What to Look for in an Electricity Supplier

C&I energy consumers in Mexico have historically acquired electricity from the nation's supplier, the Federal Electricity Commission (CFE), under imposed conditions based on regulated rates. This has eliminated the business community’s ability to question quality, conditions, and ways of doing business. As time passes, companies are becoming more knowledgeable and sophisticated as many migrate into the Wholesale Electricity Market (WEM), strategically entering into corporate power purchase agreements (PPAs) that propose more competitive economic schemes. These companies are challenging distinct aspects of a Qualified Suppliers' business in an effort to choose who to partner with for a three- to five-year period. To do this right, companies rely on energy consultants to carry out the appropriate due diligence around qualitative aspects that might not be so apparent to energy executives. These elements complement sophisticated quantitative analyses that consider the financial results that a migration to private supply could imply. The Top 5 elements outlined below will help companies determine the overall value and decisions needed in selecting a Qualified Supplier for their business.

Past Client Experiences: Word of mouth and referrals are two primary sources for business development efforts in Mexico. Culturally, this is something that truly matters. Past client experiences may strengthen the impressions of a business or they could hurt them. The energy industry is quite tight in Mexico, and, therefore, past client experiences may be accessible, thus the value of having an energy adviser who has worked with many suppliers and is also constantly immersed in market happenings.

Generation-Supply Scheme: Most consumers do not fully understand the energy regulatory or operational frameworks. For consumers, it is critical to maintain energy reliability, and there are common misconceptions around how the operational scheme between generators and suppliers in the WEM work. Therefore, it is reassuring to a consumer when a supplier owns generation, or at least is able to prove the origin and relationship between physical generation and supply. 

Financial Reliability: Energy is closely tied to finance. Suppliers´ decisions around operations, contract terms, risk-management strategy, portfolio diversity, guarantees, among others, could all potentially impact consumers financially. It is very important to understand who is financially backing a supplier, whether it is a large corporation, a fund, financial institution, and so on, in order to understand the expertise, profile and risk profile of the supplier. A lack of solvency would put a consumer at risk of being sent to a last resource supplier with uncertainty in their budget. 

Modus-Operandi: Each Qualified Supplier has their own style. It all starts with the people, their attitude, customer service and ethics. How employees work with one another, their level of coordination, response times, business facilitation, commitment, and desire to serve is something that needs to be evaluated and monitored. The DNA of a company also shows their level of sophistication, the way they operate, how they use technology, how they approach quality, and how they go about correcting their mistakes. Analyzing these aspects requires a deep understanding of their history and operating principles. 

Technical and Team Experience: Time is of essence when contracting private energy supply due to the economic opportunity cost derived from a delayed transition process. Losing time means losing money, and the lack of experience from a suppliers´ team may lengthen the energy acquisition process, especially during the negotiation and transition phases. Whether the project requires migrating a load from CFE Basic Supply or Self-Supply to the WEM or from a Qualified Supplier to another, there is a significant learning curve that comes from the volume of clients and situations that have been managed through time. Although the market has become more sophisticated with time, there are still suppliers that lack experience, so be careful not to take unnecessary risks that could eventually put your business at risk. 

As energy procurement specialists, Acclaim Energy, an independent consulting company, has developed a unique methodology called the Quality Supplier Index (QSI) to analyze around 20 different qualitative aspects that are evaluated by both internal and external market experts on a yearly basis. With this periodicity, the criteria are used to recognize the Top 5 Qualified Suppliers that have demonstrated and provide excellent service to C&I consumers. This type of annual exercise drives the market to be more professional, pushing Qualified Suppliers to constantly strive for excellence, competitiveness, transparency, and quality. 

It is always important to look at how other energy markets worldwide have developed to somewhat predict what could happen in Mexico. Some examples and experiences have proven that capacity, risk-profile, financial strength, and customer service will end up defining what suppliers remain in operation and are backed by a sustainable business. 

C&I consumers must closely evaluate, question, and allow for energy experts to support the discovery process around what suppliers are solid enough to consider as a partner for the next three to five years. Failure to do so may place unnecessary risk on consumers whose end game is to achieve cost savings and sustainability goals as well as optimized supply terms and conditions.