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FAQ: How Can I Spot an Energy Scam?

By AJ Brockman

In 2018, there were 63,626 reported cases of utility fraud in the US.

Can you imagine what that number would be if everyone reported every single energy scam they experienced?

Unfortunately, energy scammers typically target residential users. But even though you’re a commercial or industrial energy consumer, you’re not immune to scam attempts.

Here are two common energy scam attempts you may have experienced (or, sadly, might at some point):

Scam #1: Phone Call/Email from a Fake Energy Company

When someone calls you saying your power or gas is going to be shut off unless you pay ASAP, your heart races and your brain goes 100 miles per hour. “Did I forget to pay my bill??”

Chances are: No, you didn’t.

But these scammers operate on fear and knee-jerk reactions, which are powerful responses.

Luckily, there are a few ways you can spot this type of scam. Keep an eye/ear out for:

1) “Your service will be shut off immediately…”

That’s never the case with utilities or third-party suppliers.  If you’re behind on payments, they’ll send you an initial notice that contains your overdue balance.

If you’ve missed so many payments that your account could actually be disconnected, your utility or supplier will send you a formal Notice of Disconnection (typically mailed to your facility) that includes an estimated shut off date and time.

2) “…unless you submit payment in the form of gift cards/prepaid debit cards/money wire/PayPal/Venmo.”

These aren’t standard payment methods for utilities or suppliers.

3) Vague details about your “contract.”

A scammer will most likely say something close to “when your contract expires in a few months.” If they’re calling from your current supplier or broker, they should be able to tell you your exact contract end date (ex. November 30, 2019). If they can’t give you specifics, don’t trust them.

If you’re supplied by your local utility, you don’t have a contract in place. Therefore, it’s a scam.

Scam #2: Slamming

Slamming is when someone claiming to work for an energy company switches you to a different supplier or signs you up for third-party supply without your consent.

It’s not as common for C&I customers as the phone and email scams. But it’s been happening so frequently in the residential space that some states — including Maryland and Illinois — are cracking down on shady suppliers.

Do brokers and consultants slam?

If they have good business practices, no.

Although brokers and consultants can help you switch suppliers, they’ll never sign a contract on your behalf. And they won’t put you with third-party supply without your knowledge.

They’ll usually ask you to sign a Letter of Authorization (LOA), which allows them to receive pricing and usage information for your account. But this doesn’t give them permission to sign contracts for you.

How To Protect Yourself From Scammers

1) Know your account status.

  • If you’re currently under contract with a third-party supplier, who are your with? When does your contract expire?
  • Are you up to date on your payments?

2) Check the URL of the email address or do a reverse phone lookup.

  • A quick Internet search of the URL (after the “@” in an email address) should pull up the company’s website if it’s legitimate.
  • If people have received spam attempts from number in question, you’ll most likely find it reported online.

3) Ask about an LOA.

  • Brokers and consultants should ask you to sign one, and in some states it’s a requirement.
  • But look over the LOA’s language carefully to confirm it doesn’t allow them to sign contracts on your behalf.

4) If you’re still not sure, check with your broker/consultant/supplier/utility.

  • They’ll tell you if the call or email came from them.
  • And if it didn’t, they’ll help you report it.

It can be scary (not to mention annoying) to receive an energy scam call, and these days they’re harder to identify. Keep these warning signs and tips in mind the next time you receive a call from an unknown number.

Ask An Advisor: What Is Your Risk Tolerance?

 

Video Transcription

Hi! I’m Mike, and I’m a Senior Energy Advisor here at Nania Energy Advisors. One question we get asked all the time is: “How do I go about choosing the right energy product?”

In today’s video, we’re going to discuss one of the first factors to consider when choosing an energy product. And that is: Risk Tolerance.

4 Levels of Risk

When it comes to choosing an energy product, it’s not “one size fits all.” Fixed all-in isn’t always the best choice for everyone.

Each product type comes with its own level of risk. On our website, you can take a survey which will determine your organization’s energy risk tolerance. Based on those results, you’ll be classified into one of four risk tolerance levels:

  • Low
  • Mild
  • Moderate, or
  • High.

Low

So let’s talk about each level. The first is Low. If your organization has a low risk tolerance, we recommend a fixed all-in product. And here’s why:

  1. You probably have to adhere to a pretty strict budget. You want to have a pretty good idea of what your monthly energy spend is.
  2.  Having the same fixed rate makes budgeting and accounting easy from month to month, with little or no involvement from you.
  3. You can set it and go. You choose a rate, and you can rest easy knowing that there won’t be a big change in your rate despite a change in usage.

So, if you have a low risk tolerance level, look for a fixed all-in product.

