understand the components of the energy pieces that go into the pie, we’re going to talk about the pros and the cons of a Fully-Fixed Product.

Pros

  1. You have the same rate regardless of usage. Your rate won’t change based on seasonality or any major variations in your monthly usage.
  2. It makes budgeting easy and predictable. You estimate your annual usage, you times it by the rate, and you get your budget for the year. There’s no worrying about variable month-to-month charges when estimating what your budget might be.
  3. You can take advantage of the market. As we’ve seen historic lows over these last couple of years, locking in a longer term — say, 24, 36, 48, or even longer — can yield tremendous savings and protection over the long term.

Cons

  1. You have little to no flexibility. Say your facility gets more efficient and your capacity numbers improve. You’re locked in at an artificially higher rate than you would be if you were able to take advantage of those efficiency improvements in the facility.
  2. There are built-in premiums. While you have budget certainty by locking all the pieces of the energy pie, there are premiums built into each of those pieces that suppliers use to hedge their risks. So while you have premiums attached to each of those, you’re paying a little bit of a higher rate than you would with another product.
  3. Is now the right time to lock? While this could be viewed as a pro — similar to market timing — I get asked a lot “What if I lock and then the market goes down?” I usually ask in response “Would it bother you more if the price went down another 1-2 percent or if it went up 5-10 percent?” It’s about market timing and what you’re most comfortable with at that time.

Why is Fixed All-In a popular product choice?

So why is Fixed All-In such a common choice for new energy buyers?

  • It’s easy to understand. You have one fixed rate on your bill and you’re good to go.
  • There’s no guesswork. When it comes to your budget, you have the ultimate budget certainty.
  • You have an apples-to-apples comparison when you’re shopping with other suppliers.

Should you choose a Fixed All-In product?

Is a Fixed All-In product the best choice for you? Or is there another product that might fit better with your strategy and your facility?

Contact an advisor and we can have a conversation about your electricity purchasing options.

Thank you for watching!

Learn About Other Electricity Product Options:

Index Product

Pass-Through Product

Two-Minute Tuesday: What is a CEM?

Video Transcript

Hi! I’m Calvin, and I’m a Certified Energy Manager (CEM) as designated by the Association of Energy Engineers (AEE). What is a Certified Energy Manager? Well, that’s what we’re talking about in this week’s edition of Two-Minute Tuesday.

What is a CEM?

The AEE describes a Certified Energy Manager as someone who optimizes the performance of a building, facility, or industrial plant.

What does that mean, and why is it important to you?

Picture the offensive coordinator of a football team. He develops the game plan to guide the activities of skilled experts.

The Certified Energy Manager is a team leader. He helps companies develop a game plan for managing their energy.

CEMs are tested for knowledge on areas such as:

  • Fuel supply pricing
  • Energy economics
  • Mechanical systems, like HVAC and boilers

They need to know energy auditing information in order to evaluate projects on the front end and to do measurement and verification on the back end.

Do you need a CEM at your company?

For many organizations, a full-time energy manager with advanced degrees and certifications just isn’t realistic. So they look to consultants or advisors to help them put together a plan.

If you’re in the market for a company to help with your energy plan, make sure you look for one that has Certified Energy Managers on staff. They’ll bring a level of knowledge and expertise that will help your plan be successful for the long term.

Thanks for watching, and if you have any questions or comments, please contact us or leave them below.

Two-Minute Tuesday: Risk Management

November 12, 2019

Get an inside look at our Risk Tolerance Survey! In our first Two-Minute Tuesday video, Senior Energy Advisor Mike Zaura explains each question on our Risk Tolerance Survey using on-screen navigation.

FAQ: Why Do You Need an LOA or LOE?

By AJ Brockman

When you ask a Nania Energy rep to price your account, they’ll ask you for three things:

  1. A copy of your most recent energy bill,
  2. Your current contract end date, and
  3. To sign a Letter of Exclusivity (LOE) or Letter of Authorization (LOA)

In this post, we’ll cover the basics of LOEs and LOAs — what’s the difference, why we need them, and how they impact the pricing process.

What’s the difference between an LOE and an LOA?

An LOE gives a broker exclusive access to pricing from a supplier. It’s an industry standard, and it signals to the supplier that you only want them to send pricing to whoever submitted the LOE.

An LOA is not exclusive — a supplier will send pricing to anyone who submits an LOA on your behalf.

When it comes to signing authorization documents, there are a few rules of thumb:

  1. Identify your intent. If you only intend to work with 1 broker or consultant, sign an LOE. If you opt for an LOA, only sign one with brokers or consultants you’re currently working with or are strongly considering working with. Having too many authorization documents floating around can cause confusion for suppliers and you and slow down the pricing process. 
  2. Read through the document. There’s no industry standard when it comes to the language of an LOE/LOA. If the document contains the word “exclusive,” then you’re looking at an LOE.
  3. Look for term length. The LOE/LOA should clearly state how long it’s valid for.

