Advice to CBIA members as you evaluate electricity purchasing propositions

Over the past few months, we’ve seen high electricity market prices spawn a number of new electricity-buying propositions and selling tactics. If you have already been approached, you might be trying to determine if certain proposals are in your best interests.

Based on our market observations, here are some tips and advice for your consideration:

  • Enter into agreements only with companies you know and trust. Be sure they are licensed and registered with the Connecticut Department of Public Utility Control (DPUC).
  • Do not sign or initial anything unless you have read it carefully and in its entirety.
  • Scrutinize any exclusivity agreement. Many are onerous and can bind you to a broker for up to one year plus the full term of any supply agreement — a potential six-year commitment. Termination often takes effect only at the end of the supply agreement and can require up to 180 days’ advance notice.
  • Make sure you provide exclusivity for securing quotes only. Many agreements give brokers full discretion to enter your company into a contract without informing you of the terms, conditions, or costs before execution.
  • Beware of index (floating price) contracts. While they have the potential to produce savings, they can also increase your costs. Remember, you can be assuming virtually all price risk with an index contract.
  • Beware of analyses that show savings based on prior year prices or future utility prices with built-in escalation. Neither are valid indicators of future performance.
  • Make sure you are absolutely clear about other charges—in addition to the fixed price—that will be passed on to you in any supply agreement. What appears to be a reasonable price can rapidly escalate when ancillary costs are figured in.
  • Ask who the prospective suppliers will be. Before agreeing to any contract, request a specimen contract that would be executed for each supplier.
  • Above all, remember caveat emptor: “Let the buyer beware.”

We suggest you call us before signing anything. We have the expertise and would be happy to help you assess any electricity proposal you receive. Our main concern is that, as a CBIA member company, you are fully informed before entering into any electricity agreement or contract.

Regards,

Tom Guerra
Director of Products and Services
CBIA Energy Connections
(860) 244-1160
Bill Walsh
Energy Account Manager
CBIA Energy Connections
(860) 244-1942