Empowering Clients
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By Brooke Knudson   
Thursday, 31 May 2007
smc Preferred Energy Services
At Preferred Energy Services – one of Silicon Valley's fastest-growing companies – advocating for the business consumer takes top priority.
Rick Kohl says he’s in the business of selling money. As president and founder of Preferred Energy Services Inc. (PES), a full-service energy-consulting firm, Kohl’s company has provided millions of dollars in costs savings for businesses nationwide by helping them sift through the invoices distributed by the massive – albeit lucrative – telecommunications and utilities industries. On average, the company identifies savings or recovers overcharges in more than 67 percent of the invoices it reviews, saving those customers about 12 percent on those bills.

A former energy engineer for Pacific Gas and Electric Co. (PGE), Kohl’s impetus behind launching the firm in 1988 was to provide telecommunications and utility auditing, energy consulting and contract-negotiation services to mid-sized and large businesses that spend more than $20,000 per month on energy or telecom bills. “Utilities have an arrogance that they can do what they like,” Kohl says.

“My experience was that utilities have a very close, but superficial relationship with large, industrial and commercial users,” Kohl explains. “At the same time, the political environment that gave protection to the residential customer offered very little representation to the mid-sized commercial customer and as a result, there was a big need for a consulting firm that could provide advocacy for [them].”

Although PES works primarily on a contingency basis, its revenues have grown because it has been able to garner cost savings, sometimes substantially so, for its clients. “It’s a very good model because we’re on the same side of the table as they are,” he notes. “We’re paid for our performance and that’s the reason we’re making a profit.” Since its inception, PES has recovered and saved companies more than $200 million on utility and telecommunication costs, he says.

Kohl says he and his staff’s experience, paired with the depth of services PES provides its clients, are the top two reasons the company has maintained the pole position in the marketplace. Although several competitors, including accounting firms and even utility companies, tried to replicate PES’s business model when deregulation of the industry took full-swing in the early 2000s, few survived because they lacked the knowledge of energy pricing and efficiency. PES provides several services, such as contract negotiations, past billing validation, account monitoring for pricing optimization, refund procurement and cost forecasting.

‘No Crystal Ball’
One challenge for PES is dealing with large companies who overly anticipate millions of dollars in savings when there might not be, Kohl explains. “They come to us absorbed in that expectation level, and everyone wants to tell their boss that this project is going to generate lots of money,” Kohl explains. “[We] bring them back to reality to have honest and reasonable expectation levels. A lot of people are sold that this process is going to save them 20 to 30 percent on costs.

In the regulated market, opportunities for PES’s growth still exist. In negotiated contracts, especially in the telecom industry, savings are less than what they use to be. “About 10 years ago, the telecom industry was basically bleeding people – pricing was astronomical, so it was easy for a consulting company to come in and find 20 to 40 percent savings,” he adds.

Innovative Approach
In 2006, PES began working with Ukrainian software developer Softjourn to start the next growth phase of the company. “We’re focusing much more on changing the look of the entire [consulting] process,” Kohl says. The company is creating an Internet-based software model where clients who subscribe can view their accounts under various pricing structures and operational scenarios.

The proprietary software will give clients access to track accounts by location, vendor, department and other variables and reports can be custom built to suit the client’s needs. This service will also give smaller clients that the company doesn’t typically work with direct access to PES’s consulting services.  USBR
 
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