Nothing is more frustrating than enrolling with a retail energy supplier on a fixed-rate energy plan to later learn that your utility account has been dropped. As an energy broker, you might have noticed that utility account drops are becoming more and more prevalent in the retail energy sector. This article aims to outline why utility account drops happen, what to do when you get a drop notification, and how to avoid future account drops.
What Are Drop Notifications?
When a customer that is under agreement with a retail energy supplier decides to switch their account back to the utility for default supply, or to another supplier, the existing supplier receives a drop notification from the utility company.
Drop notifications are alerts that the customer has decided to switch their supplier of record. Since local utility companies handle switching between suppliers, all providers are notified when a customer decides to leave.
What Happens When A Utility Account Drops
First, it is important to understand the logistics behind the drop notification you just received from your supplier or broker. When a supplier enrolls a new customer for electric or natural gas supply service, the “switch” is initiated by the customer’s local utility company. In fact, this is how it works:
1. Supplier Notifies the Utility
When a customer signs a supply agreement with a retail provider, the supplier notifies their local utility of the specific utility accounts it will be supplying, and when that supply will commence.
2. Utility Makes the Switch
Next, after the utility receives the requests from the supplier, it initiates the “supplier switch” for the customer’s utility accounts. Whether the customer is currently on utility default supply or with another supplier does not matter. Once the utility receives the switch request, it puts through the order.
Note: If the customer decides to move away from a supplier and back to utility default service, then the same switch occurs. In this case, the switch is from a supplier to a utility.
3. Drop Notification
If the customer was getting service from another supplier prior to switching, then the previous supplier will receive a drop notification from the utility company. The drop notification indicates the specific utility accounts that are being switched to a new supplier, or back to the local utility. This poses a threat to suppliers, brokers, and customers if the customer is still under contract with that supplier.
Types of Utility Account Drops
Utility account drops can be intentional or unintentional. And, the status of a customer’s retail energy contract plays a large role in the consequences of a utility account drop. Let’s explore more about what happens when a utility account is dropped using different scenarios.
Drops When a Customer Is Out of Contract
If a customer has satisfied the terms of a fixed-rate contract or is on a month-to-month agreement with a supplier, the drop notification is a common occurrence.
This drop could trigger when the customer decides to enter into an agreement with a new supplier or return to the utility default price to compare. Either way, the existing supplier gets a notification when the customer’s account(s) are dropping or switching.
If you are an energy broker, your energy brokerage firm that is the energy broker of record on the account should receive a drop notification from the existing energy supplier. A reliable brokerage firm should communicate those drop alerts with the broker so that he/she is informed.
Hopefully, you helped your customer renew their energy contract and you are well aware of the account drop before you receive this notification. Utility drops when a customer’s energy contract has expired should not be alarming.
Drops When a Customer Is Under Contract
If the customer is still under contract with their supplier, however, the drop notification could be problematic. Many suppliers enforce early termination fees and penalties for customers that leave their fixed agreements early. These fees are usually equal to the sum of the total energy remaining on the fixed contract. See more here regarding early termination fees.
There are many reasons why a customer’s account(s) might drop mid-contract:
Energy Fraud: The Customer Was Slammed
Unfortunately, not every retail supplier plays by the rules. There are many prevalent energy fraud and energy scams in the marketplace to avoid.
Some suppliers are notorious for enrolling customers without their express permission. This practice is known as “slamming” in the retail energy sector. In fact, there were many cases in the past of suppliers cold calling customers, tricking them into agreeing to enter into a supply engagement, and slamming their accounts.
Sometimes the salespeople would pose as the local utility, have the customer confirm account numbers, and switch the customer without their consent.
Fortunately, many regulatory bodies have been cracking down on the underhanded methods and have dished out millions of dollars worth of penalties to unscrupulous suppliers.
Whether you are an energy broker managing energy contracts for your customers or an end-user, it is best to follow these tips to avoid falling victim to an energy scam:
- Look for and respond to all notifications from utility companies. The utility will send communications any time an account number changes to a different supplier.
- Call the local utility and ask to be removed from the public utility account list. This list is published and made available to all retail energy companies. Removing your name from the list can help you to avoid unauthorized enrollments.
- Protect your account information. Never give out your utility account information over the phone to people you do not know.
The Customer Changed Account Numbers
If and when a customer’s utility account numbers change, this triggers a drop notification from the utility. Since the original account number is under agreement for energy supply, when it no longer exists, the supplier receives a drop notice. There are several reasons why a customer’s utility account might change:
- The utility issues a new account number
- The customer changes its legal entity name on the utility bill
- The customer’s meter is upgraded
- The customer’s service address is changed
- The account number becomes inactive due to a business closure
In these cases, it is usually quite simple to get the customer re-enrolled on their existing supply agreement providing the broker takes action immediately.
The re-enrolling of dropped utility accounts is one of the major benefits of hiring an energy broker. Customers are busy running their businesses and often do not see drop notification letters from utility companies. When a drop is not responded to immediately, the customer risks losing their fixed rate, and even worse, having to pay early termination fees.
A reputable energy broker will stay on top of these drop notifications on behalf of their customers, and help them to enroll should a drop happen in error.
The Customer Actively Decides to Switch
If the customer decides to switch to a new supplier mid-contract, then the existing supplier will receive a drop notice that the customer is switching.
Sometimes utility companies will even provide the reason for the switch to the supplier. In these scenarios, the customer takes on the risk of having to pay an early termination penalty.
These early penalties can be quite large depending on the size of the business, current market prices, and the price of the canceled contract. Good energy brokers never advise their customers to leave a contract early.
Here’s How To Handle a Drop Notification.
If you happen to receive a drop notification from a supplier or your energy broker, there are several action steps you must take in order to save the customer from receiving an early termination fee. If the customer is no longer under contract, they will not receive an early termination fee; however, taking these steps can help you to save the customer anyway.
1. Contact Your Customer ASAP!
The most important thing is to drop everything you are doing and contact your customer immediately. Drop notifications are time-sensitive. If your customer is under contract with a supplier and did not mean to switch, you can get them re-enrolled on their contract rate in the same billing period. If you wait, you could miss a billing period and subject the customer to price risk.
2. Find Out If The Drop Is Legitimate
Unfortunately, there are some energy brokers and suppliers that do not play by the rules. Some suppliers have received multi-million dollar fines for “slamming” customer accounts. Slamming occurs when a supplier fraudulently enrolls a utility account for supply without the customer’s consent.
Many times, a drop notification can trigger an error – the customer’s account(s) were slammed by another supplier, the customer changed account numbers, or the customer unknowingly agreed to switch to another supplier over the phone.
In all of these cases, the customer can be re-enrolled easily onto their existing supply service.
3. Take the Required Action
Each supplier has a different process for re-enrolling dropped utility accounts. If the drop was not intentional, many suppliers will ask your customer to sign a re-enrollment or re-instatement form confirming their intention to honor the existing contract.
Other suppliers will take the broker’s word for the unintentional switch, while others may want an email from the customer stating their intention to remain on the existing contract.
Pro Tip: Whatever the process might be, it is critical to act quickly. Remember, drop notifications are time sensitive and can be rectified if acted upon in a timely manner.