ZenBytes Webinar 2 – Interview with Lori Rader of FirstEnergy Advisors

For our most recent webinar, Zentility interviewed Lori Rader, a Director at FirstEnergy Advisors, who spoke on her years of experience working in the energy industry, as well as the challenges of building a spin-off energy brokerage firm in a volatile market.

[00:00:00] Dan George: So Lori, thank you very much for joining us today.

[00:00:03] Lori Rader: Thank you, Dan.

[00:00:04] Dan George: Lori, so just tell us a little bit about yourself if that’s okay.

[00:00:09] Lori Rader: Sure, I’m the Director of Sales for FirstEnergy Advisors. We are an electric brokerage company and we are a subsidiary of FirstEnergy Corp. We are an affiliate of a bunch of utilities, so we are not connected to them. They are on the regulated side, we’re on the deregulated side, but we’re here to help customers find the best price terms and conditions for their electric contracts. And we also do work in energy efficiency, trying to match customers with information that they need and try and help them with any kind of services they need with respect to electricity.

So that’s what I do. And I’m happy to be here today.

[00:00:47] Dan George: Great. Obviously, I’ve had the pleasure of working with you for a few years now, Lori. And I’m interested to understand a little bit more, I guess, you started FirstEnergy Advisors, right? Just give us a little bit of background behind that.

[00:01:03] Lori Rader: Sure. I did want to just briefly discuss the reason why I was selected, I think, to work on this project for the company. I started at the utility actually when I was younger. I worked for the Cleveland Electric Illuminating Company. I worked in the rate department. I worked in finance. I worked in budgeting and load forecasting.

I worked in sales, or what really was marketing back at the time, and then even real estate. So had a really broad background of what was going on in the utility, and then through mergers and acquisitions, so Centerior was formed with Cleveland Electric & Toledo and then Ohio Edison acquired Centerior and that became FirstEnergy.

And about that time, so adding kind of to my background, I went to private industry and I worked for a manufacturing company. I did procurement there and financing. And then in about 2009 I was given the opportunity to come back to the supply side and see at FirstEnergy Solutions. So the retail arm was already created.

Retail was hot and I was in charge mostly through my career there at FirstEnergy Solutions, the government aggregation or municipal, so large kind of industrial load. And then I also worked on mass market campaigns. So I had this kind of broad background of being at the utility and then seeing the supply side.

And when we were suppliers, we also, you know, we worked with many, many brokers, some were good, some were not so good. And we saw competitive generators. What we couldn’t do as a generating company. We couldn’t compete some times others were better. Other suppliers were better. So Solutions did have problems, which I think many people know, and eventually they declared bankruptcy.

And a lot of it was tied to, you know, obviously debt ; it’s always debt, but nuclear debt in particular, some contract problems. And so Energy Harbor then took over basically Solution’s debt and they became a generating company. And at that time, right before they took over, management asked me to come and set up this brokerage firm.

And the reason they did it, Dan is because I have the expertise. You know, I’ve been kind of a broad background and the people that eventually came with me, also, a couple of the people from FirstEnergy Solutions also came over and we started this brokerage. FirstEnergy was already in the retail space.

So not just with solutions as a generation piece, but they were also marketing products for home and services for home. And they, they have this residential customer base that they were trying to grow outside the utility revenue. And this was a perfect fit to start this brokerage firm to help bring in commercial, industrial customers and also to help with residential customers sell services to them.

And electric contracts is kind of a perfect fit if you think about how people would get an energy company. So that’s, you know, that was the kind of the basis was my background and the fact that they needed a fit for this products and services group and it kind of, it worked as one and that’s what we’ve been doing since.

[00:04:05] Dan George: So, okay. I mean, that’s, that’s a seriously interesting background. I mean, I was, I didn’t understand, or didn’t know the history of FirstEnergy over the last year, so that was educational. So thanks for that. Appreciate it. But and your background as well, actually I didn’t, you kind of went out and came back in.

Right? So that was, yeah. Cause.

[00:04:24] Lori Rader: Yeah, it does inform me because I, I know how, at least, I think I know how some industrial customers think when they’re looking at their energy bills and how they look in energy and supply. So, I think it was a really good experience for me to do that.

[00:04:38] Dan George: Balance right. Sometimes. Yeah. Yeah.

Even I’m, you know, thinking myself on, you know, coming into energy as I did. And using my previous industry experience, I mean, I worked in healthcare for awhile for a long time actually, and that was all around customer experience. So, you know, my, my whole kind of ethos for marketing has always been thinking about the customer.

