3 Energy Opportunities for Your 2021 Budget – TMT

Video Transcript

Welcome to 2021! By the end of last year, you probably set some pretty aggressive goals for this year’s budget. Now, you’re a couple weeks into the new year, and you’re wondering, “How are we possibly going to hit all of these goals that we set?”

In today’s Two-Minute Tuesday, we’re going to explore three opportunities in energy that will help you hit those goals for 2021.

Opportunity #1: Review your current agreements.

Opportunity number one is probably the easiest: review your current electricity and natural gas agreements. You’d be surprised how many people think their agreements expire much later than they actually do.

Say, for example, your agreement expires in June. You have six months’ worth of opportunities to evaluate all of your options. You can set up a market alert or market watch to hit a certain price point that you’re looking for.

When the market hits that price point, you’ll be alerted so you can take action. Your new rate will take effect after your agreement expires in June. Let’s say it was a seven percent savings. You now have seven percent extra dollars in your budget that you didn’t otherwise plan for.

So, taking this simple step of reviewing your agreements can have a significant impact on your budget.

Opportunity #2: Generate revenue.

How big of an impact would it be to your budget if you were to create another revenue stream that you didn’t plan for?

Demand response is a program you can enroll in where it asks you to curtail energy usage during the time of a grid emergency. You get quarterly payments based on how much energy you can curtail, which is determined by a one-hour test event every summer.

If there is a grid emergency, you can earn extra energy payments based on how much energy you curtail during that emergency. Luckily, in our PJM territory, there has not been a major grid emergency where anyone has been asked to curtail energy in over ten years.

If generating a new revenue stream would be important to your budget, you’ll want to act now because the deadline to enroll is coming up in the spring.

Opportunity #3: Energy efficiency.

Say you have dollars allocated in your budget this year for an efficiency project, but you’re not sure which one to tackle first. Consider doing an energy audit.

An energy audit will help you identify areas of need, utility incentives currently available, and the ROI for that project. Whichever project you tackle will significantly lower your energy usage not only for this year and this year’s budget, but also for many years to come.

Seize these opportunities and make the most of your 2021 budget.

Energy can have a positive impact on your 2021 budget. By reviewing your energy agreements and their end dates, generating a new source of revenue, and reviewing efficiency projects, not only will this impact your budget for 2021 but also in the years to come.

Thank you for watching! And if you liked what you saw, please like, comment, or share below.

How to Time Your Energy Purchase – TMT

Video Transcript

Hey guys! It’s Becky here with this week’s Two-Minute Tuesday. In keeping with our theme of kicking 2021 off on the right foot, I thought I’d address one of the commonly asked questions I receive from my clients: When should I go to market?

Now there’s no proverbial crystal ball. Everyone knows that. But we used to gauge patterns based off of following weather. So you wouldn’t buy gas in the winter, and you wouldn’t buy power in the summer.

But as the last couple of years have shown us, that doesn’t really exist anymore.

Factors Impacting the Energy Market

We had some of the lowest natural gas pricing in 20 years in March of last year when there was still snow on the ground. The year before that, the fourth of July in 2019 showed us ridiculously low electricity rates.

So how are you supposed to know when to go to market?

Well, let’s slow down and look at the facts.

Year over year, we know that natural gas is down about 25 percent from this time last year. While the rig count has be steadily increasing, it still hasn’t returned to its full capacity.

Meanwhile, exports of liquefied natural gas are at record all-time highs. They’re receiving $14 per MMBtu right now in China, whereas here domestically they’re getting a little over $2. So there’s definitely demand increasing for exports.

However, demand domestically hasn’t returned quite yet. We’ve had a very mild winter, and we’re still experiencing some of the effects of COVID-19 shutdowns. This summer should prove some volatility to return as demand comes back online for both natural gas and power. We hope that production will follow, but at this point it’s still not up to capacity.

