A Real Power Negotiator
In 1991, while working as national sales manager for a natural gas marketing firm, James Headlee got a call from a customer, Georgia-Pacific Corp., complaining that his firm hadn't lowered its rates even though natural gas prices had dropped. After a little digging proved the client was right, Headlee suggested to his boss that they refund the overcharges and apologize. Two weeks later, Headlee was told he "wasn't with the program" and given just five minutes to clear out his office. "My wife had just had our fourth child, we were building a new home, and I sat in my car crying as I thought about how I was going to tell her I'd lost my job," says Headlee, now 51.
A few weeks later he realized that Georgia-Pacific likely wasn't the only company frustrated with the complex and opaque energy-buying process. Since states began deregulating natural gas rates in the late 1980s, many industrial companies had been struggling to choose from among the myriad gas suppliers that had sprung up. So Headlee launched a consulting firm in his Louisville home, becoming one of the first outfits to help corporations negotiate better rates for natural gas, and in time, electricity.
Headlee's privately held firm, Louisville-based Summit Energy Services Inc., now boasts $30 million in revenues and a stellar list of 128 corporate clients, including General Motors (GM ), Lockheed Martin (LMT ), Pfizer (PFE ), and, yes, Georgia-Pacific, for whom it negotiates a collective $12 billion in energy deals each year. About half of Summit's dozen or so national competitors are affiliates of large utilities, so Headlee's pitch to customers is that he offers unbiased advice. That distinction seems to resonate. "We value the fact they're independent and don't have a vested interest in the energy supplier we use," says Larry J. Pfeil, vice-president of engineering for Austin (Minn.)-based Hormel Foods Corp. (HRL ), which uses Summit to procure energy for more than 25 plants.
Summit's independence has paid off in spades for both Headlee and his customers. The 175-employee firm doesn't contractually guarantee savings, but Headlee says clients reap an average of $3.90 in savings for every $1 they pay in fees. "That's actually a little low for us," says Jim Casadevall, head of global indirect purchasing for Livonia (Mich.)-based TRW Automotive Holdings Corp., which uses Summit to buy energy for its 40 North American plants. In sum, Summit has saved its customers more than $1 billion, often by playing several suppliers off one another to wring out the best price.
Not that success was a given. Headlee's first clients were a couple of small municipalities that couldn't afford to pay him more than $500 a month. But Headlee got his break in 1993 when Kansas City (Mo.)-based Dairy Farmers of America signed his fledgling firm to manage energy at its 30 facilities. Soon after, his noncompete agreement expired and Headlee began courting Georgia-Pacific and other clients of his former firm.
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As its customer roster grew, Summit expanded to include such services as hedging strategies, auditing bills for errors, and reviewing plant operations for cost savings. "Our competitors don't have the depth of services we now do," says Headlee. For one major manufacturer that was unhappy with its hefty natural gas bills, Headlee suggested it threaten to bypass the supplier and build its own tap into the interstate gas pipeline. That shrewd ploy prompted the utility to slash its delivery rate from 68 cents to 9 cents per million cubic feet of gas.
Headlee is keen on giving personal attention to his staff as well. When hiring, he seeks people with strong character and integrity and then teaches them about the energy business. On each employee's anniversary, he writes a personal letter noting the individual's specific contributions. Earlier this year, Summit acquired a European company to better work with global clients, and Headlee welcomed each of his 80 new employees with a handwritten note. Headlee's former employer has heard from him, too. Soon after he launched Summit, Headlee, a devout Christian, sent his old managers a letter saying he had forgiven them. He might have sent a thank-you note.
By Dean Foust