How Your Company’s Credit Rating Will Affect Your Electricity Costs

If you are ready to pass this article by because financial issues are not part of your energy-related property operations concern—please don’t! Every facilities professional with properties taking delivery of electricity in deregulated, or to be deregulated, territories has a direct need to understand and become involved with this issue. Soon, if not already, your company credit rating will have a direct effect on the cost of your electric commodity. And soon, I submit, you will be placed in a position of being forced to deal with this. In concept the issue is very simple. Without competition there was only one provider possible, and no opportunity existed for a consumer to leave the provider with energy costs in arrears. A property might go many months without paying the bill, but the provider was reasonably safe in that there was no way for the consumer to escape ultimately paying or being cut off. And so, the provider utility was not particularly concerned with the creditworthiness of its consumers (in fact they were, but only behind the scenes). Now, with open access and alternative providers, it is possible to incur past due charges and switch to a new provider leaving the old provider holding uncollected dollars. The old provider no longer has the option to shut off the power because the property has already switched to a new provider. This old provider was operating in a position of credit risk left over from the ‘old days’ of monopolistic guarantees.