I've been dealing with more clients lately who got burned by energy brokers here in Wisconsin. What are the biggest red flags you all look for when a client mentions they're working with or considering a broker? I'm seeing some pretty sketchy practices with WE Energies accounts where brokers are promising savings they can't deliver. Would love to hear your experiences and warning signs to share with clients.
Red flags with energy brokers - what to watch for?
Linda, great topic. Here in Georgia I see brokers constantly overselling savings on Georgia Power accounts. Biggest red flag is when they won't show you the actual contract terms upfront. If they're pushing for a signature without letting you review the rate structure details, run. I've seen clients locked into rates that were 2-3 cents higher than standard tariffs within six months of signing.
Another red flag - brokers who claim they can get you "wholesale rates" or rates below what the utility charges. That's physically impossible unless they're eating the loss themselves, which they're not. Duke Energy has minimum distribution charges that can't be avoided no matter who your supplier is. I tell clients if it sounds too good to be true with energy, it absolutely is.
Watch out for the door-to-door guys especially. Here in Ohio with FirstEnergy territory, I've seen brokers literally misrepresent themselves as being FROM the utility. They'll say things like "I'm here from your electric company to update your account." That should be illegal if it isn't already. Always verify credentials and never sign anything on the spot.
Jim's right about the door-to-door issue. We get that here in Pennsylvania too with Duquesne Light accounts. I always tell clients to ask for references from similar businesses in their area. Legitimate brokers should have a track record you can verify. If they can't provide at least 3-4 reference contacts, that's a huge red flag. Also watch the contract length - anything over 2 years is usually trouble.
Good points everyone. Walt, I agree on the contract length issue. I've seen 5-year contracts with escalation clauses that basically guarantee the client will be paying above market rates by year 3. The other thing I watch for is brokers who won't explain demand charges properly. If they're promising big savings but your client has high demand, those savings often evaporate when demand charges stay with the utility.
Linda makes a great point about demand charges. I had a client in Atlanta locked into a broker contract paying 6.2 cents per kWh thinking they were saving money, but their demand charges with Georgia Power were still $18.50 per kW. Their total effective rate ended up being higher than if they'd stayed on standard service. Always look at the total bill impact, not just the energy rate.
This thread should be required reading for anyone dealing with commercial accounts. I'm printing this out for my client folders. Thanks everyone for the solid advice.