See our LOE here:  Nania Energy Advisors – LOE

See our LOA here: Nania Energy Advisors LOA – Non-Exclusive

If I sign an authorization letter with you, can I still get pricing from my current broker?

It depends on which form you sign.

If you sign an LOA with us and your current broker, it’s possible that we will both receive pricing from the supplier. However, there most likely will not be a significant difference between the rates.

If you sign an LOE, the supplier will only send pricing to whoever submitted the LOE. An LOE trumps an LOA.

Side note: If a Nania Energy rep asks you to sign an LOE, they will let you know ahead of time which suppliers they’ll be submitting it to.

How long is an LOE/LOA good for?

Each company has its own LOA or LOE, and the restrictions and limitations vary for each.

Our LOA is good for 12 months. The term length for supplier-specific LOAs are typically between 6 and 12 months.

Does an LOE/LOA allow you to sign contracts for me?

NO. However, the form does allow us to sign utility usage request forms on your behalf.

A usage request form facilitiates the transfer of information from the utility to the supplier for pricing. Each supplier has their own utility-specific usage request form. We fill them out for you to keep the pricing process moving — and we’re not constantly pestering you for your signature.

Takeaway: Know what document you’re signing.

When an advisor or broker sends you an authorization letter to sign, look it over carefully to see whether they’ve sent you an LOE or an LOA. Knowing the difference between the two can speed the pricing process along significantly.

If you’re not sure which document you’re looking at, feel free to send it to us and we’ll be happy to help you identify it. And if you have further questions about LOEs and LOAs, comment below or contact us for more info.

Ask An Advisor: Energy Bill Components

Video Transcript

Hi! I’m John and I’m the CEO and Founder here at Nania Energy Advisors. And today’s subject is your energy bill, whether it be gas or electric.

What we’re going to do is we’re going to break out the 4 components that make up each one of those bills. And we’re going to do it with the aid of some of our furry friends here at Dogtopia.

Energy Bill Components

Energy

The largest part of your utility bill by far and away is the actual energy cost. It can represent up to 70-80% of your total charges. In gas, it’s billed as therms or MMBtus, and in electric it’s billed as killowatt-hours.

Besides being the biggest part of your bill, it’s also the part that’s the most volatile, as our furry friend Riley is going to aptly demonstrate. What I mean by “volatile” is it’s subject to market conditions. So if you default to a rate and do nothing about that energy price, you’ll see whatever the hourly rate is on electric or the monthly rate is on natural gas from either the utility or your supplier.

The other thing you can do is try to control those costs. By controlling them, usually that means engaging in a fixed price product. By doing so, at least you’ll know what your costs are, and if you do so correctly you’ll be able to save some money compared to what you would have paid on a floating rate. You can do a fixed rate for as far out as 3 or 4 years.

The other way you can save money on this energy component besides managing the rate is by managing your consumption. So the less you use, the lower your costs. So it’s a formula: your rate times your usage determines your total cost for energy.

Market Charges

The second largest part of your energy bill is what we call market charges. We’ve got our friend Eevee here who’s a prop for us today. Market charges are something that move, but not too much. And generally, you know what you can expect from them.

In natural gas, they’re a line item that’s labeled “Demand Charges,” and in electric there’s several line items. They start with capacity, transmission, ancillaries, losses, and there may be some other miscellaneous ones too. These are all market-driven, but regulated, so we know in advance generally what they’re going to be but that they also move.

These charges exist because they ensure that there’s reliability of service. The utilities are responsible for making sure that everybody has all the energy they need at any given time. Those charges make sure that resources are allocated properly so that that can occur. You don’t ever have to worry about physical restrictions on how much you need or curtailments of any kind.

Delivery Charges

The third part of any utility bill, which also is a significant cost, is what we call delivery charges. This is Candy — she kind of demonstrates what a utility charge is all about. They’re not the biggest portion of your bill, but they’re still important. But they don’t move much. They are completely regulated.

These charges are what the utilities use to recoup their costs for the infrastructure that they have leading up into your building. In natural gas, think about the pipes and the meters. And in electric, think about the transformers, the lines, and the meters.

These are heavily regulated by the local commerce commission, and they don’t change much. They’re very predictable, and unfortunately you don’t have much choice in those matters. There’s just not much movement there.

Taxes

The fourth and last component of any utility bill is your taxes. This is our friend Chance. He doesn’t move much, he’s very predictable, and there’s not much we can do about him.

These are charges that the municipal and state collect through your utility bill, billed by your utility company. Public institutions like schools and park districts and libraries pay them the same as private entities.

Just to note: there are occasionally carve-outs with exemptions for taxes for specific industries sometimes in a state. So it’s always worth at least having your energy advisor take a peek at them just to ensure you’re not missing what could be some real found opportunities in the form of tax deductions that you should be taking.

Closing

Thanks for watching today’s video! And, as always, if you’ve got questions about what’s going on with your utility charges, the best source is your local agent, broker, or consultant who have help guide you and explain it a little more thoroughly.

So, from all of us today, we want to say goodbye and thanks for watching our video!

 

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