USING ENERGY BROKERS, P.2

But with a such fixed-rate price, says Tradition Engergy's Kurzer, boards and managers need to know the full picture. "The good news is that you'll never pay more if the cost for energy spikes," but co-ops also "have to recognize that if they lock in for a year-and-a-half and suddenly the price craters, we want them to understand that when you hedge, you also give up the chance to save money if things turn around."

When Indexing Is In

About four years ago, Douglas Elliman Property Management started using an energy broker to serve about 100 of the 250 buildings it manages in the five boroughs. Larry Vitelli, a senior vice president at the firm, declined to detail the deal other than to say that the company chose an indexed rate, rather than a fixed date. Vitelli says that in 2006, the arrangement saved clients about $700,000 in electric bills — most of it through tax savings but about $100,000 through rate savings.

"The reason why we do it at an index price rather than a fixed is because no one can criticize the decision if the prices drop," Vitelli says. He recalled the case of how one property went with a fixed rate and did great initially but then "got killed" when fuel prices dropped.

The buildings in this group represented by this broker range in size from about 100 units to 2,000. Vitelli says Douglas Elliman started using ESCOs about a decade ago and went to a broker because "we thought they could use their expertise to make sure we got the best price."

Belloff advises boards and agents to be wary of brokers or ESCOs promising huge savings. "No one can predict where the future energy savings are. We have customers who have saved 20 percent on their electric bills but again, it has to do with the type of product, when you lock in — what the market conditions are."

For a list of local ESCOs, go to PowerToChooseNY.com and type in your ZIP Code.

Adapted from Habitat July-August 2007. For the complete article and more, join our Archive >>