Wholesale Energy Purchasing

In 2005, Capital Consultants partnered with ECM – an energy engineering firm in Boston, Massachusetts – to change the way large companies and institutions buy energy.

ECM specializes in energy Engineering Innovations; CC specializes in energy Management Innovations, especially for U.S. Government agencies, private companies, universities, non-profit organizations and large membership associations.  Together, CC and ECM are able to convince large energy users to adopt Engineering Management Innovations to save energy, save money and, in the process, save the environment.

One of the most popular innovations CC and ECM have introduced is getting large energy users to buy electricity wholesale – directly off the grid – rather than paying more expensive retail rates; essentially making them their own utility companies.

How We Teamed Up

CC and ECM both represented Sempra Energy – California’s largest utility company – to encourage large energy users to purchase Sempra’s more lucrative, long-term retail contracts and avoid fluctuating market rates.   However, it didn’t take long for CC’s founder, Michael Kaiser, and ECM’s founder, Eugene Garcia, to realize by teaming-up they could offer customers even more lucrative wholesale contracts.   To do this they needed to find a way to provide the necessary backroom energy services needed to purchase electricity wholesale, directly off the grid, and bypass the utility companies altogether as unnecessary middlemen.

CC and ECM found an immediate side-benefit to making large energy-users responsible for their own energy purchasing was that they also became much more interested in adopting energy conservation measures, such as solar rooftops, wind energy, geothermal, etc.   Anything to save them money!

America’s Conflict of Interest

As it is now, we rely largely on private utility companies to promote energy conservation in America.   Unfortunately, there is an inherent conflict of interest in this approach because utility companies get paid based on the amount of energy used, not on the amount of energy saved!   To achieve any real energy savings in America we therefore need to adopt a paradigm shift and make those responsible for using energy also responsible for saving energy, bypassing the middleman entirely.

Taking conservation out of the hands of those who profit from energy use and putting it directly into the hands of those who pay for it not only generates immediate energy savings for customers, but as ECM and CC have proven, it also results in more conservation measures, creating the kinds of dramatic breakthroughs in new innovations and new technologies that President Obama and so many Members of Congress hope for.  However, it is essential Members of Congress realize it is how we manage the nation’s energy sector that is to blame for the lack of innovation and interest in new conservation measures and technologies, not consumers.   Americans want to save energy because Americans want to save money, so it’s how we approach the problem and the role of middlemen that become more of a hindrance than a help.

Of course the same could be said for other conflicts of interest in the American economy.  For example, expecting oil and gas companies or automobile manufacturers to be responsible for better gas mileage or replacing large, expensive internal combustion engines with electrics when it is the companies themselves who benefit from those large engines and poor gas mileage.   Why should oil and gas companies or automobile manufacturers introduce electrics, hydrogen powered cars, or more efficient hybrids when it cuts their profits and revenues?

As long as we rely on those who benefit from the status quo to also be responsible for changing the status quo we will never see the kinds of dramatic breakthroughs in new technologies and innovation beyond what U.S. Government regulations alone require.   Nevertheless, if Americans  were to adopt the same kind of paradigm shift in the oil, gas, auto, and other government regulated sectors that CC and ECM have introduced in the electricity sector, we might just see the kinds of dramatic breakthroughs Washington is hoping for, and, in the process, save American consumers a lot of money!

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“As long as we rely on those who benefit from the status quo

to also be responsible for changing the status quo,

we will never see the kinds of dramatic breakthroughs

in new technologies and innovations

beyond what U.S. Government regulations alone require.”

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Conclusion

Relying on government regulations alone will never accomplish more than incremental improvements in sectors of the economy regulated by the government because what the government is asking corporations to do is simply contrary to their underlying motives; that is, to generate higher profits.   We must instead rely on market forces to drive corporate decision making if we expect to inspire the kind of new technologies and innovations Washington hopes for.

Related excerpts from a 2009 lecture at Emory University

“As long as we are content to put the fox in charge of guarding the hen house, it is unrealistic for us to expect to see any dramatic breakthroughs in hen production or egg production; in fact, just the opposite.   So, rather than trying to enforce regulations on how many chickens the fox is allowed to eat, why not instead acknowledge we are asking the fox to do something that is not in his nature?  Get rid of the damn fox already!  Put a rooster in charge of guarding the hen house, then you will not only see more hens, but more eggs and create some new revenue streams on the farm.   That’s the economic model President Obama and so many Members of Congress are looking for today when they speak of the tremendous potential in America’s energy sector.  But unless we change our approach, we will never get there.

Of course the same could be said for other sectors of the economy, like the healthcare sector or American banking sector or any number of other government regulated sectors in the economy.  We tend to allow the foxes to be in charge of guarding or managing the hen house and then wonder why that sector hasn’t reach its full potential or why it becomes corrupt.   Meanwhile, the government is forever trying to play catch-up by introducing more and more new regulations to protect consumers, but government will always be one-step behind because of its stifling bureaucracy and crippling politics.  Government will never be able to compete with the private sector; a basic TRUTH some in Washington refuse to accept. 

The reality is we rely too much on government regulations and not enough on fair market forces.  Understand, there is a difference between free market and fair market forces.  Free market forces inevitably become corrupt and ultimately require government regulations/interventions.  Left to their own devices, businesses inevitably become corrupt because they are driven by profits and greed.   A great example of this can be found in America’s banking sector recently.   However, by having fair market forces, with limited regulations and instead relying on end-users to generate market demands rather than those selling the products, Americans can expect to see much greater results for both consumers and for the overall economy through the creation of new technologies and innovations. 

So recognize the nature of the beast and stop tempting the foxes by putting them in charge of guarding America’s hen house.   There are too-damn-many scared hens running around the American farm already!”

2009 lecture remarks by CC’s Founder and President, Michael Kaiser

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