Energy Alliance of Pennsylvania Review
We have recently been getting a lot of questions pertaining to the Energy Alliance of Pennsylvania as a result of their increased rates over the past few months. After much research, here is what I have discovered:
The Energy Alliance of Pennsylvania is a licensed retail electric provider that was set up by the Manufacturing and Business Association (MBA) through Fluent Energy as a way to get better electric rates for their members. In their own words….
“The Association has established the Employers’ Energy Alliance of Pennsylvania, Inc. (EEA-PA), which will act as an energy supplier for its more than 4,700 member companies and organizations operating throughout central and northwest Pennsylvania. By purchasing directly from the electric grid and gas pipeline and eliminating broker commissions and marketing costs, the EEA-PA is able to pass savings directly on to participating members.” (keep a mental note of the words in bold)
The statement sounds good in theory, but many members saw their rates skyrocket to over $0.13 a few months ago when PPL default rates are at $0.10402 and the majority of businesses in the area are able to get low fixed rate offers of $0.085 (35% less than the $0.13 rate). So what is going on here?
First, upon reviewing the Energy Alliance Electric Service Agreement, the Alliance buys their electricity on a monthly basis from the wholesale market which makes them extremely and completely open to spikes in the market. When the Alliance charged their customers over $0.13 the wholesale market did see a bump in prices. However, the jump in wholesale prices should not have caused rates to go up as high as they did. Here is where things get really interesting….
In the Electric Service Agreement, the part that explains how customers will be charged, it reads:
“Basic Commodity Price: this is a variable price which is comprised of the weighted average PJM Independent System Operator commodity price and other associated costs of goods sold, plus the administrative fee per kWh set forth below, and any applicable taxes and/or agent fees.”
To break that sentence down, the first part (basic commodity price) is the wholesale price of electricity. The administrative fee per kwh is listed in the contract at $0.0012 which isn’t out of the ordinary. Applicable taxes are always warranted. Then comes the kicker, ever so slightly written, “agent fees”. What exactly is an agent fee? It is not defined anywhere else in the contract, and to me it seems like it is the very thing the Alliance set out to eliminate in the first place (bold area from above “liminating broker commissions and marketing costs“).
Basically this “agent fee” gives the Energy Alliance the right to tack on whatever commission they would like on a monthly basis, and it is possible that when the members of this alliance payed a rate of $0.13 cents per KWh a few months ago, someone walked away with a nice undeserved bonus.
I would recommend to any business involved in this Energy Alliance to seek out a fixed electric rate that will prevent such spikes to happen in the future. For a list of electric companies offering fixed rates and their offers, email us or write a comment to this article.
The thing that really gets to me about the Energy Alliance of Pennsylvania is the way they market themselves. They come off trying to sell the whole “power in numbers” mentality when really their buying structure is not taking advantage of their buying power at all. Furthermore, there statement of lower rates due to the fact that they will eliminate broker fees, followed up by adding their own agent fees is just plain misleading. Even the name “Energy Alliance of PA” gives the impression that they are a non-profit when clearly they are as profit seeking as Walmart or McDonalds.
pennsylvania Tim Said,
October 30, 2010 @ 6:01 pm
Wholesale LMP (with capacity, line losses, ancillaries, etc) added in averaged 9 cents in Aug, unless the capacity was through the roof.
Excellent post. 0012 is very good, but toss on another 3 cents and I smell some complaints to the PUC.
Great write-up! I didn’t know their members were getting that scammed.
Lee C. Preble Said,
December 17, 2010 @ 2:06 pm
Thank you for your information; I found the information informative and I am sure I can put it to good use. It’s hard for me to believe, although I do, that 4700 businessmen in Pennsylvania are so damned dumb, that’s probably why the Republicans did so well in the last election..
ElectricityWatch Team Said,
December 19, 2010 @ 3:10 pm
It’s not that they are dumb, it is just that they are misinformed and uneducated about their options.
They are putting their trust in a company who is marketing themselves as an organization that was formed with the sole purpose of helping manufacturing businesses find savings on their electric bills. In reality they are a profit seeking electric supplier licensed by the state of Pennsylvania to be a profit seeking electric supplier.
EEA Representative Said,
December 30, 2010 @ 1:20 pm
The Employers’ Energy Alliance (EEA) and Fluent Energy take issue with several parts of the above review. Our comments are as follows:
1. Despite the claim that “much research†has been completed to prepare this review, neither the Employers’ Energy Alliance nor Fluent Energy was contacted for any information.
2. The Employers’ Energy Alliance of Pennsylvania, Inc. (EEA_PA) is a wholly owned subsidiary of the Manufactures and Business Association (MBA). The MBA is a registered non-profit organization based in Erie, PA.
3. The only fee that EEA members pay is the $0.0012/kWh administration fee specifically stated in the contract and on each invoice. No agent fees have been assigned to any customer to date. If you were to research wholesale variable price offerings of other suppliers you will find that EEA admin rate is one of the lowest available. The term ‘agent fees’ has since been removed from EEA’s Terms and Conditions.
4. All costs, other than the administration fee, are passed through, directly from the PJM wholesale market. Each customer receives an exact charge based on the consumption pattern of their particular account.
5. During one of the highest demand summers on record, several customers did see rates of $0.13/kWh during July and August based on individual usage patterns. What you have failed to mention is that rates since August have dropped as quickly as they increased. By the end of 2010, we expect the average EEA customer to have paid $0.075-$0.08/kWh for CAL 2010, well below your fixed price quote of $0.085/kWh.
6. Any EEAP customer is free to request a full breakdown and explanation of billing charges at anytime.
bill sherman Said,
April 14, 2011 @ 1:48 pm
The real problem here is the way EEA prepares a “savings” analysis to prospective customers with respect to their own response #5 above. In #5 above they admit to TWO months of high spot market pricing but in their bid and pricing presentations they project very slight month to month variations in their costs into the future (almost a flat line price per kWh) and compare it to PPL’s .1042. On paper a great deal right?! However, I know for a fact that they don’t account for the potential for a .13c spike for 2 months in any of their material they provide to prospective customers. Almost no one in their right mind would sign up if they knew up-front the potential for a month or 2 of pricing that is 35%+ above PPL. Their analysis makes a novice buyer think the volatility on the spot market is much less then it actually has been or can be. They are comparing apples and oranges (their VARIABLE product to PPLs FIXED product–their material is highly misleading and makes no sense with regard to this).
EEA (or anyone for that matter) has the ability or foresight (crystal ball!?) to predict what spot market electricity prices will be in the future. Electricity on the spot market can be one of the most volatile commodities anywhere. Why in the world would you buy variable priced power when fixed prices are near 7 year lows and assume HUGE risk? Its not a prudent energy risk/reward strategy whatsoever in a low priced market environment. What happens if you have a month that is .20c, .30c, .40c….it can happen and has happened in the past.
Additionally, their response above is a major contradiction when it comes to being a non-profit. Why charge anything let alone .0012 for your services if you are a true non profit? Many brokers charge less than .0012 and can offer a guaranteed price. The program is highly misleading and will come to a nasty end when spot market prices spike for any prolonged period of time. Many energy companies in Texas have gone out of business by hoping/praying that the spot market stays cheap. (google it) Eventually spot electricity will spike and the poor customers who signed up for this smoke and mirrors will be left holding the bag, and a huge electricity bill that they had no intention of signing up for.
Bill
Bryan Fleischer Said,
April 25, 2011 @ 2:13 pm
The author is right, the “agent fee” language is still in their contracts that allows them the option to add on bonuses whenever they want.