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What to Ask Before Signing an Electricity Contract

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Buying energy isn’t as straightforward as it used to be. 

With mandatory fees making up as much as half of your power bill, and the breakdown of your costs buried in the fine print, it can be hard to tell whether an offer really is too good to be true. 

Here are some important questions to ask when you’re shopping for electricity: 

Ask: Are utility fees included in my fixed price, or will they be added separately?

While a fixed price may look attractive on paper, you'll likely see a different amount on your invoice when it's time to pay. It’s important to clarify what’s included in your price quote.

In some cases, suppliers estimate the cost of utility fees and provide you with an all-inclusive fixed price premium for your term. This quote could appear inflated because it includes all of the costs you’ll see on your bill.

In other cases, your quote may represent only the fixed supply price, or the supply price with some, but not all, of the utility fees included. This quote could appear lower than your actual bill because some price components will be passed through at-cost, in addition to your quote.

In almost all cases, your quote will exclude the cost of taxes, which vary by utility and state. 

Ask: Could I be charged extra for utility fee increases during the course of this contract?

Think of the answer to this question as a barometer of an energy supplier’s honesty.

Across the country, utilities are making extensive upgrades to aging transmission and distribution equipment – and, given the state of our infrastructure, it figures to continue in the future. These costs are often passed on to power consumers in the form of mandatory fees.

Many suppliers reserve the right to hike up a customer’s fixed rate during the contract if the utility increases capacity or transmission rates. This is why surprise bills are so common among customers with a fixed energy price over a long contract term. A price premium that covered costs at the beginning of the power contract may be too low to cover costs even a year later. And as fees are set by the utility, it’s often beyond your supplier’s control, too.

On the other hand, if your peak load curtailment strategy reduces utility fees over the course of your contract, you’re still stuck paying a fixed price premium on them and missing out on year-over-year savings.

Both scenarios cause you to pay too much – either by surprise or wrapped into a high premium.

Read the contract language thoroughly to understand how changes in utility rates and fees will be handled over the course of the contract. And don’t underestimate how much a surprise bill could set back your energy budget.

Ask: How will you help me with peak load management?

Ask your supplier or energy consultant what they can do to help you reduce capacity charges by focusing on peak load management

Some power pricing structures lock-in your capacity charge so you won’t benefit from efficiencies and curtailment, no matter what. Many organizations also lack real-time visibility into their consumption to be precise about curtailment processes. And others still have the tools necessary to cut their load, but lack a clear understanding of when peak load days may happen in order to pull the trigger.

To get the complete benefit of peak load curtailment, you need the right pricing structure, insight into when peak load days are likely to occur, and a curtailment strategy, ideally including usage monitoring technology.

It’s a good sign if your supplier can help you with all three. If they tell you it’s better to just lock in your entire price, you may not be getting the full story.

The Bottom Line

When you enter into a contract for electricity supply, be sure that you understand exactly what you are paying for and how your monthly bill will be structured.

There will always be fees associated with your power bills, regardless of which supplier you choose. But it’s up to you to ask the right questions, and choose a power supplier who can help position your organization to manage and minimize them. 

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Posted: August 08, 2018

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