USING ENERGY BROKERS

A broker has an advantage over a board or a manager researching ESCOs because the broker has the technical expertise, says Stuart Belloff, executive vice president of Reliable Power Alternatives Corp. Moreover, he adds, a good broker also serves as a consultant who can help you manage energy more efficiently.

Buildings with good credit ratings are more likely to get better deals from ESCOs, says Jay Raphaelson, president of the brokerage EnergyWatch Inc., who notes that properties with fewer than 100 units often won't see savings beyond the initial sales-tax savings. As well, it is usually easier to get good deals for master-metered structures, because they provide bigger loads, properties will also get good prices if they employ time-of-use meters. Those help the ESCO balance out daytime energy-using office buildings with nighttime energy-using co-ops and condos.

How It Works

The process begins with the broker evaluating your building(s) to determine its unique energy needs and financial requirements. There are generally three choices:

(1) Fixed price, a price per kilowatt-hour for electricity or per decatherm (also spelled decatherm) for natural gas that will remain the same over the life of a contract;

(2) Indexed price, which changes with the market either daily or monthly; or

(3) A hybrid of fixed and indexed.

Some buildings need the financial certainty of a fixed price. Belloff says that savings on such an arrangement come when a broker can gauge the marketplace and find the right time to make a deal. With a fixed price, you'll see savings over the course of a year, such as when prices rise during the peak seasons of summer and winter, and if the market rises because of unforeseen factors, such as foul weather.

Indexed pricing, generally best for large buildings and complexes, can bring savings of up to five percent compared to Con Ed rates, Belloff notes. Many buildings benefit most by having some services on a fixed contract and others on an indexed rate.

The brokers say they go to a rotating group of about eight to ten ESCOs to get proposals and then return to the board, managing agent or lawyer with the top bids. Because of the daily-changing energy market, the board or its rep must decide among the bids within a day; for that reason, many boards or reps will haggle over the terms they want with an ESCO and then give one person the power to greenlight the contract. The broker's payment comes from the chosen ESCO — either a rate that ranges from about .001 to .003 cents per kilowatt-hour or a flat fee that ranges from $5,000 to $7,500.

Choosing a Broker

As of this writing, no state agency oversees energy brokers, and there is no way to tell how many are operating in the city. How should you pick a good broker?

• Make sure the terms of the contract with the ESCO and the broker's fee are clearly stated.

• Ask whether the broker is going to a large pool of ESCOs or if the firm only relies on one or two.

• Ask about the company's history and get references.

• Ask the broker what qualities the company looks for in the ESCOs with which it deals: Do the ESCOs have good credit, deep pockets, and easy-to-read contracts?

Tradition Energy represents about 31 co-op and condo buildings in the city, including such large complexes as the Amalgamated Warbasse Houses in Brooklyn (see at right). Though the five-building, 2,585-unit, affordable-housing co-op complex has its own power plant for electricity, it was getting hammered on gas prices, says assistant property manager Thomas Auletti. In December 2006, Warbasse inked a 15-month deal with Tradition where an ESCO will provide the gas service for the complex's high-pressure boilers for $10.56 a decatherm. "There were times where we were paying $14 a decatherm — it was going up and down," says Auletti.