Broker Strategies for the Current Energy Price Surge
For many market trends in the energy industry, they only reach the mainstream headlines once they start impacting the wallets of individuals and businesses. In recent weeks, energy price surges have been reported in trade press as they impact the European and Asian markets, and the impacts of these trends are now reaching stateside meaning U.S. energy consumers are paying attention and asking questions.
What’s coming to the energy markets recently isn’t the result of any single event but is the cumulation of many different challenges that have been hitting the industry from various fronts. Recovery after the worst of the COVID-19 pandemic hadn’t fully completed and the energy industry starting getting hammered by a particularly long-lasting and harsh winter from 2020 to 2021, geopolitical disputes in Eastern Europe regarding natural gas trade, an insatiable energy demand growth in Asian markets, and a number of regulatory and market shortcomings.
The result of these forces has been massive: energy shortages in Europe and Asia have threatened supply chains from major industries, rising prices have strained countless businesses, and grids have had to turn back to coal and other dirty fuels despite efforts to move away in order to meet climate goals. Because the energy industry is truly globalized, the impacts that have first been concentrated in these overseas markets are now making their impact felt in the United States. While natural gas supply in the U.S. from domestic production is high, the massive demand from international markets is expected to lead to the most expensive gas prices in over a decade this upcoming winter. Should the winter weather be particularly harsh, U.S. gas demand for heating will only increase, bringing up the price to heat buildings and limit the amount of gas available for power generation and thus pull those prices up with them.
This situation is in a way the perfect storm, and they’re the type of scenario that can make energy brokers and their customers quite nervous. The one area of the energy broker relationship that many customers understandably care most about—the price—can be completely out of the hands of the broker during such a scenario. For brokers, trying to prevent dissatisfied customers or, worse, losing long-term clients, is stressful. The benefit that brokers do have, though, is that these price surges can somewhat be seen coming, allowing them time to prepare themselves and their customers, and such tough seasons aren’t without precedent, meaning they can tap into numerous tried and true methods for managing the crisis.
Shift Messaging Towards Risk Management
In the status quo of the energy broker role, selling affordable rates and cost savings to customers is relatively straightforward. Low rates are what get people to pick up the phone, and those are the numbers that ring and reverberate in customers’ heads, making the broker’s job somewhat easy. But during times when the prices surge, that go-to strategy does not work as well, but that does not mean all is lost. This situation simply requires the broker to work a bit more to get customers to understand that they’re selling more than just energy at a given price.
For customers who don’t follow energy market trends, this shift in thinking can sound like a bunch of bologna, but that’s where brokers must lean into the key role that they play (whether they know it or not): brokers are also purveyors of risk management.
When brokers discuss with customers why prices are rising, the best brokers will pivot to educating customers about how these occurrences aren’t unparalleled, and while there’s every reason to think that this price surge event will pass, customers also have just as much reason to firmly believe price surges will happen again in the future, whether due to weather events, geopolitical occurrences, or natural movements of markets. This reality opens the opportunity for the broker to highlight their role to find the best rate structure that works for the customer and how that means more than just cost.
Paying an energy broker for simple rate structures like direct cost per kilowatthour may seem straightforward, and even time-of-use rates can be a simple to understand method for helping customers, brokers can do much more. The fact that a customer has an energy broker means they can lock in a price and rate structure for the foreseeable future and leave themselves not at the mercy of these price surges and continuingly to growing rates. This message is one that must be leaned into during these times of price surges and apparent instability that is occurring today.
Get to Know the Customer Personally
Another opportunity that energy brokers can and should lean into during this time of rising prices is in being a personal touchpoint for their customers. Especially for businesses for whom energy costs make up a significant portion of their operating expenses, such as energy intensive manufacturing in steel or cement, rapid fluctuations and price surges can go beyond making a month’s bills tough to swallow. These changes can represent a real threat to the viability of the business. But through the broker who gets to know them as a customer personally, their needs and priorities, they can identify the exact risk profile and rate structure they can tolerate and lock in what will work best for them.
These times of price surges are going to be stressful, not just for the broker sweating their ability to connect with sales, but obviously as well for the customer. As such, brokers should use this current environment and landscape to really understand each individual customer’s needs and what type of structure would work best for them. When first establishing the relationship, perhaps the customer did not understand the value a personal broker could bring and instead just asked to get the lowest available price and nothing more, paying that bill monthly and not giving thought to the value of interaction beyond that.
But the moment of uncertainty and prices surges can be Exhibit A of why that approach may not be optimal, and it presents the broker with the perfect opportunity to demonstrate that fact. When the customer and broker alike anticipate price surges, as have been clearly rumbling in the energy insider circle for weeks now, brokers will be best prepared to dial up their customers to give them a fair warning and chat about options. This simple act will achieve wonders in cementing that trust and strength of relationship.
Sell Your Knowledge
In the end, energy markets are exceedingly complex and can be intimidating, even for those in the industry. So, for a broker’s commercial and industrial clients, hearing news of gas shortages, power surges, refinery outages, and more can be scary. Brokers should let customers know that they’re available to educate and keep them informed. Brokers are so much more than just the middle man getting the customers energy; brokers are the best available concierge for navigating these markets and keeping ahead of any energy trends that will continue to impact their business.
If customers wanted to just automate, buy through an app or web browser, and not think about the implications to their operations, they can and would do that. But by getting on the phone with a broker and establishing a personal connection, they’ve chosen to talk to a trusted energy advisor and a subject matter expert. So, brokers must hear them out, offer up insights, and use it as an opportunity to flex knowledge to show them why they want to start or continue working with a broker!