In deregulated states such as Texas, small to mid-size business have the same power to choose their electricity rate that much higher energy consumers enjoy.
While shopping for energy can be time consuming and complicated, it’s worth the effort.
The Energy Buying Process
To start shopping for Texas electricity rates, you’ll need your billing info. This information includes your business locations and meters, current electricity rates, contract start and end dates, product type (you’ll want to know what’s included in your energy rate and what is not), utility, and annual electricity usage.
Once you have that information, you need to reach out to different suppliers that serve your area. Next, set up an analysis and choose a rate and a supplier. Be on the lookout for hidden fees that suppliers may not disclose initially.
Then you’ll need to pass a credit check that’ll require your business’s legal entity name, legal address, and Tax ID. For new businesses that don’t have an extensive credit history, you may have to pay a deposit. The deposit depends on your credit history, where the market is, the electricity price, and term your business signs up for. If you don’t want to do a deposit, be prepared to personally guarantee the contract (meaning if your business is unable to pay the electricity bill you, as the guarantor, will pay instead). Once your business has passed the credit check, review the contract documents to understand all the terms and conditions before signing up.
When to Use Energy Consultants
If you don't have the time or feel like you've bitten off more than you can chew, there are alternatives. You can work with an energy consultant that can help you with the energy buying process.
Many business shy away from using an energy consultant because they don't want to incur a high upfront cost. Typically, most consultants are paid small fee embedded in the price over the term of the energy contract.
When considering whether or not you should hire a consultant, keep these things in mind: Do I have the time to do it myself? Do I want to even do it myself? Where do I start?
You can always price and negotiate your own contracts, but how will you know you're getting the best deal unless you're pricing with multiple suppliers? The beauty of using an energy consultant is that they are the intermediary between you and the energy suppliers. Their function is to handle all the paperwork, negotiation, and heavy lifting for you to in order to manage your overall monthly energy spend.
Typically for small to medium size businesses, they focus on locking in a long-term low electricity rate. A good consultant will stay with you throughout your contract term to assist you with any needs that may arise, such as a meter change, an issue with billing, or turning on or off power at one of your locations. Generally, established consultants will have strong relationships with many suppliers and are able to get you rates that are better than what otherwise may be available.
When to Buy
You’ll want to buy when electricity rates are low, but when is that? Looking back over the past decade, prices tend to trend upwards in the summer months, typically June through September, due to the higher demand (such as people use more air conditioning during hotter months).
Electricity prices tend to be lower in winter, typically March through April and October through November. Depending on your situation, you may want to try a locking in a rate to carry you over to a shoulder month in winter so you can lock in a long-term low rate.
What to Consider When Buying
Past price trends show that the overall cost of electricity is on the rise from year to year. Locking in a lower rate for a shorter term, such as a 6 or 12 month rate, may not save your business the most money in the long run. If you’ve gotten bids for several terms with several different suppliers, you can compare how much you would save per year and over the term of the contract. You'll want to make sure your bids are an apples-to-apples comparison with your current electricity rate.
To do so, multiply your current electricity rate by your annual usage. That’s the total you’ve spent on electricity for a year. Then get the lowest electricity rate for each contract, and multiply each one by the your annual usage. Then take the difference between the current amount your business is paying and the amount your business would pay. This will get you the annual savings. Annual savings is what you want to compare between the different rates rather than term savings.
For example, if your current rate is $0.07632/kWh and your annual usage is 219,360 kWh, then 219,360 kWh x $0.07632/kWh is $16,741.56 spent on electricity per year (not including other fees such as delivery and service charges). Then if you select a rate of $0.0430/kWh, you’d expect to spend $9432.48 a year. Then take the difference between the current spend and project spend, $16,741.56 - $9432.48 to get the savings. Thus you’d expect to save about $7,309.08 a year on electricity.
Once you’ve calculated the annual savings for each electricity rate, you’ll want to consider the term length. Currently, electricity prices tend to increase from year to year (see the Average retail price of electricity chart, monthly above.) You may want to lock in a longer contract for a term of 24, 36, or even 48 months. In the above example, the 6 month appears to be the lowest, but may not be the best. In order to lock in the savings, the 24 and 36 month term may be best.
Getting it All Done
In the end, consider what time of year it is, the estimated annual savings, and what contract is right for your business. You’ll want to get quotes from several different energy suppliers and then compare the annual and term savings. Finally, make sure to read through the contract to see what types of fees and conditions exist as part of the contract before signing.