That all said, how are you supposed to make a decision on when you should be looking at your options to make an energy purchase?

A Shift in Perspective

I’d encourage you to switch the conversation from savings to risk management. Are you willing to look at some options now and potentially pay a little bit higher than your current contract to have safety and security and lock in for the next three years? Or, are you willing to take on a little more risk and ride the market and see how the change in political parties or social and economic factors play out? How is the vaccine going to have an effect on shutdowns?

It could go either way, it just depends on the risk level that you’re comfortable with as an organization and what you’d like to see as an end result.

So, I’d encourage you to have the conversation now with your strategic energy advisor just so you’re on the same page. You can set up some market watches to start watching pricing if you’re not quite ready to take action yet. But at least you’ll be in the know when the opportunity arises to make your energy purchase.

Thanks so much for listening, and we’ll talk to you next week!

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Two-Minute Tuesday Recap

Video Transcript

Hi! This is Michael DeCaluwe from Nania Energy Advisors, and happy 2021!

You know, 2020 brought a lot of challenges. It meant working from home. It turned Amazon and Instacart into verbs. Your baby monitor is now next to your laptop. As we look into 2021, we want to review our Two-Minute Tuesdays — topics we covered last year and what we have planned moving forward.

In 2020, we reviewed such things as utility rebates, percentage swings and gas products, and what an energy advisor is and does. We try to keep these videos under two minutes, but it usually depends on who’s giving the video whether that’s successful or not.

The information we provide is geared to be actionable items that you can apply to your own individual energy strategy.

As we look to 2021, we’re excited to hit the ground running and continue to provide valuable content. If there’s any specific topics that you want to see covered, please feel free to reach out. Otherwise, look for further videos on Tuesdays, and good luck to you in 2021!

Have a Two-Minute Tuesday topic in mind? Reach out to our Content Marketing Manager AJ Brockman at abrockman@naniaenergy.com.

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What is a Price Trigger? – TMT

Video Transcript

Hi! Welcome to this week’s Two-Minute Tuesday where we’re going to be talking about strike prices and fixed price triggers. We’ll be answering some questions about what those are and when someone might use them.

Strike Price vs. Price Trigger

A strike price is more of a technical investment term. When you’re looking at purchasing natural gas and electricity, we’re most likely talking about a price trigger.

A price trigger is when a client authorizes a set market price that the market might go down to, at which point a transaction might be automatically executed or approved to be executed.

When should you use a price trigger?

Here are a few situations where that might be used.

1) Slower Decision Making/Authorization Process

The first is when you have a slower decision making or authorization process. Good examples of this are school boards or condominium associations where they need to have a group vote in order to approve a transaction.

Obviously this isn’t very conducive with market volatility and moving quickly on a price. So what they might do is approve a price trigger and a specific target to be executed in the near future. In this situation, it would be automatically executed based on that target price, so they don’t have to go back and get additional approvals.

2) Multiple transactions

Another situation where someone might use this is a large user who is making multiple transactions. Think of a data center or a large manufacturer for whom energy is a significant cost in the price of their product.

In this case, they’re making many transactions over time, and they want to streamline that process so they can execute more quickly based on market volatility. In this scenario, they may or may not execute automatically.

Often, there’s a buyer or someone in place who can make those decisions, and what they really want is to be notified when the price hits that level so they can give a quick yes or no and then the transaction would occur. But the transaction wouldn’t be slowed down by paperwork or needing to get things signed right at that moment; it’s all been done in advance with the price trigger.

3) Market Monitoring

The third scenario is for market monitoring purposes. We use this often when we’ve got a client with a contract that’s up at the end of the year, and maybe we’re looking to see if the market drops below the current price for a client and we want to take advantage of that.

So in that situation, there wouldn’t be an automatic execution, but that price trigger would set off a notification to let us know where the market’s at so we can look at it and bring it to a client for evaluation and then to potentially make a decision on that.

