"ESCOs"

[Noob]

In learning about solar I've been heeding the advice here to first conserve energy and examine one's own bills.

In New York, 3rd party energy "suppliers" are called ESCOs, as distinguished from ConEd itself, which normally does both "supply" and "delivery" of energy.

There are DOZENS of these 3rd parties, who spend most of their time knocking on doors and sending mailings, often pretending to be from "the electric company" and informing us that we've been overcharged.

It has every trapping of a complete scam (in the way that most of them operate) but more importantly, is it remotely worth the bother?

Based on some quick Googling it seems that ConEd itself is usually at LEAST as cost-effective as any of the other "suppliers".

The official site is poweryourway.com , and I note that a more consumer oriented tracking site called poweryourway.org tried to maintain a list of cost effective ESCOs but gave up in 2009 saying that one should just stick to ConEd. I'm inclined to believe them.

1. Is there any real purpose of these ESCOs other than to provide the APPEARANCE of deregulation and antimonopoly?

2. Does anyone ever reliably save money by using an "ESCO" instead of just paying ConEd?

3. How does this actually WORK, and what do these shell companies actually DO? All the billing, all the energy "delivery", and all the maintenance CONTINUES to be provided entirely by ConEd!

As far as I can guess, it's all just back-end bookkeeping and these things are nothing but boiler-rooms...

FYI these companies handle both electric and natural gas.

Any advice from you old hands is appreciated.

[peakbagger]

The acronym is used rather broadly.


ESCOs frequently assist firms and government entities with implementing energy reduction projects that the entities either cant afford to implement or dont want to as they need to emply capital elsewhere. An exmapl is a school with a old inefficient heating system, the ESCO installs a new system on their own dime and get paid back by the difference in heating bills. The school doesnt have to go to the voters but then end up with a new more reliable heating system. In order to take advantage of many tax credits commercial entities need to be making profits so they can use the tax credits, if they arent making money they dont get the credit, so an ESCO can step in and set up a structure so that the ESCO gets the credit and the manufacturer reduces their costs.

The ESCOS you appear to be discussing are electricity suppliers, most buy blocks of power contracts on the forward market and resell the power to smaller users. Utilities are typically not allowed to compete directly with these firms in a deregulated market but they do usually have to offer a "default" rate which is the rate that someone would get if they dont choose. It is generally higher than the rates offered by third parties. Unfortunately there is another sometimes shady group that tries to get folks to sign up with a specific energy supplier in return for a kickback or commission. Somewhat like phone "slamming" they will do whatever they have to con someone into signing up with a specific supplier that may not be the best price for the consumer. In some cases the energy providers are intentionally set up to charge very high rates or have other surprises for the unwary consumer. In many areas with competitive power, some entity usually nonprofit will act like Consumer Reports and compare all the offerrings and make recomendations. In NH, there is one sleazy firm that blankets every phone number in the state with calls from fake numbers trying to get folks to switch.

Do note the utility still does the billing and they charge a fee for transmission and overhead, the only thing the electrcity suppliers are doing is selling you power. CON ED would much rather do both but with deregulation they cant and arguably havign competition for energy suppliers drvies the price down as they have to compete where in CON ED doesnt.

[Sunking]

It is an attempt at De-Regulation. Here in TX we are De-Regulated and the secondary suppliers are usually much less expensive then the generators like TXU.

It does sound crazy but here is how it works in TX. All the power is generated, distributed, and metered by TXU. However the optional suppliers buy the power used by the homeowner or business at Wholesale. TXU reads the meter and bills the Delivery service at Wholesale prices. Then the Delivery service bills the homeowner at a retail rate. What is odd is if I deal directly with TXU as my provider they charge me roughly 10.5 cents per Kwh. However I use Champion Energy and they charge me on my new contract I renewed last month for 8.57-cents per Kwh locked in for 3 years. Prices have gone down in TX since 2008 and expected to continue to go down for the next several years.

So the secondary providers are just middleman buying at wholesale around 5-cent per Kwh, do all the paper work, billing, and assume the risk for a nice little 50 to 75% profit reselling at retail. Everybody wins.

[Noob]

It is an attempt at De-Regulation. Here in TX we are De-Regulated and the secondary suppliers are usually much less expensive then the generators like TXU.

It does sound crazy but here is how it works in TX. All the power is generated, distributed, and metered by TXU. However the optional suppliers buy the power used by the homeowner or business at Wholesale. TXU reads the meter and bills the Delivery service at Wholesale prices. Then the Delivery service bills the homeowner at a retail rate. What is odd is if I deal directly with TXU as my provider they charge me roughly 10.5 cents per Kwh. However I use Champion Energy and they charge me on my new contract I renewed last month for 8.57-cents per Kwh locked in for 3 years. Prices have gone down in TX since 2008 and expected to continue to go down for the next several years.

So the secondary providers are just middleman buying at wholesale around 5-cent per Kwh, do all the paper work, billing, and assume the risk for a nice little 50 to 75% profit reselling at retail. Everybody wins.

That sounds great but I DON'T think it works that way in NY. It doesn't sound as if anybody's willing to lock in anything, and as I said ConEd still does all the "paperwork and billing" as well as maintenance. And I don't know if anyone's saving any money. (The NY Times article indicated they probably don't.) But I also haven't gotten a bunch of bids, either.

At least it makes some sense that the energy is bought in batches "wholesale". It's still crazy, but there's a logic to it. So thanks!

Thanks for the explanations. Now I have to figure out how they "deregulated" gas delivery too. Same nutty principle, I guess. It really seems like a huge waste all around -- if they instead had merely been regulated HARDER, rather than deregulated, all those levels of profit absorbed by these scores of middlemen could have been forced back into consumers' pockets.

