H ow Your Company’s Credit Rating Will Affect Your Electricity Costs

Abstract

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 pay-
ing 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