If you own a business in a state with deregulated energy and you’ve signed up with an energy supplier in the past, you might be all too familiar with the email subject line “Renew Electricity Contract”. And yes, we realize that time flies and you cannot believe your fixed electricity rate is already expiring. If you do not already have an energy broker handling the renewal of your electricity contract, then there are many important things you must know about business electricity contract renewals. This article outlines the dos, don’ts, and musts when it’s time to renew your contract or switch energy suppliers.
What Happens When You Don’t Renew Your Energy Contract
Nothing ever good comes from forgetting to renew your electric contract. Most retail energy suppliers’ electric contracts have language that allows them to bill an uncapped, variable rate after a fixed-rate contract end date. In almost all cases historically, these variable rates can be up to 100% higher than the then market prices wiping out any savings you might have realized from your fixed rate. These high, variable rates are one of the most common problems with energy suppliers today.
Other energy suppliers will auto-enroll you into a new fixed-rate term if you fail to renew your energy agreement. This new term and rate is at the discretion of the supplier and their contract terms. Often the rate is not favorable as you may be able to find a better deal by negotiating with a different energy supplier.
When Is The Best Time To Renew An Electricity Contract
When shopping for commercial electricity rates, you have several options that are not offered to residential customers. One of the most attractive options is to commit to a future-dated fixed-rate energy contract that has a start date well into the future. For example:
- You are currently under contract until January 31, 2024
- Future contract rates with a February 1, 2024 start date are favorable
- You decide in February 2023 to sign a renewal contract that begins on February 1, 2024
In the example above, commercial customers are not required to pay any money or even put down a deposit with the energy supplier. They can simply sign a renewal agreement to begin at a later date at a predetermined price.
Now that you understand how energy futures contracts work, you can see there is lots of opportunity to find low fixed renewal rates and save money. The best time to renew your energy contract is when the market is low. With recent energy market volatility due to the Russia-Ukraine crisis and other factors, it’s best to consult with a professional energy broker who can guide you through your rate options and point you in the right direction.
To Renew or To Switch? That Is The Question
So, you’ve been on a fixed-rate electricity supply contract with a retail energy supplier for almost three years. They’ve treated you well, billed you the same fixed rate every month, and you never had to worry about any hidden electric fees or charges. This supplier is offering you a renewal rate for your next contract. Should you take it or should you shop?
That is not an easy question, but the best answer is: it depends. If you have a relationship directly with the supplier and have a sales representative who looks out for your best interests, then it could make sense to remain with your current supplier. Although rare, these situations can lend themselves to special contract negotiations due to the long-term relationship.
If you are like most commercial customers and your supplier is simply the name on your electric bill under the supplier section of the bill, then it might be best to shop the market using the services of an energy broker or energy consultant. In most cases, you will always be able to find a lower renewal rate from a different energy provider that will allow you to save more money.
Here is a table with the advantages of both options:
|Renewing with current supplier||Shopping for new supplier|
|No switching required. Simple and easy.||Finding a lower rate.|
|Develop long-term relationship.||Utilizing services of an energy broker.|
|Familiarity with their practices.||Special offers for switching.|
Comparing Energy Renewal Offers
When you’re ready to renew your electricity contract, there are several things you need to know when comparing renewal offers from energy providers. By keeping the following tips in mind, you will be able to secure the best deal for your business without exposing yourself to any risk.
Know Your Contract End Date And Start Date
Energy supplier contracts have a start date, end date, and term (in months). Typically, energy suppliers will start new contracts during a particular month on the customer’s meter reading date. And since all customers have different meter read dates, the exact beginning and expiration of your contract can be complicated. Enlist the services of an energy broker to help you when renewing your contract. If you happen to sign a renewal with a start date that is too early, it could expose you to hefty early termination fees from your existing supplier.
Next, it’s important to compare all of the terms of your renewal offers side by side and make sure that they include the same price components. In some states, there is a special tax on energy rates, and some suppliers like to quote rates with or without tax. Making sure that you are able to truly understand your renewal options is critical to ensuring that there are no surprises down the road.
Renewal Contract Terms
Finally, be sure to read the terms and conditions of your new supplier’s contract in detail. Be sure to be aware of hidden contract language that allows for pass-through charges, auto-renewals, or other harmful elements.
How Energy Brokers Can Help With Renewals
Using a qualified energy broker to help manage your energy contracts can give you peace of mind knowing that you have an expert in your corner. Not only will energy brokers have more market knowledge, but they can also help you to stay organized so that you do not miss out on a renewal opportunity or renew too late for that matter. A professional broker will notify you when there are good pricing opportunities to price your contract renewal, gather multiple renewal quotes from energy suppliers, and ensure that the switch to a new supplier goes smoothly.
Need Help Managing Your Renewal?
Diversegy’s team of energy industry professionals has over 100 years of combined experience managing energy supply contracts and agreements for our commercial clients. In fact, we pride ourselves on our deep understanding of the energy markets so that we can help our customers take advantage of future pricing opportunities to save money. Contact us today to learn more about how we can help with your energy contract renewal needs.