[peakbagger]

If you wanted logic, it wasnt the right question to ask.

[Noob]

If you wanted logic, it wasnt the right question to ask.

Yeah.

I found a very good discussion at http://www.fatwallet.com/forums/finance/1160858/ that reaches more or less the same conclusion -- don't bother. People there identified two or 3 legitimate providers out of the dozens and dozens of near-scammers and MLMers in this market (how in hell is that allowed to continue?), and those happened to be owned by real power companies, but even then the savings were not there in the end.

Still might be worth watching "Energetix" and "ConEd Solutions"...

But... Energetix only serves Bronx and Queens (and Yonkers)?

And... "ConEd Solutions" wants to charge 10.80 cents/kWh (11.8 for "Green" and 13.3 for "Wind") on supply charges.

But my recent regular, ordinary ConEd bill showed a supply charge of 7.0979 cents/kWh.

What... the.... ?

[bonaire]

In SE PA, we have PECO as a supplier. They seem to indicate that if you do a solar pv grid-connect, you have to stay with them rather than switching to another "provider" (or basically, a "biller").

We get mail all the time about switching rates. Usually it is a half cent less compared to PECO. And, PECO controls distribution and they charge .06/kWh for distribution while the biller is only discounting the generation value a bit. They give the discount for one year. Then, you may or may not see something similar to your original PECO rate. So, "why bother" is more or less happening in PA as well.

[inetdog]

In SE PA, we have PECO as a supplier. They seem to indicate that if you do a solar pv grid-connect, you have to stay with them rather than switching to another "provider" (or basically, a "biller").

My guess is that the billers are not required by state law to provide net metering and have naturally decided not to do it, since there is no money in it for them.

You can't have net metering if you buy from the biller and sell back to PECO.

[Noob]

My guess is that the billers are not required by state law to provide net metering and have naturally decided not to do it, since there is no money in it for them.

You can't have net metering if you buy from the biller and sell back to PECO.

Hey, that's kind of a huge "caveat" for grid-tie solar prospects, isn't it? It should be part of a FAQ or primer or something -- DO NOT use an ESCO/3rd party electric supplier if you expect to get two-way net metering?

I wonder how it works with Sunking's provider.

[Sunking]

I wonder how it works with Sunking's provider.

We have no Net Metering Laws in TX. That i sone of the reasons energy is so cheap here. The various utilities have various policies with respect to RE systems. Coops and other small companies do not allow any grid tie period and is out of the question. Most that do allow grid tied systems use two meters or a smart meter. In those circumstances The POCO pays wholesale for what you generate like 5-cents per Kwh, and charge you 10-cents for what you buy. Net is they always make money off your system. That is the way it should be.

The only area in TX with Net Metering Laws is the Left Coast Island of Austin. Poin tis if you rstate or area has net metering laws means everyone is paying higher artificially inflated electric rates. When state or local regulators put Net Metering Laws into effect, they allow the utilities to artificially raise electric rates on everyone to cover for their losses. Basically it is for WELFARE for the affluent who can afford the systems in the first place without subsidies from the working and poor class.

What really sickens me is folks who have to take out a loan to pay for their systems. They have been brainwashed into thinking they are saving money. If only if they knew how money really works, they would know better. Eventually they figure it out when they realize their monthly loan payments plus the bill from the POCO totals more than they were paying before. By then it is too late SUCKER.

[Noob]

We have no Net Metering Laws in TX. That i sone of the reasons energy is so cheap here. The various utilities have various policies with respect to RE systems. Coops and other small companies do not allow any grid tie period and is out of the question. Most that do allow grid tied systems use two meters or a smart meter. In those circumstances The POCO pays wholesale for what you generate like 5-cents per Kwh, and charge you 10-cents for what you buy. Net is they always make money off your system. That is the way it should be.

The only area in TX with Net Metering Laws is the Left Coast Island of Austin. Poin tis if you rstate or area has net metering laws means everyone is paying higher artificially inflated electric rates. When state or local regulators put Net Metering Laws into effect, they allow the utilities to artificially raise electric rates on everyone to cover for their losses. Basically it is for WELFARE for the affluent who can afford the systems in the first place without subsidies from the working and poor class.

Thanks... so it's a non-issue for you. But in places where there IS net-metering, people should probably refrain from ESCOs?

What really sickens me is folks who have to take out a loan to pay for their systems. They have been brainwashed into thinking they are saving money. If only if they knew how money really works, they would know better. Eventually they figure it out when they realize their monthly loan payments plus the bill from the POCO totals more than they were paying before. By then it is too late SUCKER.

That's why I raised the question in a thread about leasing. If there's no money down, and the KwH rate is locked in, what's wrong with people leasing and immediately taking $100/month or so off their total power costs? Just the credit hit?

[peakbagger]

Utilities typically lose money on net metering. They were forced to offer it by state governments. In return for offering it, they are allowed some sort of way of recovering the loss. This could be a system benefit charge or just plain a direct charge to the rate base. As long as net metering is a low percentage of their customers all the other customers dont complain. Alternatively a country can decide to do what spain did which is owe the utilities directly and not have the customers pay. Spain is currently in the hole for billions of solar subsidies and Germany also is. They both realize that if they had all the other customers pay the outrageous solar subsidies, the primary custoemrs would revolt or they would watch their industrial base head offshore

An ESCO isnt regulated to the same extent as a utility is so they have no interest in net metering. In most states with Renewable Portfolio Standards, they do have to comply with suppling renewable power as a certain percentage of their supply. Most just buy into cheap merchant power and buy RECs. to meet their minimum percentage.