Mild

The next level is Mild. For customers with a mild risk tolerance level, we recommend a managed product.

If you have a mild tolerance for risk:

  1. You can afford to go 10% over budget without major consequences.
  2. If you enroll in a managed product through a supplier, they’ll lock different portions of your usage every month until 100% of that volume is locked. They use market opportunities and logic in order to determine how much to lock and when.
  3. It’s another set it and go option. You don’t need to be involved in the process.

So, if you have a mild tolerance level for risk, consider a managed product.

Moderate

The third level is Moderate. If you have a moderate risk tolerance level, then a layered product might be a good fit for you.

Moderate risk tolerance means:

  1. You’re not a budget-driven organization.
  2. A layered product is different from a managed product by involvement level. With a managed product, the supplier makes all the purchasing decisions for you. With a layered product, you need to be actively involved in the buying process so you can decide when to lock.
  3. And, you need to actively monitor the market to decide when the best opportunities are.

So, if you have a moderate risk tolerance and the time to devote to the energy buying process, look into a layered energy product.

High

Our last risk tolerance level is High. An index product is a good option for you if you have a high risk tolerance level.

You most likely:

  1. Have little to no budget
  2. And you’re comfortable with market fluctuations. You can survive the extreme upticks of the market.
  3. Although an index product does not require you to lock, you should remain alert and be ready to act should an opportunity present itself in the market.

So, if you have a high risk tolerance, an index product might be a good fit for you.

Other Factors to Consider

Risk tolerance isn’t the only factor you need to consider when choosing an energy product. Other factors to consider are:

  • How much is your annual spend on energy?
  • Do you have any energy efficiency projects planned?
  • And how much time do you want to devote to monitoring the market?

Use this video and our survey as a guide, but please consult with an advisor or broker for a more detail conversation on choosing an energy product. Keep an eye out for a future video when we dive deeper into the 4 types of energy products.

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Pros & Cons of an Index Product

By Michael DeCaluwe

Occasionally I will get asked about what is a better energy solution — fixing energy or selecting an index product.

Answering that question involves both understanding what an index product is and knowing your specific energy needs and risk tolerance.

What is an index product?

On an index product, your energy rate fluctuates with the market and varies month to month. Your monthly electric rate is based on an hourly rate published your regional electric grid operator.

The utility’s meter takes hourly reads of the amount of power consumed,  and the hourly quantities are charged at the grid operator’s hourly rate. This is your indexed power rate.

Index power rates are typically low at night and during the spring and fall. Rates are higher during “peak” usage hours (8AM-5PM) and during summer and winter when energy demand is at its highest (for heating and cooling needs). Your electric invoice is the total of all these hourly costs for the month.

Are you a good fit for an index product?

An index product is a good choice if you can tolerate volatility or if energy makes up a small portion of your operating costs. Over time, index energy costs have historically been lower than fixed costs because there are no supplier risk premiums built in.

You could also benefit from an index product if you can shift your load to off-peak times. You could take advantage of the lower off-peak hourly rates.

Lastly, if you have a pending energy efficiency project or load management upgrade, consider choosing an index product until the project is completed. Then, you can lock the lower rate that could result from the project.

What’s the difference between being on an index product with a supplier and being with the utility?

If you’re not under contract with a third-party supplier, then you are receiving your electricity directly from the utility. Some utilities offer an hourly index supply rate.

However, there are several differences between the utility’s index product and a supplier’s:

  • A supplier’s index rate (Day-Ahead) can be less volatile than the utility’s (Real-Time) based on the types of indices they use. In some hours, this difference can be as high as 20%.
  • The utility could be socializing non-energy costs, which would increase your index rate.
  • The utility must accept all customers into its programs, while a supplier has credit thresholds.
    • In some markets, customers on utility supply may end up paying for receivables from uncollected supply costs.
  • If a company ever wanted to fix a portion of their future load, the process would be easier if they were already on an index product with a supplier.

If none of these issues are a concern, then the utility could be a good option for you.

Is there more or less risk with an index product?

Although an index product for power has historically been less expensive than a fixed product, it is not risk-free.

For example, during the polar vortex in January and February of 2014, utility index rates were as high as 4-5 times the average price of energy for these months.

Can you take the risk of having your energy costs be 30-40% over budget? Most energy buyers say they can’t take that risk, which is why they typically select a fixed product.

Also, an index product doesn’t give you the ability to budget for energy expenses. For budget-conscious organizations, an index product is not a good choice.

Index at your own risk.

Index energy solutions can be a good fit for some energy consumers. However, you need to know both the benefits and the risks that come with them. The decision to select an index product should be part of a long-term strategy rather than a short-term gamble to save on energy costs.

