Preparing Energy Price Quotes To Achieve Success

So you have a customer who wants to sign up with a supplier, and now you need to present a price quote. Preparing and presenting energy supply quotes are the foundational tasks performed by retail energy brokers. And, in order to do this properly, there are many concepts to grasp. From LOAs and LOEs to wholesale electricity pricing, here are the do’s and don’t of properly presenting supplier prices to your customers.

Comparison Of Energy Suppliers

First, it’s important to show a true apples-to-apples comparison of all supplier and utility quotes. Some suppliers will quote prices without taxes and other components, while others will quote “all-in” rates. Detailing the specific components of the price quote is always a good idea so your customers truly understand their options. Here is a simple chart outlining how you could present multiple supplier quotes:

In the example above, Supplier B appears to have a cheaper rate due to the constrained swing or bandwidth requirement. It is important to list out the major contract terms that might affect the price.

Energy Contract Details

Another key element you want to highlight in your quote comparison is the major differences between each supplier’s energy contract terms. It’s important to be able to decipher the energy contract language so that you can explain it to your customers in layman’s terms. Be on the lookout for energy bandwidth clauses, early termination fees, contract renewal terms, and hidden energy pass-through charges.

Electric Load Factor

Some customers that have poor load factor ratings might be wondering why their price quotes are higher than their neighbors. Another element of your price comparison should include the customer’s load factor rating. You can usually get this information from the retail electric supplier(s) providing the quotes. If the customer’s load factor is low, this presents a great opportunity to explain your energy efficiency solutions, help your customer understand the calculation of their business energy consumption, and even talk about developing an energy efficiency strategy for the future.

Load factor directly impacts pricing due to capacity costs in fully-bundled fixed prices. Because suppliers must spread a customer’s capacity cost obligation across all annual kilowatt hours (kWh), the ratio of capacity cost to annual kWh plays an important role. Let’s look at two examples below:

Customer A

• Annual Capacity Obligation: $100,000 (~1 MW capacity tag)
• Annual Usage: 5,000,000 kWh
• Capacity Cost / kWh: $0.02/kWh
• Load Factor: 57%

 Customer B

• Annual Capacity Obligation: $100,000 (~1 MW capacity tag)
• Annual Usage: 3,000,000 kWh
• Capacity Cost / kWh: $0.033/kWh
• Load Factor: 34%

Customer A and B have the same capacity tag of ~1 MW, totalling an annual capacity cost contribution of $100,000. Customer A uses 5 million annual kWh and Customer B uses 3 million annual kWh. Customer A, has a greater load factor rating due to its annual kWh usage in relation to its capacity obligation. Because capacity costs are spread out over total kWh, Customer A qualifies for a less expensive supply price than Customer B.

Utility Price To Compare

It is also important to inform your customers of the local utility price to compare. In most deregulated energy markets, the utility price to compare is the default service rate should a customer elect to remain with the utility company for energy supply. In Texas, customers must choose a retail supplier, or be placed on the supplier of last resort’s pricing.

Utility rates typically fluctuate up and down with the energy market. In some states, these rates change monthly, while in others they change quarterly or semi-annually.

It is important to always know the current price to compare so that you can inform your customer of his or her options. In rare cases, it might make sense for the customer to remain with the utility. In other cases, this is a great way to display value and savings when comparing supplier rates to local utility rates.

Pro Tip: Remember, you are typically offering your customers a 12, 24, or 36 month fixed-rate contract with a supplier. It is unfair to compare the current utility price to your 3 year agreement. A better way to make a true comparison is to look at historical utility price averages.

Pro Tip: Some utility companies do not post a standard price to compare for all rate classes, but rather publish a monthly, individual price to compare for each customer based on their specific load. In these scenarios, you must obtain twelve months’ of billing statements from your customer to accurately calculate a weighted average price to compare.

Pro Tip: Most utility prices to compare lag the current market due to utility procurement rules. If the price to compare seems abnormally low (or high), it could be that future prices will be adjusted to represent accurate market conditions. It’s best to understand each utility’s procurement schedule so you can help your customers forecast the future price to compare.

Pro Tip: Some utilities are moving to hourly interval pricing for their default supply rate. In these cases, it is nearly impossible to do a true comparison of a fixed rate against these index-based rates. These utilities will typically publish a standard fixed adder that is added to the hourly wholesale index price. For these customers, it might be prudent to explore an index product with a less expensive fixed adder.

Technology Tools for Quote Preparation

Technology is playing a critical role in modern-day energy management. From real-time analytics tools that analyze consumer usage and market prices to advanced supplier quoting tools, adopting technology into your strategy is a must to succeed in today’s climate. There are several different ways to utilize technology to your advantage when preparing price quotes for customers:

• CRM Tools: There are several energy CRM tools available today, such as Diversegy’s home-grown MATT system. These tools allow you to track price quotes, manage contract renewals, and store customer information. Having an organizational system is critical to helping your customers manage their energy procurement strategies.
• Automated Matrix Pricing: Many of the energy pricing tools today allow brokers to obtain matrix price quotes instantly in a single dashboard. These tools allow you to filter pricing from many suppliers at once, compare product types, rates, and contract terms. In the past, this simple task would take hours of combing through Excel spreadsheets.
  

• Quoting Tools: Nothing is better than presenting a professional energy price quote with a savings and supplier comparison. Today, there are several tools that allow you to build professional, branded quotes to present to customers.

Common Mistakes Brokers Make with Quotes

Are you having trouble closing energy contracts? The answer might be in your quoting process. Here are the common mistakes brokers make with energy quotes and some quick tips:

• Presenting too many options: Customers like simplicity. Yes, we understand that the energy markets are complex, but sometimes over-explaining can lead to confusion and inaction. It’s best to do your homework on the front end to truly understand the customer’s goals. Then, you can present a few price options based on the best-fit product structure.
• Not using the price to compare: When prices are high (like they are at the time of this article), it can be hard to convince a customer to contract at a higher price than their current rate. Remember, it’s best to always show how your new rate compares to the utility default price to compare. This paints a clearer picture of how your rate compares to current market conditions.
• Not explaining the quote: Many brokers think that sending a quote via email is good enough, yet those emails typically never get answered. When you are ready to present a price quote, it’s best to set up a meeting or phone call to walk the customer through the details and provide some clarity.
• Not explaining your services thoroughly: Remember, you are not just a price gatherer. You are an energy professional who can help your customer manage their energy procurement strategy. It’s important to explain (or add to your quote) a list of services you will provide after the sale. Things like market monitoring, bill audits, and contract management can go a long way for a customer looking to solve their energy expense problems. 

More Energy Pricing Tips To Keep In Mind

Remember, your customers do not understand energy matrix pricing, custom energy prices, business energy quotes, or supplier contract language. They only see what you are presenting to them. It is important to be an effective communicator, excellent in your negotiation with energy suppliers, and a true resource for your customer. If you do all of these things properly, you are well on your way to becoming a better energy broker and earning six figures by selling electricity.

Need Help Presenting Energy Quotes?

In summary, how you prepare and present energy quotes will determine your success as an energy broker. It’s important to be detailed, clear, and to be able to answer your customers’ questions. If you need help putting together an energy supply quote for one of your customers, contact our team! Did you know that Diversegy’s sales partners enjoy an extended level of support from our back office team. We can help you create customer price quotes, put together agreements, and even help you close sales. Interested in being a sales partner? Contact us tdoay!