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Energy Pricing Offers 101: Electricity

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We recently highlighted which factors to consider when finding the best natural gas offer for your business. Much of the same holds true for buying electricity — but with some small, key differences. 

Direct Energy Business is here to help you find the best electricity offer for your business. We've put together an in-depth eGuide on what impacts electricity and natural gas prices, and what to look for when determining the best offer. 

With electricity, there are three main factors that make up a pricing quote: price of supply, overall usage, and the delivery period. Here's what goes into each of the three main price determinants: 

Price of Energy Supply

Electricity supply pricing consists of six main costs:

  • The cost of electricity itself
  • Costs associated with ensuring sufficient capacity or generation in a market
  • Service charges related to grid maintenance
  • Transmission costs, or the cost of moving power from the generator to your local distribution company
  • Costs to help recover losses associated with transmission
  • And, the costs related to procuring power from renewable energy resources, such as wind and solar power

All of these supply factors can directly impact the price of your electricity. 

Overall Electricity Usage

Electricity pricing is based on on your usage history with previous suppliers and/or your recent invoices. Because this information is estimated, increases or decreases in your usage can affect the overall cost. However, as we often discuss on the Direct Energy Business Blog, there are many ways save energy and money by reducing your business's electricity usage

Electricity Delivery Period 

The electricity delivery period is the time frame for which you are requesting a pricing quote and is subject to price fluctuations depending on the length of the contract. For example, a 24-month fixed price contract at a rate of $0.08/kWh may actually be a better value than a 12-month contract at $0.07/kWh as a longer term contract may protect you from potential rate increases during the second year of the contract. 

So, how can you identify the best electricity pricing offer for your business? By soliciting at least three supplier bids, directly comparing the price offers, and requesting different price configurations to get a complete sense of your choices. Your best option will be a financially stable supplier that can meet your business's billing, service, and price requirements.

For more information on finding the best electricity pricing offer for your business, check out our Energy Pricing Offer 101: Electricity infographic.

Posted: September 29, 2015