So those are three different scenarios with three slightly different outcomes on a price trigger. But the core point is setting and approving a target price at which some transaction or notification is going to be exercised in the future.

If you think price triggers might be a good fit for you or if you just have general questions, reach out to your energy advisor for further details.

As always, thanks for watching, and please comment, like, or share below!

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What Is Your Covid Energy Strategy? – TMT

Video Transcript

So you’re an energy buyer, and you know the market’s at 20-year lows. What can you do with this information?

Determine Your Priority

An important first step is determining your priority. Prior to Covid, we were hearing more from clients about energy strategy, risk tolerance, and budget.

But it seems like overnight we’ve really shifted to a PnL economy, especially for those industries that Sam highlighted as the ones who are hurting. They’re after absolute dollars savings.

So the first step is to determine which bucket you’re in: Cost Savings or Budget Stability. Or maybe you’re in a hybrid, and you want to look at options for both.

If Your Goal Is Cost Savings…

As Mike mentioned earlier, we’re in 20-year lows for both electricity and natural gas. If you’re in that absolute dollars savings bucket, there are different options and energy strategies that we can employ.

Option 1: Sweet Spot

The first is called a sweet spot. Typically, people look at 12- , 24- , and 36-month terms, something that’s structured around a year. But now, we’re seeing a lot of popularity around sweet spot pricing. So maybe a 15- 27-, or 33-month term gleans the lowest rate instead of the typical one, two, or three year terms.

Option 2: Blend and Extend

The second option is blend and extend. Let’s say you have less than a year left on your agreement. Under that scenario, you would engage with your current supplier and, for example, in exchange for adding two years onto your  agreement they’d open up the months left on your current term and lower the cost for you. That provides some immediate rate relief.

Option 3: Strike Price

The third option is strike price. For example, maybe the market’s at 5 cents for electricity, but you really want a rate that’s 4.8 cents. You can ask for an alert to be more aggressive on pricing. If we ever hit that 4.8, we get an immediate notification, and you’re able to take advantage of a volatile day in pricing.

If Your Goal Is Budget Stability…

For those that are still thinking long term and still thinking strategically, you might want to look at longer-term agreements, such as four or five years. We’ve definitely seen a long-term trajectory for clients that are still healthy.

That’s going to depend on credit and a willingness to go that long, but we’re certainly seeing an appetite for longer-term deals in light of where market prices are at.

 

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What Is Swing Percentage? – TMT

Video Transcript

If you watched last weekend’s Masters, you saw some pretty sweet swings out there. If you like Masters Champion Dustin Johnson, some might even say he had 100% swing.

In this week’s Two-Minute Tuesday, we talk about natural gas products and what “swing” means.

What is swing percentage?

Swing is a term used in natural gas products to determine how much you can deviate from your monthly usage. The most common products are 0% swing and 100% swing, but you could do something in between as well.

0% Swing vs. 100% Swing

For 0% swing or a fixed price per therm, your supplier will determine how much you use month in and month out based on historical data. You pay a fixed rate for that monthly quantity. Anything you use over that monthly nomination, you will pay the market rate for. Anything less than that, you will sell back to the market at the market rate.

For a 100% swing product, you pay the same fixed rate regardless of deviations in usage. Let’s look at an example.

Example

Say you use 10,000 therms every November. One November, this goes up to 11,000 therms. You were fortunate enough to lock in a rate of $.25/therm.

On a 100% swing product, you would pay $.25 per therm for all 11,000 therms.

For a typical fixed rate, or 0% swing, you would pay $.25 per therm for the first 10,000. But then you would pay the market rate, let’s say it’s $.28 per therm, for the remaining 1,000 therms.

Which swing percentage is better?

So, which is better: 0% swing or 100% swing.

The answer: it really depends on what you’re looking for and what your long-term strategy might be.

