Ag Energy Co-operative Ltd.
An energy co-operative is not an unheard of business proposition, but Ag Energy Co-operative is certainly one of the most unique energy solutions servicing the needs of the agricultural producers and commercial businesses in Ontario. The Canadian Business Journal spoke with Rose Gage, CEO, about Ag Energy and its place and importance for the Canadian agricultural and commercial businesses. “We are unique, as we are the only co-operative that offers natural gas and electricity in Ontario. We focus on serving larger consumers in the commercial space. Our members are our owners and our customers, and we also have non-member customers such as commercial or manufacturing entities. Our focus is customers and members who consume more than 150,000 kWh of electricity annually or 50,000 m3 of natural gas per year,” says Gage.
Ag Energy is the only existing energy co-op that focuses on servicing Canadian agriculture and it celebrated its 25th anniversary on May 30th, 2013. Ag Energy came to life in 1988 with the goal to provide competitive energy products and services to farm operators, agri-food, agri-tech, and agricultural goods and services providers. The idea to create such an entity arose from the market need prompted by the deregulation of the gas market for large industrial and commercial users in Ontario. This prompted members of Flower’s Canada, Ontario and Greenhouse Vegetable Growers Association to action. Since natural gas is such a major cost for the Ag businesses, by pooling their natural gas volumes, they were able to purchase large volumes directly from suppliers, thus getting competitive wholesale prices, lowering their energy costs, and making their businesses more competitive and more profitable.
As with any co-op, all members enjoy an ownership stake in Ag Energy. The members actively participate and have an equal say in the direction of the Co-op’s business activities, as well as enjoying competitive and transparent pricing, expert views on energy markets, trends and market factors and other services as well.
Ag Energy entered into the Ontario electricity market in 2003, and in 2005 unveiled FireFly Energy, a retail division offering natural gas and electricity to those energy consumers not qualified for Ag Energy membership (these were non-agriculture in focus, and often times smaller in scale), and extended the FireFly natural gas program to British Columbia in 2007.
“As a co-op focused on energy, we deal with risk, but if the risk is well-managed then there is reward for the member and customer by virtue of a de-risked and customized energy solution. Furthermore, if the Co-operative is financially successful, the member receives additional financial benefits.” — Rose Gage
Because of its unique position as an energy co-op in the Ag sector, Ag Energy continuously educates its members, potential members and other stakeholders at large about its mandate and goals, as these often go misunderstood by the larger publics. According to Gage, the common misnomer is that Ag Energy business focuses on agriculture and its commodities (grains, for example).
“We seek to represent the Co-op as well as its members through educating stakeholders, from customers to different facets of government, peer companies, regulatory bodies, but also suppliers and financial institutions. Communication and education are also important from the relationship building perspective, assuring stakeholders that our business model is doing well, and that it has a solid future,” says Gage.
With over 175 years of combined energy industry experience among its staff, Ag Energy serves some 330 members and more than 1,000 customers, offering flexible natural gas and electricity programs and energy strategies and solutions to all medium to large volume agricultural producers and processors. The members and their members (i.e. another co-op as a member) employ more than 5000 employees, $500 million in revenue / sales per year with estimated 90 per cent of the Ag Energy’s business originating in Ontario.
Operating in Volatile Markets
Market for natural gas and electricity carries inherent risks tied to price volatility of these commodities. For example, recent history had shown tremendous downward pressure in the commodities prices due to the increased production and supply availability. This created the lowest natural gas prices of the past 10 or even 15 years. However, the production patterns had changed once again, and with a prolonged winter, the markets saw increased demand, so gas prices have started to rise once again.
Servicing customers in these volatile markets, Ag Energy provides customizable energy solutions for customers in regards to risk adversity, helping them understand the market and making an educated choice in regards to their energy needs, whether they want to track the market (buy at the current market price) or choose to lock in their price for a certain period of time. “Yes we do provide natural gas and electricity, but we also provide consulting services. It is all about having that dialogue, making clients understand, and understand where we can add value. We work for them to create a higher probability of consistency to their cost in these markets, which is important to them, for energy tends to be a larger portion of their overall business spend,” says Gage.
Ag Energy remains very selective when it comes to choosing members as well as customers. This is because the Co-op exposes itself to risk every time it takes on new members, from their ability to pay into and support the co-op model to choosing members with the right co-op attitude. “We are talking about standards by which the Co-op operates such as being cooperative, having a voice, etc. We want to make sure that there is a fit. In this aspect we are very different from say publicly traded companies who have different metrics in taking on new investors and partners. A suitable Ag Energy member is a business with ties to the agricultural sector, is supportive of the Co-op and its values, and actively participates in the Co-op. The Co-op seeks clients who want to participate and stay with the Co-op for longer term,” says Gage.
“If we can continue to offer products and services, and continue to offer great service to those we touch, then we will be around for next 25 years, making money and make our members happy.” — Rose Gage
In comparison to other energy providers who serve hundreds of thousands of customers in the retail space, Ag Energy is one of the smaller energy providers.
But size is of no matter to Ag Energy. The Co-op’s main focus is on the members and customers. The focus is to provide quality transparent service in regards to energy delivery, and competitive competence to mitigate price risk.
While Ag Energy’s expectation is to grow strategically in the future, whether it will be organically, joint partnerships or potential acquisitions, the focus will always remain with satisfying its members and customers. To do this, the Co-op continues to expand its services while offering and providing reliable and competitive source of natural gas and electricity for the agricultural space.