22 Feb Part 2 | YOUR VIRTUAL UTILITY | The nation’s leading, next-generation utility…
Dear Family, Friends & Partners of Zenergy,
In Part 1 of our Virtual Utility Series, I introduced the concepts of “your virtual utility” and “the nation’s leading, next-generation utility” while giving you an overview of the contrasting “legacy utilities.” Today, I would like to elaborate on the legacy utility model to help you better understand why our innovative new outlook to energy in the 21st century is pertinent to the times and gives us a strategic advantage in the marketplace.
Another noteworthy point when thinking about legacy utilities is the fiscal aspect of the regulated utility, i.e., accounting and finance practices dating back 50 to 70 years. These were, of course, propped up by the then widely accepted view that the monopolistic business model was the best way to ensure a real “Power to the People” movement. At one time, the grid was a sea of frayed wires (some live and others not), competing protocols, and made up of hundreds and then thousands of limited partnerships and corporations. The overwhelming view was that more control and more standards were needed, hence the birth of the monopolistic utility. Ironically, up until recent times, the same stakeholder families were listed as owners/beneficiaries in prominent utility companies/organizations across the nation.
All of above gave birth to what is now known as the Investor Owned Utility (IOU). An IOU is officially defined as “a business organization, providing a product or service regarded as a utility (often termed a public utility regardless of ownership), and managed as a private enterprise rather than a function of government or a utility cooperative.” Essentially, this became the model whereby you and I were reduced to “ratepayers” and started flipping the bill for what many experts and economists have deemed over the years as the lowest rung of the industry concerning science, engineering, and innovation. In the recent bestseller entitled “The Grid,” author Gretchen Bakke describes one renown scholar voicing that only the laziest engineers and graduates would embark on careers in the utility industry. By the way, I highly recommend this book as it would help anyone better understand this subject.
Back to accounting and finance practices: when I was a young man, I worked in a service-based industry and, a huge utility company (IOU) that was in the top 5 in the United States was one of our clients. I recall many times at the end of quarters and, to a much greater extent, at the end of their fiscal year, they would always place significantly large orders of new inventory. These large orders would occur regardless of whether or not they actually needed the new supplies. One day, and unquestionably to my detriment as a commission-based Account Manager, I dared to ask, “Why are you guys ordering so much when you don’t even need it?”
It was in that instance I learned first-hand the grotesque inefficiencies associated with the regulated monopoly business model. As was explained to me, if they didn’t use up their entire budget, they would lose it. Believe it or not, this “use it or lose it” budget mentality didn’t stop there, it affected the way they consumed their resources. For example, in my case, we were selling them X type of product, which had a guarantee of say 80,000 miles as the minimum performance, yet they were replacing X at 50,000 to 60,000 miles as a regular practice. Imagine this mentality running rampant in an organization of 10,000, 25,000 or even 50,000 employees.
I mean, after all, you and I had no say in any of this since we were just ratepayers, not customers, and surely not stakeholders of any import. Therefore, the utility companies were never incentivized to be cost-efficient; instead, they were forced to spend the budget they’d risk losing otherwise. As a student of operational sciences, most experienced executives and operators know that in an organization such as a regulated utility, it is easy to foster a negative fiefdom culture. In this case, the bigger the budget, the bigger your fiefdom, hence innovation not necessarily being at the top of any of the IOU’s respective to-do lists.
While it is quite clear today that these practices were neither in the best interest of ratepayers (the public) nor the environment, they nevertheless built one of the most reliable electricity grids on the face of the planet. As old and tattered as it is, it has been a thriving, comfortable previous century. The challenge today, however, is that demand continues to grow regardless of economic growth, policies or even politicians for that matter. One thing is for sure: demand will only continue to increase. Parallel to this challenge is another, equally important one: the U.S. is an incredibly inefficient user of electricity. While analyses vary, experts estimate that, at best, approximately 60% of all the energy flowing through the system is wasted.
