Are ESCos Cheaper Than Con Ed?
If you own a business or a home, or if you pay a Con Ed bill (in other words… if you are a human being in New York!), there’s a good chance that an energy company has reached out to you to try to win your account, be it at home or at work. Maybe someone called you or showed up at your door with an honest pitch, telling you that they are with a certain company and explaining the benefits of working with their company for your energy supply (see this post for what that actually means!). Maybe someone called you and wrongfully said that they work for Con Ed or National Grid – they might have said that they need access to your meter for some reason. If you look at your energy bill, you may see a line item telling you that a third party company is supplying your energy.
Whatever your experience with one of these third party companies energy supply companies – or ESCos – has been, there tends to be one overarching question that dominates the conversation: are ESCos actually cheaper than Con Ed? The simple answer is yes - sometimes. The real answer is slightly more complicated. If you’re reading this, it’s fair to assume you’re interested in the longer answer, so let’s check it out.
First off, how is it possible that an energy supply company is would be cheaper than the utility? Common sense might tell you that since Con Ed (the utility in New York City) buys such an outrageously huge amount of energy, they might get discounts from the actual producers of energy and thus would be able to sell at a lower price than any small supplier. That’s a reasonable thought to have, but it’s not true. Sorry!
Electricity is bought and sold every hour of every day on a commodity market. Con Ed buys from the market, and so do all the ESCos. It’s a fair marketplace – that means no discounts for buying in bulk. Every company, big and small, pays the exact same price. Now that we’ve got that covered, let’s move on to the next question:
Why do prices differ so much?
This is where things get tricky. While all companies pay the same price up front, they definitely don’t all charge the same price to their customers. A small company like Phoenix Energy can afford to charge a lower after-market rate to their customers because of the low overhead they have as compared to a giant company like Con Ed. Think about it: at Phoenix, we have eight people in a small office space. Con Ed has to pay for entire buildings, fleets of trucks, and so much more. That makes sense, right?
ESCos can also be more strategic in their purchasing of energy. Because they aren’t as heavily regulated by the city and state like Con Ed is, they can offer unique pricing strategies that add value to their customers. For example, Phoenix Energy offers a capped rate, protecting its customers against high seasonal spikes, while also allowing them to take advantage of low rates when they are available. While Con Ed’s customers are on a purely variable rate, totally exposed to the volatile energy market, a pricing structure like the market cap offers customers much more security. Feel free to reach out to a Phoenix Energy Guru to learn more about the market cap and what it can mean for you at your business or home.
Now we understand how and why ESCos can be cheaper than Con Ed. But it isn’t always the case. Sometimes, Con Ed offers great rates – this can be for a month or even a few months at a time. But if the last ten years are any indication, their rates fluctuate. There’s no real way to know when a spike will arise. It’s true: some months, Con Ed may have the best rate on the market. So why would you ever enroll with an ESCo, if Con Ed can offer great rates, too?
Well, ESCOs know this information about Con Ed’s rates. The rates are public. And because ESCos are competing not only with Con Ed but also with one another, they know they need to do more than just offer great rates. Companies like Phoenix and others offer a number of value added services that can put them ahead of the curve, such as energy efficiency consulting. A great ESCo will work not only to just reduce your rate, but to reduce your usage as well, taking a comprehensive approach to reducing your monthly costs. With services like energy efficiency consulting, ESCos are trying to show you the big-picture approach they take to winning your business.
If ESCos were, as a general rule, more expensive than Con Ed and didn’t add value to their customers, they wouldn’t exist – it’s that simple. Since there are so many of them out there that are doing great business, it’s a sign that they are doing something right- namely, giving their customers great plans to save on their energy bills. It’s true – not all companies are cheaper than Con Ed. Some will try to take high margins on their business, charging customers high rates in hopes that the customer won’t notice. If you’re curious about how competitive your rates are compared to other options on the market, you can explore Con Ed’s website or give Phoenix a call to chat. As New Yorkers, we know that we need to work together to help one another out. That goes for everything from giving up your seat on a crowded 6 train to someone in need of a rest to making sure no one’s getting fooled on their utility bill.
To recap: in short, yes, ESCos can be cheaper than Con Ed. Not all are, and even the best ones might be slightly more expensive than Con Ed in a given month. But they offer a lot more flexibility and customer service than Con Ed. If you find the right ESCo, working with them can be a pleasure and can take a lot off your plate.