The Opportunity of Energy Group-Buying

Posted April 18, 2016

How Group-Buying for Energy Works

We are used to the idea of big businesses getting better prices for a lot of different products, such as phones, internet, office supplies, and cars. For some reason though, many people seem to believe that this relationship stops when it comes to energy. We generally believe that our utilities are just passing the commodity price straight to us and so we should be paying the same rates for electricity and natural gas as bigger users. Right?

Not exactly. Most big businesses are getting lower rates for electricity and natural gas than the rest of us. The size of these savings depends a lot on which market, or region, you are in. In some regions, big businesses are paying nearly the same rate as homeowners. In others, they are paying as little as 60% of the price that homeowners are paying. In this article we will explain how, by working together as a group, homeowners and small businesses can get access to these same low commercial rates; and we will also show just how big these savings can be.

The Comparison of Residential and Commercial Rates

It can be quite difficult to find good data on electricity pricing in many markets, thankfully the Energy Information Association (EIA) provides a great breakdown of pricing in the U.S. which we are going to use in our analysis. These numbers are not perfect, as they only show the cost of the electricity itself and do not include delivery or other regulatory charges, but they are a good indication to help us see the difference in prices.

The raw electricity data from the EIA can be found here, and natural gas data can be found here. This data is for all of the U.S. states in the month of November, 2015. The difference between Residential and Commercial rates clearly varies a lot from state to state, but this spread provides a good indication of the amount of savings that can be expected from a group-buying model.

The table below maps out the difference between Residential electricity rates and Commercial electricity rates across all of the U.S. states that have deregulated energy markets. On average, residential rates are 23% higher than commercial rates, a fairly significant difference. In some states, such as Texas and Pennsylvania, residential rates are 50% higher than commercial rates!

As high as this difference is in electricity rates, the difference is even higher for natural gas rates. The chart below also maps out the difference between Residential and Commercial natural gas rates across the U.S. states that have deregulated energy markets. On average, residential rates are 31% higher than commercial rates, and in Florida they are 67% higher!

Take a look at the following two tables to get an idea of how large the difference is in each state. (article continued below the tables)

Res vs Comm Energy Pricing

Clearly, the difference between Residential and Commercial rates can be quite large in many states, and are at least 7% cheaper in every market. So how can we close this gap to ensure that homeowners and small businesses are getting access to these same lower rates?

Historically the only way to get access to these rates was through a standard Retailer plan, but EnPowered is now allowing homeowners and small businesses the ability to group together to get access to lower commercial rates.

Retailer Plans

When energy markets began to be deregulated in the late 1990s in countries around the world (click here to learn more about that) the promise was that energy Retailers would bring innovation to consumer pricing. It was their job to offer unique products and services to customers to help drive down costs for everyone. They have begun to deliver on that promise for commercial customers, as many big businesses have found ways to control their energy costs.

Unfortunately, these savings and benefits have not been passed down to homeowners and small businesses. In nearly every market globally, electricity and natural gas rates are consistently higher for low-volume consumers than large-volume users. In fact, in most markets, electricity rates have been rising steadily for homeowners and small businesses.

The reason that these savings have not been passed down to low-volume consumers is because the majority of the competition has been focused on large commercial customers. Retailers have fought hard and offered low pricing to these customers to grow the size of their customer lists. In fact, they have sent large teams of sales reps to these big businesses and offered very low rates to steal customers from each other.

When those same sales reps knock on the door of a small business or a homeowner, the economics do not make sense anymore. Any savings that could have been offered to the customer is simply being paid to the sales rep as a commission. As a result, most homeowners and small businesses are staying with their utility’s default energy supply.

In fact, in most markets less than 5% of homeowners and small businesses have left their utilities, whereas upwards of 50% of commercial customers have already switched to a different supplier.

Group Buying

This is why EnPowered is offering Group-Buying for energy. By allowing homeowners and small businesses to group together, they will be able to get access to these same compelling commercial rates. EnPowered is the first company in the world to allow customers to join a group online to group-buy for their energy.

By offering the same compelling rates that commercial customers are currently getting, homeowners and small businesses will be able to save on average 20% more on their electricity and 33% more on their natural gas bills.

By working together in a group, many homeowners and small businesses will be able to pool their usage together and get access to lower commercial rates. EnPowered will handle all the hard work on the back end, and all a customer has to do is pay their same energy bill every month. The only thing that changes is the price on their bill.

How it works

All a customer has to do is go to the EnPowered website, select their country and region, and join a group that interests them. That could be an electricity group, a natural gas group, or both. Joining the group is completely free, they will only need to input their account number and EnPowered will do everything else. About two billing cycles later, their bill will change to show their new rate.

There is a different group for each region, which is usually an entire state or province. This means that you do not need to create a small group with only your neighbours, instead you can join an existing group with people from across your entire region.

As more people join the group, everyone’s rates drop even further. So as people invite their friends, family, and neighbours to join the group, everyone will get access to better rates. Over the course of a month, as prices drop, more people will join the group, until at the end of the month the group will close and the whole group will get their new rates.

Group Bar Few Members

Anyone who joins the group is guaranteed to get a good commercial rate. If only ten homeowners joined your group this month, that would be too few people to get a good rate so the group would remain open for the next month. This will continue until enough people join the group to guarantee low rates for everyone.

Group Bar Avg Members

If a lot of people have joined the group this month, and the group is so big that rates cannot drop any further, the group will still remain open until the end of the month. So everyone can join the group that month to get low commercial rates.

Group Bar Many Members

Finally, since we are all working together as a large group, EnPowered is able to negotiate better terms with its suppliers as well as better prices. For example, in the province of Ontario, EnPowered has removed all cancellation fees from electricity contracts to ensure that customers are able to test out an electricity group without getting locked into a contract.

In markets all around the world, residential consumers are paying upwards of 50% more for their electricity and natural gas than commercial customers. EnPowered is working hard to try to narrow this gap for its customers. By working together as part of a group, homeowners and small businesses like you can get access to these same lower commercial rates. Join an EnPowered group-buying pool today by visiting