Finding an energy broker to negotiate energy supply contracts on your behalf is critical to purchasing low-cost energy for your business or organization. With many retail energy suppliers offering utility rates in deregulated energy markets, it can be difficult to understand the best supplier and retail energy contract terms. This article outlines the top things to look for in a favorable energy supply contract and the advantages of hiring an energy broker.
Why It’s Important To Negotiate Energy Supply Agreements
If you are thinking about entering into a retail supply contract for your business, understanding the elements of the contract is critical to your success. In fact, many of the retail energy contract terms are up for negotiation if you have the right energy broker on your side. Items such as contract bandwidth clauses, fixed-price components, pass-through charges, and blend-and-extend clauses can all be negotiated or added to your contract.
Many energy suppliers offer standard energy supply contracts with boilerplate terms that are beneficial for the supplier and not necessarily the customer. If you consume lots of energy, then you have leverage when negotiating with an energy supplier. You should be able to eliminate certain clauses such as auto-renewal language and include other terms that allow you to consume as little or as much energy as you would like and still get the same fixed rate. Negotiating terms that suit your needs can not only help you save money, but it can also prevent future energy supplier problems.
What To Focus On When Negotiating Your Energy Contract
There are a few key elements of a retail energy supply contract that can have a big impact on your business. Here is a list of the most important terms and conditions of an energy supply agreement that should be negotiated on your behalf by a reputable energy broker:
Bandwidth Clauses
Energy bandwidth clauses limit customers to using a certain amount of energy over the course of a contract term. In some cases, if you plan on using more energy than you did in the past, a bandwidth clause can work against you, forcing you to pay index energy rates for the excess energy. Hiring an energy broker to negotiate your energy contract can help you to eliminate these terms.
Pass-Through Charges
Another common clause found in retail energy contracts is the ability for a supplier to pass-through additional costs above and beyond the fixed rate. In many cases, this is limited to future, unanticipated changes in transmission or capacity costs. If you are a large enough user, you might be able to negotiate a super-fixed product that does not allow the supplier to charge anything above the fixed rate.
Add-Drop Clauses
Some customers, like real estate owners who have tenants moving into and out of buildings, need more flexibility in their contracts. Typically, when a new owner takes over a utility account, the account number changes, and a drop notification is triggered by the supplier. In these cases, early termination fees are usually charged by the supplier. The right energy broker can help you negotiate flexible terms with your supplier that allows you to add and drop utility accounts throughout your contract.
Force Majeure
Force Majeure in legal contracts allows a party to breach the contract due to an unforeseeable catastrophe, such as the electrical grid shutting down for a month. In a rare case like this, a supplier is not obligated to uphold their end of the contract. In recent times, however, some energy suppliers have been taking advantage of this clause claiming that the Russia-Ukraine conflict is a force majeure event. An energy broker might be able to help you negotiate and eliminate certain events from being able to be used as force majeure.
Dual Billing Payment Terms
Many larger organizations elect to dual-billing terms with their retail energy suppliers. Suppliers will often offer lower energy rates when dual billing is in place since it allows the supplier to avoid the utility consolidated billing fee. If you are electing a dual-bill arrangement, then you might be able to negotiate better payment terms for your invoices.
Energy Brokers Can Help You Negotiate Better Terms
There are many advantages to hiring an energy broker for your business when purchasing electricity or natural gas. In fact, energy brokers specialize in energy procurement strategies and can help match you with the best supplier for your business and energy consumption profile. Now, some customers might wonder if energy brokers are legit and if there is truly an advantage to using a broker over an in-house employee. We understand that you might have concerns about energy brokers, so we put together this list of benefits:
Supplier Relationships: Energy brokers work with energy suppliers on a daily basis. They have an inside track on the best suppliers to deal with and what terms can be negotiated with what supplier.
Market Knowledge: In addition to having an understanding of retail energy supply products, energy brokers can help advise you as to the right supply agreements that match current market conditions. If the market is very volatile, you might be better off signing up for a fixed rate. If off-peak prices are low, then you could benefit from a hybrid energy product.
Leverage: Because energy brokers send lots of business to energy suppliers on a monthly basis, they sometimes have more leverage and bargaining power than a single user on their own. Let your energy broker strut his stuff and show you how he can negotiate a favorable agreement on your behalf.
Need Help Negotiating An Energy Supply Contract?
In conclusion, with the right knowledge and energy broker by your side, you should be able to craft a retail energy supply agreement that meets your needs. Whether you are a real estate owner that needs flexible account add and drop terms, or you are a large manufacturer that needs better bandwidth allotment, the right energy broker can help negotiate the terms that are right for you. If you are looking for help negotiating your next retail supply agreement, contact our team of energy professionals today.