There is a lot to be said about new investments and micro grid technologies, however, at Zenergy, we believe beyond a shadow of a doubt that the existing infrastructure can be extended for another 100 years if we can implement an en masse style of conservation and efficiency measures. This fervent belief, by the way, is the essence of our Zero Cost Program–we apply new, modern technologies to the existing infrastructure and wrap it up in an innovative fintech-style delivery mechanism. The result is win, win and win.
In Part 1, we learned that the national energy grid was built using technology based on old systems and equipped for the ’60s, with a weak, monopoly-oriented culture in mind. So, when we explore the supply chain in the energy industry and understand it, then it begins to boggle the mind just how powerful our slogan can be. Consider that you’ve got hydro carbons such as coal and natural gas, which have to be refined, processed and then transported to a power plant where they are used to create electricity by fueling a generator. That electricity is then carried through poles and wires and delivered to various consumer types. Keep in mind that while we’ve examined just three or four processes, within each of these points along the supply chain are anywhere from five to ten different parties. Plus, you’ve got traders on both sides of the equation, marketers, originators, exploration, sellers, and, of course, the power plant itself, which also has many of these parties in its operation.
Now, let me ask you this: when you look at the supply chain that I have just described, where does energy conservation fit? Not sure? That is because it doesn’t fit in anywhere. So, if you start putting all of the things that Zenergy markets and sells–conservation, sustainability, and the products these services encompass–into the supply chain, you quickly realize that they don’t fit in either. Moreover, you discern that the old framework is one wherein all of these players are not necessarily incentivized to work with one another and are unquestionably disincentivized to help the customer implement any sustainability or conservation initiatives. Contrarily, each of these abovementioned players is instead highly incentivized to move or sell as much volume as feasible and at the highest possible prices. I mean, it has been said that there is no such thing as customers in the energy industry, there are only counterparties. In this case, most any trader can tell you, some days you’re the hammer, and other days you’re the nail; hardly a recipe for customer service best practices.
All of that said, the good news, my friends, is this is where Zenergy comes in and where we make our impact in the business landscape across North America. Mind you, even if employees or decision makers at a utility wanted to be environmentally or socially responsible, the reality is that they aren’t set up to do so. As stated in my previous blog, all incentives that exist to help customers with these types of investment are all actually subsidized via tax payer dollars and/or cost that are socialized across all ratepayers within that utility. We, on the other hand, can step in and have an immediate impact helping our customers realize their sustainability and conservation goals because, unlike the legacy utility, we don’t have to worry about or contend with those outstanding issues. And we don’t need or required tax incentives, or any other type of subsidized dollars to make our solutions perform and bring the value that they do.
In our model, instead of trying to sell the customer as many kilowatt-hours as possible, we create value by reducing the number of kilowatt-hours they consume, and it doesn’t stop there. Depending on the application, the same holds true for gallons of water and thermal units of natural gas. We can step into a client’s place of business with a solution, make the best of what’s already in place, create a substantial positive impact on the environment, immediately decrease their energy spending, while also improving the long-term enterprise value for the client. We come in and apply the solutions that, quite frankly, their utility should be offering but are just not in a position to.
In conclusion, as your virtual utility, Zenergy’s approach to energy is a different ideology without legacy problems but a whole new foundation set up from the start to accommodate what we call responsible energy. It ranges from responsible purchasing to procurement to management and includes electricity, water, and natural gas, and that, my friends, is what the virtual utility is all about. That is the vision and the power of our slogan as we represent a new outlook on energy, ideal for a modern age of innovative technology and environmental and social responsibility. That is what we mean by “Your Virtual Utility,” a forward-thinking energy company with a focus on conservation and not consumption. It is only by conserving energy that we can fulfill our mandate to reduce the demand on our national energy grid while preserving limited resources for future generations and allowing them to inherit a healthy country and planet devoid of harmful carbon emissions.
This follow-up article wraps up Part 2 of our Virtual Utility Series (expect a Part 3 sometime in the next 30 days), which I hope helped you understand our core ideology and business model. If you have not already done so, we kindly invite you to subscribe to our newsletter on our investor relations website, www.zenergybrands.com, to stay up to date with all company happenings, and to follow us on all of our social media platforms:
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CEO & President