HOW OUR STRATEGIES PUT A FAMILY-RUN COMPANY BACK IN THE DRIVER’S SEAT
Energy savings of 36% a year expected and a return of trust
THE CHALLENGE:
We began working with a family-run regional owner of multi-family, retail and commercial properties, with three important goals in mind:
Help the firm to understand and budget for its natural gas costs
Find ways to substantially reduce its costs and protect its investments
Ensure that its ongoing needs would be served through best business practices
THE SITUATION:
The group had a long term relationship with an energy supplier, and didn’t initially see the need for a second look. Upon our offer of a confidential, no risk and no obligation evaluation, the family granted us access. We reviewed the Brooklyn, Manhattan and Nassau County gas bills and determined that the previously trusted supplier had not only failed to offer favorable pricing for two years, but had engaged in unsavory business practices, passing through hidden costs of $60,000 on bills without notifying the customer. Many of the higher rates corresponded with higher gas usage for heating buildings during the winters, leading to broken budgets for the client.
3 POINT ENERGY STRATEGIES AND SAFEGUARDS:
We ran a competitive Request For Pricing with several of our trusted and transparent suppliers, resulting in comprehensive solutions:
A two-year, low priced contract that would secure $121,000 or 36% savings per year
A stipulation in the new contract that the new supplier would be unable to change the price, other than for changes in state regulations.
The hidden costs that hurt our client were technically Con Edison DDS Storage charges, which should have been clarified in the contract. Moving forward, those charges are already included in the new low price. Budgets were secured and lowered for the next two years.
SOLVING AN UNSOLVABLE PROBLEM FOR A CLIENT’S PROTECTION
Contract flexibility desired to meet larger needs
THE CHALLENGE:
A commercial property owner serving midtown Manhattan and downtown Brooklyn sought standard, one-year fixed rate contracts for electric and gas for the firm’s portfolio. It tasked its current energy supplier with a contract inclusion that could not be achieved; the property owner wanted the ability to sell any building in its current contract list without being charged the standard-practice termination fee for removing it from a contract. With 2019’s influx of rent and owner regulation laws affecting his primary business practice, the owner was not committed to long term holds at its buildings.
SOLUTIONS FROM A COMBINED TEAM EFFORT
We immediately turned only to our short list of flexible, trusted suppliers who might be able to comply with this need. After securing low price, one-year offers, we worked as an intermediary between the customer’s outsourced attorney and energy supplier’s management. We first negotiated a termination provision that satisfied our customer: Provide 30 days notice of selling any properties and no charge would be incurred for exiting the agreement. Next, we opened up the entire agreement for edits and ultimately ensured protections for our customer against several key “what if” situations.
HELPING AN OWNER TO MITIGATE FURTHER RISK ON A NEW BUILDING
Short term solution desired to avoid uncertain cost increases
THE CHALLENGE:
We entered into conversations with a luxury Brooklyn waterfront building owner as tenants were slowly were moving in. As a new construction that was only 60% occupied, its heating systems were not yet fully operational and tested during a New York winter. Therefore, there was significant uncertainty over how much natural gas the new building would use during the 2019-2020 heating season. The owner wanted to protect their investment and ensure profitability with a fixed price. While they understood the risk in calculating how much energy the property would use, no risk could be withstood on the price point in $/therm.
GOALS MET: BUY LOW WITHOUT RISK AND POSITION FOR NEAR TERM RENEGOTIATION.
We discussed the situation with eight of our preferred energy suppliers. Four were willing to evaluate the building and offer “100% swing” an energy regulatory contract term that means that regardless of how much energy is purchased and used, the same rate would be charged.
A national energy supplier was committed to help the customer protect their upcoming winter costs with 100% swing and use estimated usages for the agreement volumes. We also helped the customer lock in at a time when market rates were at the lowest point in three years. A short term contract was best, so that the customer could renegotiate with more confidence in energy usage expectations again in 2020.
OWNER ADDS REVENUE AND LIBERATES FROM RISK OF PENALTIES
Long term, over satisfactory solution for added revenue of $20,000 per year
THE CHALLENGE:
We began our relationship with an owner of Bronx rent stabilized apartment buildings when they felt trapped without options for alternative electricity purchasing. With small profits and a significant annual utility cost of $4 Million, the firm hesitated to make any changes that would risk penalties or overcharges. Obligated by city housing laws to charge tenants the standard utility rate, it had always allowed Con Edison to provide electric supply instead of exploring the marketplace of third party energy suppliers.
Under this scenario, signing a commonly used fixed rate agreement would surely lead to the owner losing money to tenants a few months a year, since the fixed price would likely be higher than the Con Edison rate in some months. An energy supplier variable agreement, where the customer locked in certain costs and floated others, would also present intolerable risk.
FINDING THE BEST SOLUTION:
We constructed a guaranteed savings agreement with one of our diligent energy suppliers, that allowed the owner to earn an additional profit of 2% after billing its tenants. Working on thin margins, the extra $20,000 per year on electric supply costs was a terrific outcome for the firm.