Whether you are an energy broker negotiating with energy suppliers on behalf of your customers, or an end user looking to find the best energy supply prices for your business, there are many things to consider before signing an energy contract. This article aims to serve as a guide when shopping for energy and warns both consumers and energy consultants/brokers against falling for the lowest price every time.
The Energy Pricing Dilemma
Whether you’re new to shopping for energy in deregulated states, or a veteran, it’s quite obvious that there are many different energy plans and energy companies to choose from. But, who are the top energy providers in the United States, and how do you know if they will honor their end of the bargain? Sometimes the lowest advertised fixed rate comes with its own problems. In fact, there have been many situations where fixed-rate energy contracts are not honored by energy suppliers. This creates problems for energy brokers and customers, who end up paying higher-than-expected energy bills.
Over the last decade there have been many horror stories about retail energy suppliers filing for bankruptcy, changing energy contract terms, and ultimately leaving their customers holding the bag. Here are some of the more recent scenarios that can cause a low fixed rate to change in the middle of an energy contract term.
Bankruptcy Filings
There have been several retail energy suppliers to file for bankruptcy over the past few years. Companies like Liberty Power, Agera Energy, and SunWave went out of business and did not honor many fixed-rate energy contracts. As a customer of one of these companies, you might have been forced to choose another supplier or go back to your local utility company for default supply. This can be troublesome if the then-current market rates were much higher than your fixed price.
Mid-Contract Fixed Rate Changes
Recently due to current energy market volatility, there have been a handful of energy suppliers attempting to charge additional fees outside of their promised fixed rate. And what’s worse, they are attempting to do this in the midst of a fixed-rate contract term. Some suppliers are legally trying to claim Force Majeure in their contracts due to the Russia-Ukraine conflict, while others are not giving an excuse at all. This can be quite frustrating as a consumer when what you thought was a low fixed rate suddenly changes. If you are an energy broker serving customers, it’s your name and reputation that take a beating.
Transmission Adjustment Pass-Throughs
Although some energy contract language allows retail energy suppliers to pass-through transmission rate adjustments to the customer, this can come as a shock if you were expecting a fixed price. And, this strategy of advertising a low fixed rate to simply adjust it later through non-discretionary transmission fee adjustments is becoming more common practice. It is best to hire a professional energy broker to negotiate with suppliers on your behalf and review the details of your contract before you enroll.
Consider Energy Supplier Reputation Instead
A best practice to avoid having your fixed energy rate change is to choose a reputable energy supplier instead of simply chasing the lowest rate. A good exercise is to calculate the difference between a reputable supplier’s rate and a no-name supplier and consider the extra expenses as an insurance policy. For example:
Let’s assume your business uses 100,000 annual kWh of electricity
- Scenario A: Constellation Energy – $0.0850 / kWh fixed for 24 months
- Scenario B: No Name Supplier – $0.0790 / kWh fixed for 24 months
- Annual Difference: $600
Constellation is one of the nation’s top energy companies with an outstanding track record. Even though their fixed-rate offer in this scenario is $600 per year more than the alternative supplier, it might be worth considering the intangibles. Constellation will most likely honor its contract, not file for bankruptcy, and not attempt to bill additional energy pass-through charges.
On the other hand, potential problems with the no-name supplier could cost you much more than the additional $600 you will pay with Constellation. In fact, there have been recent examples of suppliers charging 50-100% more than the fixed contract rate.
Energy Broker Pro Tip: As an energy broker, it is important to make your customers aware of the potential risks associated with signing up with a less reputable energy company, and to offer them an alternative option. After all, if the energy supplier you recommend does something to negatively impact your customer, you could lose the customer relationship for good.
Need Help Deciphering Energy Suppliers?
Not only does our team have over 100 years of energy market experience, we also have relationships with practically every licensed energy supplier today. We have an understanding of what happens behind the scenes and can recommend a more reputable energy supplier for your business. Contact us today to explore your energy options.