100% swing gives you budget certainty. You pay the same fixed rate regardless of deviation in usage in the coming year. Say you’re expecting increased production, maybe you’re adding new equipment, or you’re very risk averse and you’re worried about the cold winter coming up. 100% swing will give you protection from that.

On the other hand, if you’re not planning any major changes in the coming years and your usage has been pretty stable, a 0% swing product might be the best fit for you. Although there’s a little bit more risk involved with the 0% swing product, you get the advantage of paying a lower rate because there’s no risk premium included in the rate like there is with a 100% swing product.

So,  what might be happening in your facility in the near future plays a big role in choosing the right swing product for your gas needs.

When it comes to natural gas products, channel your inner Dustin Johnson and make sure you choose the right swing. If you need help choosing that swing, reach out to one of our advisors.

Thanks so much for watching! If you found this video helpful, please like, share, or comment below.

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Illinois Utility Rebates for Schools – TMT

This is a clip from our October webinar in which Senior Energy Advisor Becky Thompson chatted with Vanessa Perkins from Resource Innovations about utility rebates for schools.

Video Transcript

VP: I know that a lot of you are dealing with COVID right now as well, and it’s critical for you to have outside air coming in and ventilating through your building. And I know that’s going to cost more money because you’re going to have to heat and cool that air. Every new chunk of air has to be conditioned.

So some ways to have a quicker payback and better ROI is to look at the ways you’re heating and cooling that air and start in that area. Like a boiler tune-up, for example, and making sure your boiler is running at the optimal pace and has the optimal fuel-to-air ratio. Those types of things that might be considered “maintenance” might be covered by the utility programs.

So it’s always worth seeing, even if you’re not doing projects right now, just find out what’s laying around that could possibly be paid for by the utility or subsidized by the utility to help you start saving on costs that you’re experiencing. Especially with the outside air intake.

BT: And that’s such a great point because a lot of my districts are telling me that energy efficiency is low on the list right now. It’s all about student and staff wellness and health and safety. So they’re putting in the MERV filters and all of these kinds of things that are really decreasing their efficiency, and they’re doing it because they have to have a plan to reopen.

But eventually, that’s going to be a substantial cost that the district is going to have to take on. So, if I’m understanding what you’re saying correctly, maybe there’s not an incentive directly for increasing your indoor air quality. But some of the other pieces that affect that that are part of that process you can get money back for, so you can offset that cost so it’s not such a kick in the chin for you.

I know lighting, specifically, if you haven’t already done that it’s typically less than a year payback. And upgrading to LEDs reduces your lighting expenses by 80 percent and increases the efficiency by 80 percent. So within a year, your lights are paid for, and now you can take that money and maybe look at the some of the bigger projects that are maybe lower on the list that suddenly you have the money to fund them.

It’s all about shifting things around and just getting creative with that. It’s really important to know an efficiency program doesn’t just mean a new rooftop unit or a boiler replacement. There are so many ways that these programs operate and tons of money just sitting there ripe for the picking.

The NEA Way — Do What’s Best for the Client

Video Transcript

If you look at my email signature, it includes a quote that says, “As a strategic energy advisor, my client is always my number one priority. Whether it is negotiating the best rate, identifying areas of opportunity, or monitoring the market in preparation for a new contract, the client always comes first.”

This statement is not only what I live by, but it goes hand-in-hand with our NEA guiding principle of “Do what’s best for the client.”

In one of our previous videos, my colleague Mike Zaura talked about the importance of delivering legendary service. To build off that, we can’t provide legendary service unless we are always doing what’s right for the client.

Whether it’s scheduling a meeting after work hours to fit our client’s schedule, giving market updates even if a contract doesn’t expire for another four years, or providing the best option for a company, we have to always be transparent, available, and insightful.

A good advisor puts their client’s needs before their own in order to make them successful. Not only do I know that our entire team does this on a daily basis, but we are constantly collaborating on ways to do this even better. There would be no Nania without our clients, and if they aren’t happy, we aren’t happy.

