Periodically we post information about experiences customers have when purchasing electricity. The following post describes recent lessons learned from customers who are currently buying electricity from a third party supplier. Here we focus on supplier billing verification and tracking.

Verify savings and/or rates

A customer recently asked us to help them switch from an index, or variable rate product to a fixed price. Before we quote pricing for a customer, The Megawatt Hour analyzes the customer’s prior invoices on their current contract to determine whether a new product makes sense or not. Sometimes a customer’s current contract is fine as is– there is no compelling to reason to make a change.

In this case, The Megawatt Hour’s analysis unearthed important information. The customer’s supplier was billing the customer on a variable rate. Marketing materials, and information sent from the supplier after the first month of the contract suggested that the variable rate would generate savings over the term of the contract. When the customer used The Megawatt Hour to compare their supplier invoice to the utility’s tariff and to a market index, they learned that their supplier was charging them significantly more than either a market index or the “what you would have paid the utility” rate and had been for the entire term of the contract.

How do you know if your invoices are accurate, and/or if you’re really saving money?

• If you are on a variable rate, it will be more difficult to validate your invoices than if you are on a fixed price contract. A fixed price is a simple validation, you simply confirm that you are paying the same fixed unit rate that appears on your contract.

It is also worth noting that if you are on a fixed price contract, you shouldn’t count on savings against the tariff rate. You bought insurance, not savings. Nevertheless, if you are curious about how your risk mitigation strategy worked, you should compare the fixed price to the utility tariff and/or to a market index. There are market circumstances when you will see your risk management strategy work very effectively. For example, customers who signed fixed price contracts prior to January 2013 (and who are located in the Northeast) avoided significant price spikes by locking in a rate before January/February 2013. In some areas of the Northeast, customer invoices would have been 50-100% higher if they had been on an index rate in January and February 2013. For most businesses, that kind of price spike is enough to blow a quarterly or annual budget. See this prior post for discussion about recent index price increases.

• In order to verify an index invoice, you need to check your supplier bill against your utility tariff rate and/or a market index rate.

How do you do that? Most utilities publish a rate-class specific calculator for “what you would have paid” if you’d stayed with the utility. The Megawatt Hour tracks the utility tariff rate as well as the market index rate. You should verify a) that you are paying a market index rate that is based on a real, verifiable index; and b) if you’ve been promised savings, check to make sure that you’re receiving a discount below your tariff rate. A recent contract review of a customer’s billed variable/index rate revealed that the customer was paying 20% more than both the market and utility tariff rates.

• Ask your  supplier for details around any suggested savings. As the Public Service Commission’s published Uniform Business Practices state:

If savings are guaranteed, or guaranteed under only certain circumstances, the ESCO must provide a written statement which includes a plain language description of the conditions that must be present in order for the savings to be provided.

Check your contract

If you can’t verify your savings or your rates, or your supplier is not responding to your requests for further information, the first stop should be a thorough review of your contract. The contract will show you what you should be paying, how the supplier will calculate your invoice, what your rate is based on, and how to raise a billing complaint with the supplier.

A supplier may contract with a customer over the phone, over e-mail or in person. It is helpful to maintain flexibility in the contracting process. However, as part of that transaction, no matter the form, the customer is entitled to receive a copy of a contract or sales agreement including the prices, terms and conditions applicable to the customer.

Make sure you have a copy of your supplier agreement on file.

We have heard about a supplier recently who claimed that their customers didn’t need a contract. The contract is there to protect you as much as it exists to protect the supplier. You want a contract. Don’t do business with a supplier unless they provide you with a copy of your supplier agreement. In fact, in most states, if a supplier doesn’t provide you, the customer, with a comprehensible contract, that supplier is not operating in a way that is consistent with the rules of the local utility commission.

Your supplier should answer your questions in a clear way, no jargon

When a customer enters into an supplier agreement, the supplier agrees to comply with the public service commission’s Uniform Business Practices, in which they commit to a code of conduct surrounding marketing and communications. Here is a link to New York State’s Uniform Business Practices document. Suppliers who are licensed in New York State (and most other deregulated markets) have a responsibility to communicate clearly about rates and services with clients, and are supposed to respond to and resolve complaints within 5 business days. What we’ve realized, in working with customers, is that while suppliers are supposed to respond in a timely fashion, sometimes customers don’t know what questions to ask suppliers.

Here’s how to ask your supplier about your invoices and rates.

Here’s how we suggest you communicate with your supplier about your invoices. If you ask these questions, they should provide you with clear, straight forward answers.

• If you have a contract copy in hand, send the section in the contract that dictates how the supplier is billing you, and ask for the numbers connected to each component for at least one billing period.
• If you are unable to verify information that way, send your supplier this message:

Please send me a break down of my electricity invoice from the start of our contract. If a full, comprehensive detail is not available, please send me detailed information for the last three months. Include a detail of usage, and costs including how your company calculated and arrived at the cost of power, ancillary services, capacity, and any fees or premiums. Thank you.

Take the time to verify your supplier bill, at least once in a contract cycle. Errors are more prevalent than you might expect. We have been surprised by the number of billing mistakes that we’ve discovered when we track customers’ invoices against a benchmark. Also, if you discover errors, the process for obtaining a refund should also be straight forward.

Here are a few other tips to keep in mind when you think about your supplier bills.

Bottom line for businesses:

• Verify your bill against a benchmark so that you can validate your purchasing strategy and, more importantly, know that you are getting billed accurately.
• Keep a copy of your contract on hand. Reference it when you have questions.
• Ask your supplier specific questions, and you should get specific, plain English responses.
• If you need help, contact us. The Megawatt Hour platform automatically tracks current costs and compares them to the utility tariff rate as well as a market index rate. We can provide you with a quarterly report that provides you with rate and invoice validation.