A Tale of Two Neighbors

It was the best of times, it was the worst of times. It was the age of new technology, it was the age of high energy bills, it was the epoch of enlightenment, it was the epoch of political posturing, it was the spring of environmental consciousness, it was the winter of global warming.

So might begin a modern day version of Charles Dickens’ Tale of Two Cities. But today I had a delightful conversation with one of our customers in Georgia and I may need to write a different book: A Tale of Two Neighbors.

My novel – I would say “true story” but Oprah Winfrey would get upset that I am changing some of the details – begins on a pleasant suburban street where two neighbors, both customers of MXenergy, are having a conversation over the border of bright red peonies that have blossomed between their two yards.

The first customer --- Mrs. Adams, I’ll call her – shares with her neighbor – Mr. Morgan – the good news that she has just received an offer from MXenergy to “blend and extend” her fixed price contract for another year. The new rate is slightly higher than Mrs. Adams old rate but it is substantially lower than the current rates that MXenergy is offering new customers. What MXenergy has done, Mrs. Adams explains, is “blend” her old rate into the new rates and “extend” the term of the contract for another year.

Mr. Morgan is delighted at Mrs. Adams’good fortune. But at the same time he is puzzled. Mr. Morgan, you see, has also been a loyal customer of MXenergy. But he did not get this offer. In fact, when he returns home and pulls out his latest bill he finds that his price is substantially higher than Mrs. Adams’ new rate.

Mr. Morgan calls MXenergy and inquires why. Unfortunately, a new customer service representative loses his call. Understandably annoyed, but still amazingly patient, he complains to his elected officials and sends a note to MXenergy expressing his disappointment.

One day, as I am passing the water cooler – literally – I hear about Mr. Morgan and his tale of frustration. I think to myself: If the politicians in Washington can’t understand energy prices, how can I expect Mr. Morgan to figure them out? So I decided to call Mr. Morgan and talk to him.

Mrs. Morgan answered the phone and soon I am having the most pleasant conversation with both Mr. and Mrs. Morgan. First, I express gratitude for their loyalty all these years. I explained to them that MXenergy as well as Shell Energy Services, a company that merged into MXenergy in 2006, had set out in 1999 to help customers like the Morgans protect themselves from higher energy prices. We did this by offering customers a fixed rate for 1-3 years, similar to a fixed rate mortgage.

But then I had to deliver the bad news: We cannot offer them the rates we offered Mrs. Adams. You see, it appeared that when the Adams’ and the Morgans’ first enrolled with MXenergy, both families opted for fixed price protection. Their timing was excellent, as prices started to rise in 2000 and with the exception of a dip in late 2001 and early 2002 they haven’t looked back since. Both had the benefit of fixed price protection for the first couple years.

But then in 2004, when the Adams family renewed its fixed price protection plan, the Morgans decided to switch to a variable price plan. This may have worked out for the Morgans in 2006 and 2007, when energy prices dropped temporarily. But by late 2007, prices started to go up again. By late spring of 2008, natural gas prices were 89% higher than a year earlier. When we at MXenergy saw the higher prices, we decided to offer our fixed price customers – including the Adams – a chance to switch onto a longer term price that would “blend” their old rates with the current higher rates. By doing this we could offer a lower price than the market.

Unfortunately, for variable price customers like the Morgans, we had nothing to blend. We could only offer current prices which of course are much higher.

The Morgans took the news with grace and good humor. Mr. Morgan had retired some time ago but he was clearly a sophisticated businessman. He and his wife immediately grasped the risk that they had taken – and for a time had benefited from – when they opted for variable prices.

“Can we sign up for your fixed price now?” Mrs. Morgan asked.

“Of course,” I said. Fortunately we had a senior rate that I could offer which was substantially below our current rate for other new customers. I promised the Morgans a customer service representative would call them soon to confirm their decision.

I don’t think Mr. and Mrs. Morgan would necessarily quote Sidney Carton at the end of Tale of Two Cities: “It is a far, far better thing that I do, than I have ever done.” But I hope they are happy with their fixed rate plan: long term fixed price protection.

Of course, we don’t guarantee that prices will go up or that fixed prices will be necessary. But fixed prices are like insurance: better to be safe than sorry.

The End.