PowerOptions Continues to Successfully Navigate the Competitive Waters

By Cynthia A. Arcate 9 October, 2013

Fifteen years ago, PowerOptions launched the first competitive offerings for electricity and natural gas in the newly deregulated energy market in Massachusetts. Recently, we announced the award of our newest electricity program offering through 2019. This is our sixth open solicitation since we were founded and, as with each previous offering, it reflects the robustness of our evaluation with new pricing and opportunities for our members. We just keep getting better at this, and here’s how I know:

First, we received more bids than in previous solicitations, and the bids were from the biggest players in the region. Also, the pricing was extremely close. Any one of them could have handled our program, although only one cleared the bar for our high standards for service, low price and favorable terms and conditions.

I believe the robustness of our solicitation is a reflection of the desirability of being the supplier for PowerOptions members, but I know it’s more than that. The market is very tight. Margins are very thin. Suppliers see our program as an opportunity to make money on volume with lower customer acquisition costs. What’s making the business so tight? Why is it more competitive today than three years ago when we did our last solicitation? The one answer we got from suppliers is that there are more players in the market – largely brokers and consultants who have changed the game, but often not all for the good.

Consultants and brokers play a vital role in helping customers navigate the marketplace and secure a good deal. But some do what is expedient for them rather than what is best for the customer. Often consultants and brokers require their customers to sign agreements where customers can be locked into deals by the consultant or broker, and have evergreen provisions that allow the consultant to do it repeatedly with minimal or no customer consent. A fairly recent Massachusetts Supreme Judicial Court case upheld a broker agreement even though the school district was locked into a long term deal significantly over the market price, and the district had virtually no opportunity to withdraw from the agreement.

The terms of the consultant/broker agreement with a customer should be very well understood by the customer, particularly a non-profit or public sector customer. Similarly a non-profit or public sector customer should be well aware of the reputation of the broker or consultant they may hire as the broker/consultant’s reputation will ultimately be reflected back on the public sector or non-profit customer.

From our perspective, we are also seeing potential customers of PowerOptions’ electric and gas programs allowing advisors to dismiss as unimportant the strong customer protection terms and conditions we secure for our members. These are dismissed in exchange for tenths or even hundreds of a cent savings in a contract. As we all know, those savings can be wiped away in a second with one instance of passed-through market costs or costs of regulatory changes imposed on suppliers. It’s easy to look good in a down market. Our fear is that low prices of late have created complacency among customers about the terms of the deal. But wise customers remember the days of overnight price shock from natural disasters (Katrina) and geopolitical events (Middle East).

For those reasons, we will not sacrifice steadfast adherence to protecting our members in our supply contract, and our reputation to deliver a good deal at a good price while ensuring predictable reliable competitive supply.

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