New Jersey businesses power their way to profits by saving on electricitySavvy New Jersey companies are saving on power costs and protecting themselves against future price increases. More and more corporations are turning to specialized companies like American Energy Savings in Old Bridge, New Jersey that have multiple relationships with a slew of power companies. American Energy Savings advises New Jersey businesses seeking to reduce the price per kWh they pay. They help their clients take advantage of the wider view of the business and multiple power company connections they bring to the table..
At the other end of the spectrum you have a passel of power companies that also offer savings in cost per kWh for power. These companies also bring value to their clients but do not have the infrastructure or motive to offer independent consulting advice to their prospective clients.
New Jersey corporations who deal directly with a power companies will be offered the electricity products that the power company brings to the table. New Jersey based energy management companies like American Energy Savings however are directly accountable to the interests of their clients. They're local and they invariably offer similar pricing to the power companies because they have specially negotiated rates that make them competitive.
Further, sometimes an energy company starts a client of with a good rate that expires at the end of a specific term. Responsible energy management companies alert their clients well in advance and research the best renewal strategy for them. Corporate power consumers who do not renew their contracts are often billed at the default rate by the power vendor, which is some cases leads to higher power prices.
Here is another example of the superior market insight that companies like American Energy Savings can offer:
Socio-economic factors and their possible impact on energy pricing:Recent developments at nuclear power plants in Japan are being watched carefully by American Energy Savings, one of New Jersey's leading energy management firms.
The firm led by Jay Lopatin, a pioneer in the power management field, works closely with NJ corporations and offers its clients a deeper and longer view of power strategy.
Take for example the reading American Energy Savings offers its clients on the current kerfuffle concerning New Jersey's nuclear industry the implications of New Jersey's dependence on nuclear power.
New Jersey (according to Department of Energy in Washington DC) currently generates more than half its power from just three nuclear plants that are located in New Jersey. The Great Garden State, (which at 1,195 people per square mile* is the most densely populated state in the US) also has the dubious distinction of housing the country's oldest nuclear plant (Oyster Creek, built in 1969 and located in Ocean City). Oyster Creek was recently re-commissioned for another term and is now scheduled to be retired in 2029.
The fires and radiation leaks in March at nuclear power plants in Japan are likely to cause some heart searching on whether NJ should retire or re-tool its older reactors.
If even one of these older nuclear plants are retired or taken off-line for maintenance it could strain the North East region’s ability to meet power needs in New Jersey. The resulting increase in power demand on available supply could send the price of power up.
Result: You could see more and more businesses looking for longer fixed term power contracts to protect against that eventuality.
How New Jersey Companies can take advantage of the de-regulated energy market: It makes financial sense for large consumers of power to review competing providers and their prices they offer NJ companies for electricity & gas.There are some 36 approved utility vendors to date in New Jersey. Some offer both electricity & gas. Others offer one or the other. A few also offer consulting services for the reduction of energy consumption.
The problem for most companies who look to save on their energy costs is that they do not have the specialized expertise to evaluate the claims of various competing power companies.
Each company utility naturally pushes its own product and pricing.
Consulting is Key:A few consulting companies like American Energy Savings LLC (
www.aesavings.com) are therefore well positioned to partner with companies who are looking at potential savings of 20-30% per year if consumption savings and unit cost savings are taken into account. Savings of the kWh price alone could be between 10 & 20%.
These energy management companies are also able to explain to clients about the different ways electricity can be purchased as well as what to watch out for.
Pricing Models for purchasers of power: 1. Fixed term/Fixed Price: Wholesale energy prices in NJ are always fluctuating. Companies that want to hedge against fluctuations and have a predictable price for their utilities pick this method of buying electricity.
Terms Periods Available: Fixed energy contracts usually range from 6 months to 24 months. Power companies offer them by contracting to buy specific quantities of power at specific prices.
Generally longer term contracts will cost more per unit. A very few offer much longer periods with at least one company offering a 5 year fixed price/fixed term product.
Penalties for early termination: A client that wants to get out of a fixed term contract typically has to pay a penalty. This is often calculated in one of two methods:
- A flat or monthly cost recovery fee or
- The estimated amount of gas/electricity that would have been consumed during the remainder of the Term multiplied by the excess in price (if any) for the remainder of the contract. Some companies estimate the amount of utilities that a client is likely to need and charge a penalty fee to their customers if there is significant over or under usage from that estimate.
They do this because they have committed to purchase a fixed amount of power for a fixed term at a fixed price. Changing the quantity purchased exposes these utilities to the vagaries of the month to month wholesale power market.
2. Month to month purchase of wholesale energy. This wholesale price includes estimated line losses and state service taxes as well as a price margin for the power supplier. Here the customer pays the average month to month price of electricity as it rises and falls based on demand and supply.
There are sometime savings that can be achieved by this method for much of the year because this way the customer does not have to underwrite the cost of purchasing energy futures to hedge against the possible rise of month to month prices.
Month to month prices are particularly vulnerable to price increases during times of the year when energy consumption (and hence demand) is high.
Next Steps for New Jersey Businesses who are looking to save on the supply component of their power bills.1. Round up 12 months of your electricity and gas bills and send them to a reliable and experienced energy management company to analyze them (at no cost to you).
2. The management company should then (having understood your needs), put together a custom proposal for you after studying the pricing available from a panel of pre-screened utility companies. Since the management company usually has a prior track record with these utilities it could obtain for you planning and pricing that you may not receive if you tried to do this yourself.
3. You sign and send in the proposal/contract and fax it back. Your service will switch without interruption in 3 to 6 weeks (to catch the next billing cycle you should typically send in your signed contract 18 days before your next meter reading).
4. You watch the saving pile up and then begin working on reducing your actual consumption of power which is a longer term but equally or more rewarding process.
Bottom-Line: Power Management is a great way to shore up a company's bottom-line. Unfortunately many companies that could be saving large amounts of money are not taking advantage of opportunities in this area.
Disclosure: Biz4NJ is a business development consulting company. In that context Biz4NJ provides strategic consulting and business development support for American Energy Savings after having done the due diligence on their capabilities. For this reason Biz4NJ has chosen not to interview any other Energy Management Companies in the preparation of this report.For more information on how American Energy Savings & Biz4NJ can reliably reduce your energy costs please email P.Philip@aesavings.com or call 732-553-8118 x 1107 Sources:
Percentage of NJ power that comes from nuclear energy:
Department of Energy:
http://www.energy.gov/newjersey.htm
Short resume of Jay Lopatin, CEO of American Energy Savings:
http://www.aesavings.com/html/founders.php
* Population density figures for New Jersey are from the 2010 census.
Population density figures for the US are less than 1/10 of New Jersey at around 86 people per square mile.