Please comment below with your questions and thoughts, and feel free to contact me directly if you’d like to hear more.

 

About the Author

Michael is the Senior VP of Commercial & Industrial Sales at Nania Energy Advisors, where he as worked since 2007.       He believes that listening to and understanding clients’ energy needs is vital to becoming a thought leader in the industry and forming a mutually beneficial business relationship. In his spare time, Michael enjoys being a dad, staying active, and playing basketball.

Michael can be reached via email at mdecaluwe@naniaenergy.com or via phone at (630) 225-4552. Click here to follow him on LinkedIn.

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FAQ: Are Energy Brokers Crooks?

By AJ Brockman

Some C&I energy purchasers are wary of working with energy brokers because they’ve been burned in the past.

Prospects have expressed these fears about working with a broker:

  • “Brokers favor some suppliers over others and don’t give you ‘true’ numbers.”
  • “They don’t give you a true apples-to-apples comparison.”
  • “Brokers aren’t transparent about their costs.”
  • “They’ll make you terminate your current agreement early and leave you with thousands of dollars in early term fees.”
  • “Brokers double-dip. They’re getting paid by the supplier and still charging you a direct fee.”

Unfortunately, energy brokers are getting a bad rap due to a few bad apples. And as a result, some energy purchasers are choosing to use their local utility as their supplier.

However, not working with an energy broker could cause you to miss out on the benefits of a deregulated energy market.

“I had a terrible experience with a broker after we reviewed their rate vs. the utility. How do I know another broker won’t do the same?”

Here are a few signs that you’re working with a “good” broker:

1) They’re completely transparent with you.

Your broker should answer questions such as “How are you paid?” and “What are your costs?” without batting an eye.

2) They give you honest, straightforward pricing results.

The components included in an energy product vary by supplier.

For example: Supplier A’s “Energy Only” product could include Energy and Capacity charges. Supplier B’s “Energy Only” product could have Energy, Capacity, and Ancillaries included.

Your broker should communicate these differences to you and give you a supplier comparison that’s as apples-to-apples as possible.

Similarly, they should tell you the pros and cons of each supplier and recommend the supplier that best fits your needs — even if they don’t have the lowest rate.

3) They don’t tell you to terminate your current agreement before it expires.

A good broker will NEVER advise you to terminate your energy agreement early — even if today’s market is lower than your current rate.

Early termination fees can be detrimental to your budget and difficult to reconcile.

Your broker should only give you pricing that’s effective after your current agreement’s expiration date. And they’ll ensure that your switch to a new contract is clean and has no additional fees.

Good brokers are out there.

Don’t let one bad broker experience keep you from working with someone new. It’s important that your broker meets your energy needs and works with vetted suppliers that do the same.

Use our Advisor/Broker/Consultant Evaluation Checklist to determine if your current broker is right for you.

 

Energy Broker vs. Energy Advisor

By AJ Brockman

In the video above, we shared with you the three main differences between an energy broker and an energy advisor.

Regardless of who you choose to work with, your advisor or broker should perform specific functions to ensure you’re getting the information and assistance you’re looking for. Below are 5 questions you can use to evaluate your current energy professional.

Does your current advisor or broker…

1) …perform bill audits?

A good energy advisor or broker should perform complimentary bill audits, especially when you sign with a new supplier or switch products. They should check that your invoice are formatted correctly and contain your contracted per-unit rate and product.

If any of these are incorrect, will your current energy professional work with the supplier to fix it?

2) …send you newsletters or post blogs?

The energy industry is constantly evolving. It’s important you stay informed on energy news and changes in law that could impact your facility.

Does your energy professional send you market updates in a monthly newsletter or blog?

3) …serve all C&I customers?

If you have facilities in multiple cities or states, it’s in your best interest to work with someone who can service your entire portfolio.

Can your current advisor or broker serve all utility rate classes in all deregulated states based on state requirements?

4) …monitor the market?

The energy market changes day by day and hour by hour. An experienced advisor or broker realizes this and actively monitors the market, notifying you when it’s the best time for you to lock in a rate.

When did you last receive a market update?

5) …proactively contact you about renewing?

This goes hand-in-hand with monitoring the market. Waiting to look at renewal rates a couple of months before your contract expires doesn’t give you much time to:

  • review your energy strategy,
  • time your purchase, or
  • get multiple pricing offers.

Has your current advisor or broker contacted you about renewing your contract — especially if it expires in the next 6-9 months?

Evaluate your energy professional.

There’s a lot more you should expect from an energy broker or advisor than just giving you a low rate. Does your current energy “guy” meet these criteria and your needs? Use this checklist and see for yourself.