Business owners who want to swap their old standby energy provider for a newer player in the deregulated Illinois electric power market will find a dizzying array of choices.
Making the right selection can be daunting when there are more than 25 alternatives to Commonwealth Edison Co. for the commercial market, and getting the lowest bid may not always be the smartest way to go, warns Phil Nevels, co-founder of Power2Switch, a Chicago-based startup that offers commercial and residential power customers online comparison shopping between electricity suppliers in Illinois and Texas.
Power2Switch is expanding to New York, Pennsylvania and Ohio this spring. The firm also recently launched a free online electricity comparison widget through the Illinois Chamber of Commerce and the Lakeview East Chamber of Commerce.
(Power2Switch is one of the hottest startups in Chicago’s growing entrepreneurial scene, getting a leg up via Excelerate Labs in summer 2011, and in December garnering a $1.3 million investment from venture capitalists including OCA Ventures, Hyde Park Angels, New World Ventures and I2A.)
About one-quarter of ComEd’s small commercial customers have signed with another provider, and at least 88 percent of the biggest electricity consumers in the state already have taken their business elsewhere, according to the utility. For the remainder that haven’t investigated the benefits of switching, here’s some advice from a local power broker who’s been doing his homework about how to get the best deal around.
Crain’s: What do you tell commercial power users who may be confused about the sudden flood of electricity provider choices they have?
Mr. Nevels: The Illinois Commerce Commission site and the Citizens Utility Board are sources of solid information. Also, visit our site and get educated. When you receive a rate from a supplier, find out what that rate includes. For example, make sure you’re making an apples-to-apples comparison and also make sure that it’s a fixed rate. The No. 1 way people get burned is by signing a variable rate contract. Many other providers engage in multilevel marketing practices, which we discourage, as they incentivize the selling of electricity supply by individuals lacking sufficient knowledge on this space.
Crain’s: If business owners switch to a new power company, what range of discount can they expect to get compared with their current monthly bill?
Mr. Nevels: Businesses can get a 20 percent to 25 percent discount coming off of ComEd. Some businesses switching from another supplier may not see savings that are as dramatic, maybe 10 percent to 15 percent. On our site, businesses can get discounts as high as 30 percent depending on their current supplier, their size and when they lock in rates.
Crain’s: Is there any downside to locking in a multiyear contract with a new provider if the discount looks good enough?
Mr. Nevels: Our customers typically sign one- to two-year contracts. You’ll probably still have some savings even if the rates change a bit. I wouldn’t recommend longer than two to three years because the ComEd rate may be lower than supply rates in 2013, when it makes its next long-term electricity supply purchase.
Crain’s: Some communities are getting discounts from suppliers by aggregating their energy needs with one provider. What’s your opinion of these arrangements?
Mr. Nevels: These are typically opt-out programs, and businesses have a window of time during which they can choose not to participate. They’re not a bad thing, but our site is about giving people a choice of where they get their energy.
In aggregating, someone is doing that for you and doesn’t take into account the preferences of the individuals in the community. One preference might be lowest-cost, and others might want green energy. Oak Park made the decision to be green, but it’s not the lowest possible price. We found some instances where the broker would go out and say they’re getting the lowest rate, but they may have a conflict of interest or better relationship with one energy supplier over another.
Crain’s: If businesses want renewable energy in their mix of power, will they pay a premium?
Mr. Nevels: Depending on the supplier, a consumer can pay a 2 percent to 5 percent premium for green compared to a regular brown plan. But you can be green and still save money if you’re coming off of ComEd and you can decide what proportion of your energy you want to be green. The two major priorities are: Do I want to help the environment or save the most money possible? Most people choose the latter.