I think your mindset is exactly the same. So speaking to Dave as well, actually, so he’s actually exactly the same too. So we’re always thinking about the customer who are the most important people in all of this. So yeah, just looking at First Energy, so setting up that brokerage what was, what would the key factors about setting that up, Lori?

[00:05:19] Lori Rader: Well, we, you know, we at first tried to avoid risk, I think that’s one thing that, you know First Energy. Not a big fan of it because, you know, they had kind of been in these retail markets. So, you know, a broker is a little bit more of a safe space. And I think really important. One of the company pillars with the brokerage is the pillar of customer service and they want to get back to that.

They they’ve always handled it as a pillar, but I think now the enhancement to that idea. And I, you know, I’m passionate about what I do. I tell everybody that, you know, I look at myself as a customer and I want to be treated the way, you know, I treat people. So when, when you have that mix, the brokerage is there and we also had expertise.

So, you know, these, these are the, the foundational blocks of what you want to do when you start a brokerage service. And as you know, and I talked to you and I’ve talked to Dave before. I mean, I follow the markets all the time. My team does too. We look at articles and we understand what utility filings look like.

And I have a background in some utility rate making. So all of those things together. You know, we, we try to focus on that customer and we try to find them and earn their trust really is the most important part of being a broker because, you know, I approach this like I approach, you know, someone coming to me for services, what would I look for?

And I look for somebody who I could trust, but I think you build that trust in the information that they provide you. And when you feel peculiar about the information they provide you, or they’re not clear, or they’re pushy, you’re going to take a step back. But for me, the most important thing is that I want to know what’s going on and I want to inform the customer and we’re transparent.

And I think that, again you know, full disclosure, we are partners with Zentility. We use our technology platform. It’s our Sherpa by FirstEnergy Advisors tool. And we want to make things transparent for customers and we want to give them the most information, so everybody in my team is dedicated to that, and I’m trying to find the best price for customers at the time they go to market.

[00:07:37] Dan George: No, I completely agree. I mean, we, we, we absolutely, I mean, we set up Zentility in 2016 and that was when I spoke to Ryan, it was his first… It’s because he came at a Constellation as you know, and then he was like, you know, I’d really want to bring a bit more transparency, I want the customer to be in control. I want them to be the focal point of brokering. So that’s the reason why Zentility was founded at that point. And, you know, we evolved into partnering with the likes of yourself and Dave and other partners that we have to just be able to offer this technology that we’ve developed but it’s all down to having that transparency of data, just making sure that they understand what pricing is available, what the costs, the comparisons are what’s going on in the market today. So all the things that we try to tie into that digital report, just to help them make that decision. And it’s not just, here’s the price. What do you think? It’s more, you’ve got a full disclosure. So yeah, transparency is, I think critical if I’m honest.

[00:08:38] Lori Rader: So when we first started our little, you know, this brokerage, we didn’t have a lot of money to, spend on a CRM system or, a lot of big systems, and I think that’s true with anybody who starts a business, even though we were part of a big corporation, we were a small group. And I was looking at hiring, you know, an analyst or two or three to handle back office issues, which was contracting and keeping track of all the things that we need to keep track of and everything for corporate reporting. And one of my employees booked a contract with one of your customers, Dan. I don’t know if you remember it. This is how we met Ryan and Ryan is the CEO of Zentility. So the customer was what you would call double booked, but that was okay because it brought forth the relationship, meeting Ryan actually and he did a demo for my employee and I think during the demo, I said “Wow” about four times, because I could see in the technology you want an answer to, I don’t have to hire people to handle all this contract work in the back office and that I could see things being taken care of for me as a broker. So that was wonderful. But the most important thing I saw from that website was this ability to share this with my customer and also to give it to my customer if they wanted to. And anybody who wants to know what my commission fees are, I always tell them what they are on projects, but it’s more than that. It’s the idea that the customer could go in. And I can do it for them or any of my staff can do it: take a bill, get their account number, put it in this platform and take it to the market and get custom pricing. If they’re large enough for, or if they’re medium sized, commercial, industrial, they can get instant pricing through the pricing tool, which is wonderful. But you know, putting in their parameters, it’s all in one space and then digitally a contract comes back. They can sign it if they want, but what’s most important is they see all of the prices come back to them. And again, Ryan uses that word, “curate” the best price terms and conditions, and it does and customers get reports and they see it.