I could not be more proud to be a part of a team and organization that stands behind strong values the way Nania Energy Advisors does. I know I am always going to do what is best for my clients, and I can guarantee that all my colleagues will as well.

Thank you for watching.

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MOPR Is NOT Someone Who Sulks – TMT

Video Transcript

Hello, I’m Michael DeCaluwe, Senior Vice President at Nania Energy. Have you heard the term “MOPR” recently in energy conversations?

In this week’s Two-Minute Tuesday, we’re going to be talking about what exactly MOPR is and what it means for you.

What is MOPR?

As the title mentions, MOPR is NOT a pessimist who sulks. MOPR stands for “Minimum Offer Price Rule.” 

It’s a new rule created by FERC, the Federal Energy Regulatory Commission, which regulates our regional electricity grids. MOPR only applies to PJM, the electrical grid that includes northern Illinois, Ohio, Pennsylvania, New Jersey, and Maryland.

This rule covers how capacity costs are set in this market. As we’ve mentioned in previous videos, capacity is a reliability cost that is set to make sure that the grid has enough power to cover periods of peak energy use. Think summer days when it’s hot and everyone’s AC is on.

Over the past few years, some states have enacted renewable energy mandates that have provided subsidies for certain types of power generators such as wind, solar, and even nuclear.

Some generators have complained to FERC that the existence of these state subsidies have given an unfair advantage to some in competitive capacity auctions.

In response, FERC ruled that the current model for capacity auctions in PJM is unfair and decided to change it. This new model is MOPR.

What does MOPR do?

Under MOPR, PJM will set resource-specific price floors for capacity bids, meaning that each type of generation resources (nuclear, solar, coal, etc.) will have a minimum price that they must place in the capacity auction.

The first new auction under MOPR will likely take place next spring for the 2022/23 planning year.

What does this mean for you?

For electricity consumers in these areas, this will likely mean higher capacity prices due to the price floors set by MOPR. Capacity currently makes up about 25 percent of electricity costs in PJM but could be much higher going forward.

What can you do about it?

The best way to avoid these higher capacity costs is to limit your peak demands in the summer, starting in 2021. Enrolling in a peak day notification program or doing energy efficiency projects to lower your electricity usage and demand are two ways you can reduce your peak demand values and offset some of this coming price increase.

So although MOPR might make you sulk, there are things that you can do now to help you prepare for its effects.

Hope that you found this week’s information helpful, and please be sure to like or comment on this video.

Thanks for watching!

The NEA Way – Deliver Legendary Service

Video Transcript

As a sales rep, one question I get asked all the time is, “Why are you guys different from other energy providers?”

It is a great question, and rather than give you a sales pitch about our products and services, in this video I thought I’d share the guiding force behind what makes us unique: our culture.

When the reality of working remotely during the pandemic started to settle in for the long haul, we developed what we call “The NEA Way” — 32 fundamentals that capture who we are and what Nania Energy is all about. It drives how we interact with each other, our suppliers, and our clients. It explains why we do what we do, and it’s why Nania Energy is such an amazing place to work.

One of our 32 fundamentals is “Deliver legendary service.” This is all about the experience for you. Make every interaction stand out because of its helpfulness. Create the “WOW” factor that turns our clients into excited fans.

Every person on our team has delivered legendary service in one form or another to our clients. Our Energy Solutions Specialists find answers and resolve problems quickly. As problems inevitably arise, response time and clear communication are what elevate service to legendary service.

Our sales team has a unique process for finding the right product and strategy that fits the short- and long-term needs for your facility. There is no one-size-fits-all approach when it comes to energy, and our team is determined to find an energy solution that helps you achieve your goals — and make the process easy along the way.

Delivering legendary service is one aspect of who we are and what we strive to provide our clients. If you’ve had a “WOW” experience you would like to share with us, we would love to hear it.

Thanks for watching!

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