Insight Into The New York Energy Market

Posted on August 21st, 2012 by
   

Phil Van Horne, CEO of BlueRock discusses how the current health of New York’s energy markets effects commercial and industrial customers.

Full Transcript

Ben Lack I think that the best way to get started is to have you talk us kind of size up a bit about what the business does and what you guys are trying to do at the end of the day.
Phil Van Horne BlueRock Energy was begun in 2003. We sell natural gas and electricity to primarily small and medium sized businesses. Today we cover most of New York State.
Ben Lack Excellent. Talk to me a little bit about the climate over the last 9 years with clients that you guys have worked with. How has the natural gas markets changed most specifically within the last 12 months, what are we looking at?
Phil Van Horne With the changes in the economy, the cost of energy has become very important to our customers. One of the things that we see in this small-to-midsized segment is the need from our customers to understand what drives energy costs. As far as the natural gas market, it has changed dramatically over the last 12 months. The market has moved significantly downward in the Northeast – Pennsylvania, in particular – primarily due to the shale gas boom.
Ben Lack Does that help close business at the end of the day with dropping prices or are you finding that customers are trying to hold out for the lowest price or for the bottom?
Phil Van Horne Many customers want to lock in the lowest possible prices. We sometimes recommend other options, but they understand it’s difficult to always find the very bottom in the energy market. Businesses need to look at the energy cost compared to their own operations, so we typically look at a more comprehensive strategy helping to capture what’s best for the business at the right time and price.
Ben Lack Talk to me a little bit about what makes the Northeast market most specifically the New York market unique. What do you guys have to do in order to handle customers and make sure they’re taken care of compared to other folks around the country?

Phil Van Horne
The New York market in particular is very unique and there is no standardization across the state or even within a particularly utility. The rules for natural gas and electricity are often different even in the same utility. The procedures,  rules and the environment are completely different, so it creates a large administrative challenge to stay on top of all that. In addition, New York has a very unique sales tax structure that carries a number of combinations and variables.
Ben Lack Tell me a little bit about you guys over the last couple of months, released different product offerings to different clients. So talk me a little bit about what the need was and how you supported that need with these new offerings.
Phil Van Horne One of the products that we rolled out across the state is our partial hedge product that allows customers to hedge part of their use.  That locks in part of their requirements at an attractive price, while still allowing them to take advantage of changing market conditions. This approach includes a combination of market variables.  It’s a good blend of hedging the upward price while at the same time maintaining the ability to take advantage of the market declines.
Ben Lack How are the customers receiving the new product?
Phil Van Horne We launched that product primarily based on feedback from the customers who were saying it was something they wanted to see. As we rolled it out both to our existing and new customers. It has been very well received.
Ben Lack And the reason why I am asking is because with prices you’re offering as quickly as they are, what is the appropriate way to hedge that, what is hedge really there for; is it to ensure that if prices for some reasons shoot up again the companies are being protected or is it more so to flatten out pricing?
Phil Van Horne The offering flattens it out and if the market drops further, it gives customers the option to participate while protecting them from the upward spike.
Ben Lack Excellent. Talk to me a little bit about where you see the company going over the next 6-12 months?
Phil Van Horne We’ve got New York pretty well covered now. The next thing were looking at is expanding into Connecticut as well as Pennsylvania.
Ben Lack And what is the reason for choosing Connecticut first?
Phil Van Horne We think there are opportunities due to the market structure and type of businesses there. For a company like us who targets small to medium sized business, we think it’s a good opportunity.
Ben Lack With the kind of customers that you’re working with, what kind of appetite do they have for purchasing renewable energy as part of their portfolio whether its renewable credits or actual generation coming from wind, solar, hydro or other sources of renewable power?
Phil Van Horne It depends on the type of customer. We see the appetite for renewable energy increasing and it has been increasing for the last few years. Our renewable energy offering is 100% New York-state generated. We find many of our customers like the idea of purchasing from local sources.
Ben Lack Having been in the business for almost or running this company for almost a decade talk me a little bit about a surprise, unexpected pleasant surprise that your profession or the company has accomplished within the last 12-18 months.
Phil Van Horne I think one surprise has been our ability to expand on a consistent basis. We’ve maintained roughly 30% growth rate just about every year. Being able to establish that growth and maintain it has been a pleasant surprise.
Ben Lack Excellent. And this is going to be my final question tell me a little bit about why you’re doing what you’re doing and why you chosen to spend your time in this space and why the industry interest you?
Phil Van Horne In my prior life, I was President of Niagara Mohawk Energy Marketing. I gained a lot of knowledge and knew very top-notch people who worked in the industry. I saw the opportunity to work independently following Niagara Mohawk’s sale of the operation as part of the National Grid acquisition. It’s a combination of opportunities that the market presents us, as well as the people that I was able to network with and hire to help grow BlueRock Energy.
Ben Lack Before we let you go is there anything else you’d like to share with our audience?
Phil Van Horne We’re very active in the community across a number of charities. Our employees are giving their time to get involved, rather than just signing a check to a particular charity. I look to them to do things themselves on their own time and then we back that all up with a financial contribution.

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