And the beauty is there’s no obligation. They don’t have to do anything if they don’t want to. But it stops them, and I said this many times to different customers, but getting in this platform and getting pricing will stop you from making a hasty buying decision. So you’re ready. When you’re ready, we’ll be ready for you. And once everything’s in one place, you can go out to the market any time and ask suppliers to quote, and you guys have a tremendous amount of supplier relationships. So the customer is going to benefit from the platform’s ability to pull data and information from a vast amount of suppliers.

And then once they’re contracted, again, this is another reason why we love the platform is that everything’s in one place. And especially for customers who don’t even know where all their bills are. So we do that for them. We get it in one place and the contracts in one place, and that next renewal there’s reminders that come to the customer, you know, 12 months, six months before their contracts end. And then we’re looking at pricing and even in between the customer and the broker, meaning me, we can go into the platform and, and request this rate check and the rate check comes back. And again, they’re clean. They’re neat, easy to understand, and the customer has the ability to see what is going on and especially to establish a baseline of where prices are if they don’t want to entertain a contract in the market.

[00:12:17] Dan George: Full disclosure, like this really wasn’t rehearsed and actually Lori, you sell the platform better than I do. I just wanted to mention it because no, I agree with you because basically, we have a lot of partners that use us and this wasn’t intended to sell our platform. That webinar is a discussion between us, but the important thing: controlling those contracts, making sure that they’re all placed. I’m looking right now, I mean, we’re going to talk about the market in a second, but you know, we’re in a pretty bad spot right now. And we’re looking at renewals for people, in ’23, ’24, you know, ultimately we don’t have that control of contract. If we don’t have that view, that holistic portfolio view, then it’s difficult to be able to look ahead that quickly.

Does that make sense? And make those kinds of, let’s see what we can do for our customers. And I think that’s, that’s a massive benefit that having a platform

[00:13:12] Lori Rader: And Dan, I mean, you don’t have to have the plan for them to do this work. But it just makes it easier for me to do it and it makes it really transparent for the customer.

So, that’s why I believe in it. But again, you don’t have to have it, but for me, it’s a benefit, but I do have concerns and that’s kind of, one of the topics of the conversation we have today is, you know, what are the concerns we have, and, you know, NYMEX today’s over $9. So we want to know what the future looks like, and none of us do. You know, nobody has that full crystal ball. And, you know, I think that the gas situation is precarious. We don’t know as customers. My son had gone on a trip, a mission trip, a couple of years ago when gas prices were really low. He went to Lafayette, Louisiana, and he met a bunch of the local people there. They were painting houses and one of the locals said to him, you know, you think $2/gallon gas is a good thing, but it’s devastating to the people of Lafayette because, you know, we depend on the price of gas being higher and when it’s not it devastates us. So it’s about the trade-offs as you know, citizens of this country, I guess, and Lafayette might be doing better now.

I know that the prices are high and I think the gas market is going through this discipline period where, their future investments are really what are most tenuous for them and how they’re going to get financing. There’s this push towards electrification, especially in cars, and solar renewable energy, and all of this, there’s also the idea that we don’t want to use fossil fuels anymore. So all this puts concerns, at least for me, is in terms of pricing electricity in the future. And the reason gas and electric go together is because all those years of low price- ‘and you’ll see this graph here – is when you have all the gas producers producing electricity, and as we move towards the future, and right now the 23, the red on top. You know, it’s severely separated from what you see. Future prices are 23, 24, 25 and 26. And I think, you see the gap here and I don’t know what I look at this, and it reminds me of what it looked like last year, almost as the separation as we get through the the current year.

But the prices are all bunched in the later years. And I have concerns that customers might not be looking at contracts in later years because they’re so focused on what’s happening now. And I think now might be a really good time to if you have a contract or let’s say you have the benefit of being with a utility for a little while longer, you might want to think about that and today, or, in the near future, look at pricing a contract out into the future.

Because if you look at this graph in front of you, you’ll see the the prices in ’24 ’25 and ’26, are considerably lower than what you’re seeing for the ’23. So, like I said, all these things are kind of piling together and you don’t know what the future’s going to bring.

You don’t know if gas companies are going to be able to invest in exploration and, and get the financing they need. And you know, the hot weather again. You know, it’s really hot this summer. The near-term pricing is going to be really, really difficult for customers and I think as we move into the next few years, Dan, I know that there’s something we want to talk about too, just think about what that means if people can’t pay their bills and what it means to suppliers and what it means to brokers, or what it means to suppliers who aren’t properly hedged with their generation and might not have enough generation as we move towards all of this electrification. So the risks are there and I don’t know the best ways that individual customers need to mitigate all their risks, but I do see this as one avenue that, you know, customers can go and they can ask for pricing today for future. And maybe they should think about establishing a base.

