CEO: Locking in energy prices pays off for businesses

Head of third-party supplier says companies should buy energy in advance

PEORIA - Illinois businesses that don't lock in their energy prices are taking a risk, said the president of an energy company that has been doing business in the state since 2002.

"Energy prices are higher largely because of worldwide demand," said Jeff Mayer, CEO and founder of Stamford, Conn.-based MX Energy, a third party supplier with more than 500,000 customers in 12 states and Canada.

"There's a continuing energy crisis throughout the world because it's just the beginning of economic growth in countries (and energy users) like China and India, not the end," he said.

While prices at the gas pump are rising again, U.S. consumers enjoyed relatively low natural gas prices earlier this winter because of a warm January, said Mayer.

When colder temperatures hit much of the country in February, those prices warmed up, he said. "Now natural gas is 6 percent higher than it was last September," said Mayer.

Companies can avoid fluctuating fuel prices by buying in advance, he said. "Businesses all over the country are locking up prices for the next couple of years," said Mayer.

"It's the difference between an opportunity cost and business cost. If a business doesn't lock in prices, that company is gambling its profit over the next couple of years," he said.

But Chicago-based Citizens Utility Board, a watchdog group that serves Illinois consumers, said results have been mixed since energy deregulation took effect in the state last year.

"We have seen that some small businesses have had some success on the open market while others haven't fared so well," said CUB spokesman Jim Chilsen.

The problem is price, he said. "We need more affordable prices for electricity. It's not just a matter of how many companies are offering to sell energy. We need to drive down prices," said Chilsen.

Mayer said buying energy in advance provided a business customer the opportunity for a level payment. "We're offering price volatility insurance to people," he said.

MX Energy has also found success selling peace of mind to those concerned about global warming along with electricity. "We sell a carbon offset product for an extra penny a therm. That costs the average user about $10 a year," said Mayer, referring to the company's support of tree planting in the northwest United States as an alternative to fossil-fuel consumption.

Twenty-five percent of MX customers in Georgia pay for the carbon offsets, he said. "We plan to offer the plan elsewhere," said Mayer.

Global warming remains a big concern, he said. "One of the statistics I find amazing is that the average U.S. home gives off 5.1 tons of carbon dioxide a year," said Mayer.

Steve Tarter can be reached at 686-3260 or starter@pjstar.com.