The new business model at Wesson Energy in Waterbury leaves even the employees scratching their heads.
The simple approach for the 85-year old provider of heating oil: Help our customers buy less of our product.
While president Craig Snyder realizes the model appears counterproductive, he insists it is good business with sound reasoning.
In forming an energy efficiency division that assesses a home’s power waste and heating loss, Wesson is responding to the desires of its customers to lower their bills through better use of their energy systems.
This new division will decrease the amount of heating oil Wesson sells to individual customers, but it creates a comprehensive energy company with a greater customer base taking advantage of more services such as energy audits; HVAC and insulation upgrades; and heating systems such as geothermal, propane and oil, Snyder said. The movement also leaves the door open for further expansion.
“Our future is going to be more customers using less,” Snyder said.
Following this path puts Wesson at the forefront of a budding Connecticut industry aided by utilities, state programs and federal stimulus dollars. These companies provide energy efficiency audits and the resulting work of upgrading buildings for maximum energy efficiency. As utility customers want to lower their energy usage in the state with the second highest electricity rates in the nation, the efficiency industry boomed since infancy.
In 2006, the Connecticut Energy Efficiency Fund launched a pilot initiative for its Home Energy Solution program, where United Illuminating and Connecticut Light & Power would pay energy efficiency companies such as Wesson to perform home audits. In the audits, efficiency experts would weather strip homes, switch out light bulbs for better ones, shore up water loss, and assess the insulation and heating and cooling systems.
In the first year, 3,200 people participated in the program. In 2007, that number grew to 5,100. By 2008, it nearly quadrupled to 19,350.
Last year, the total participation in the Home Energy Solution Program was 31,474 customers.
On Aug. 19, the U.S. Department of Energy announced an expansion of the federal version of this initiative, the Weatherization Assistance Program, which has received more than $5 billion in federal stimulus money nationwide. Connecticut’s slice now exceeds $64 million on top of $6 million the utility companies received for their own versions of the program.
With CL&P and United Illuminating customers totaling more than 1.4 million, “there’s plenty of work still to be done,” said Mitch Gross, CL&P spokesman.
Participating customers in the Home Energy Solutions Program pay a $75 co-pay for the efficiency companies to do the home assessment. The remaining cost of the work, which averages around $800, is paid for through the electric utilities’ contributions to the Connecticut Energy Efficiency Fund. The average annual benefit to a customer is $300 in weatherization, lighting and water savings.
The efficiency experts also make recommendations on where the customer can improve insulation, water heaters, and heating and cooling systems at their own cost. Often, the efficiency company — Wesson, for example — provides these services.
Along with Wesson, Victory Energy Solutions in New Britain is one of 18 companies certified for the Home Energy Solution program. The company started as a two-man operation four years ago, but business took off once Victory achieved certification.
Victory now employs 15 full-time workers and will grow to 20 by the end of August, said Paul Keyes, partner at Victory.
Unlike Wesson, Victory didn’t transform from a traditional energy supplier. The company was founded as an efficiency provider and has grown with the audits and performing home upgrades such as insulation and geothermal systems.
But the efficiency industry remains in its infancy in Connecticut, with the capacity to grow even further, Keyes said. Renewable energy installation isn’t too far behind, as is smart metering — electric meters that display a building’s real-time energy use.
“We’ve only touched the tip of the iceberg of what we can do,” Keyes said. “We are starting an industry here, not just a cottage industry.”
Competition in the efficiency industry is growing quickly, Keyes said, and the extensive vetting process for Home Energy Solution program companies works to ensure industry quality. Efficiency experts must be certified under the rules of the Building Performance Institute.
Getting employees BPI certified takes extensive training, which costs companies time and money, especially if they are switching from a traditional energy supplier model, said Gene Guilford, president of the Independent Connecticut Petroleum Association, or ICPA.
The energy efficiency industry is creating the ballyhooed green collar jobs, or those positions aiding in environmental sustainability, Guilford said. Since the roles are an extension of HVAC work, more traditional contractors are making the switch.
More than 25 ICPA members are retraining employees for BPI certification. Since Wesson is one of the few to successfully switch to the efficiency industry, the ICPA presented the Waterbury company with its Marketer of the Year award in June.
“It translates the political idea of creating green collar jobs into the reality of somebody’s business,” Guilford said.
The switch at Wesson wasn’t easy, Snyder said. The company had 80 years of selling one product line, and it took two years of training and weekly employee meetings to not only learn the nuts and bolts of energy efficiency but also have workers take further responsibility for their own personal education in the new industry.
At first, two Wesson employees became efficiency experts. That number quickly expanded to eight to meet the new demand. Now, there are 20, comprising one-fifth of Wesson’s workforce.
“In the midst of one of the worst recessions, we’ve been able to grow our employee base by expanding into this new line of work,” Snyder said.
In 2009, Wesson performed 1,500 energy audits. So far in 2010, that number has risen to 2,500. All available appointments for energy efficiency audits are booked for the next eight weeks with a wait list expected to grow once the cool weather hits.
At first, the business used the existing base of heating oil customers to sell these new services. Now, the majority of appointments are new customers, Snyder said.
By gaining clients’ respect and trust through showing them how to lower their energy costs, Wesson can expand by adding more customers and offering more energy services. A solar panel installation division is coming soon.
Instead of a traditional heating oil supplier, Wesson now sells customers on reducing their carbon footprint through a variety of products and services, Snyder said.
And that business model shows signs of making sense.