[00:17:25] Dan George: Interesting. No, this is interesting. It is a bit of a … It’s a crazy dose. I mean, I was just talking to Ryan literally an hour before this call and we were talking ourselves around the price at the moment and the impact it’s having, obviously in terms of customer decisions. Also with a few of our account managers this morning as well around, you know, there’s always as a business, you’re always in a position whereby it’s like, okay, there’s always a bottom line. Right? We’re a business. Where ultimately you have to look after that customer too, right? And it’s a position whereby you’re trying to be as creative as possible with the products that you can offer people. Correct? And I think the suppliers do a great job in terms of offering those different packages to brokers. Right?

[00:18:08] Lori Rader: They do and I do want people to understand, like, I don’t know if there’s any customers on the call, but what this, you know, this particular graph is from Constellation, but a lot of the suppliers put these graphs out for their brokers. And really, if you look at the very last point on this graph, and I don’t know what date it is, so the rest of it’s it’s all historical is you know, there’s trades every minute, right? Or every five minutes. But this is actually in the PJM territory. And you look at the very last point on this graph and that’s where the trades closed at that day. And if you were looking for a contract that started in, let’s say January of 2023 and went through January of 2026 at those very end point prices are the prices each year, that would essentially be blended together to give you a final price of a contract along with ancillaries, and risks, and margin, the commissions but this makes up, 85% of the costs of what the cent/kWh is going to be at that one point in time. And you can see if you can get rid of that high red line and concentrate on maybe a future look- that’s why I’m saying you could find a future contract at a lower price. I just didn’t know if I was clear about that, but that’s really what that means.

[00:19:32] Dan George: Okay, no that’s fair. I know firstenergyadvisors.com I think went live today. Right, Lori?

[00:19:36] Lori Rader: It did. It went live this morning -very exciting!

[00:19:41] Dan George: Super exciting there. So firstenergyadvisors.com, go check out Lori and her team, some of the services they do, providing a great service to their customers, as we said. We do have a question actually to you from John Lenz, one of our partners, and he asked “Is FirstEnergy encouraging their commercial/industrial customers to switch in order to reduce their generation costs?”

[00:20:03] Lori Rader: Of course we always encourage, you know our large industrial customers to shop for generation because that’s what we do. We try to find them the best possible prices whenever we are in a market – and I know Dave feels the same way I do – we’re in a market where the utility is in the short run, if you’re not under contract, you’re gonna have to at least think about comparing the utility prices to a future supplier price. And I think, yeah, I would encourage all large industrial, commercial customers to at least look at baseline pricing. You know, the tool is there, like I said, and I would encourage customers to at least price, and then if they can find something competitive and they can work around the pricing.

And obviously that pricing goes into the products and services they provide. So they at least will give themselves some surety if they want to do a fixed price. I think some of the problems with utilities and Pennsylvania is they rely on- especially as you get to be a bigger customer industrial customer- you’re at the mercy of the daily price, so the daily settlement, or the hourly settlement, depending on which the utility you’re in. So, this is very risky for people. They’re going to have bills that they most likely will not be able to pay. And I think they’ll be going back to the utilities and trying to work out budget payments. So if that’s the case and you’re seeing that type of volatility that you can’t stand, yeah, you should, you should be pricing yesterday , or maybe a fixed price, that’ll help you through that out in the near term. And then, you know, look at a longer term price to take advantage of the fact that the, the market and it looks like it. And I’ve heard this, the ’24, ’25, ’26 is really- inflation adjusted- the pricing is very similar to what, you know, the 10 year average price has been. So, it’s not a huge risk.

[00:21:56] Dan George: Yeah, you told me. Yeah, that’s really, really interesting.

[00:22:00] Lori Rader: I hope that answers the question.

And well, if you look at LCI suppliers, I think he’s asking that also: what percentage. In most of the states they all shop. I mean, there are like 80 some percent of them are shopping. A nd you know, this has been going on for the past 20 years almost.

[00:22:24] Dan George: Yeah. Lori, thank you so much. And a pleasure really, really has thank you for joining today and giving us that kind of low down of, of where the FirstEnergy Advisors and where you’ve come and hopefully where you going. And hopefully we’ll see some more stability in our market. It’s going to help us through to the end of ’22 and into ’23, hopefully, but thank you so much again.

[00:22:51] Lori Rader: Thank you so much for having me. Thank you, Dan.