One of the biggest monthly bills for business owners is their electricity bill. Unfortunately, they have limited control over the cost of keeping the lights on and the building at a comfortable temperature. Finding the right electricity plan can help them lower operational costs without sacrificing comfort.
Local utility companies supply small businesses with electricity. However, electric rates in your state may vary based on several factors. Understanding these factors is essential to getting the best price. How can a business owner narrow the choices to find the provider that best meets their needs?
Comparing Electricity Rates for Businesses
Business owners should first learn whether they live in an Energy Choice state. These states allow business owners to compare electricity plans from various suppliers to find one that fits their organization. Owners should compare rates before their current contract expires to lock in a new rate if they find a better one. Customers who don’t lock in a rate will move to the index or month-to-month variable rates.
Seasonal Changes
Rates typically rise during the summer and drop as winter approaches. A business owner can secure rates six months before their contract expires, allowing them to secure the best rate and save money.
Factors That Determine the Price of Electricity
Business owners pay demand charges based on the volume of electricity they use during peak hours. This demand is measured in kilowatts (kW) or megawatts (MW). The size of the business plays a role in demand charges, and equipment and appliances that use a significant amount of energy will drive these charges up. Businesses that remain open around the clock require more power, leading to higher demand charges.
Electricity range also impacts energy bills. The range is the amount of energy consumed during a specific period. Business activities determine the electrical range, although there are seasonal variations. Load is the amount of energy consumed at a particular time. The peak load, when the business uses the most energy, may influence energy pricing, and the time of use often plays a role in what the business pays.
Time of use looks at peak hours of usage. When many people pull from the electrical grid simultaneously, rates may be higher. A company might choose a time-of-use rate and plan business activities around peak hours so they pay less in energy. However, these rates vary by provider and location, so the business owner must research the rates carefully.
Plan Types
Business owners may choose a fixed plan with a set rate for a predetermined number of months or an indexed rate plan, with rates determined by energy prices in a set geographical region. Rates vary by local market energy prices. Variable month-to-month plans have rates that change each month based on usage and market fluctuations, while a block and index electricity plan is a mixture of fixed and indexed rate plans. Customers pay a set rate for minimal usage. Additional usage is billed at the indexed rate when it exceeds this amount.
Business owners should review their electricity contracts yearly, if not more often. Doing so will allow them to lower operating expenses and increase their bottom lines. Many factors influence electricity prices, so the contract should also be reviewed whenever the organization changes significantly. Owners who regularly evaluate electricity rates find they save money while reducing their environmental impact, so everyone wins.
