What Is a Lock in Contract for Energy Plans

And many providers on ComparePower allow you to lock in the rates you see today for a start date of 60 to 90 days in the future. Understanding market fundamentals, product types, key terms, and pricing components will strengthen you when shopping at a competitive price. It`s time to take responsibility for your energy expenses by making pricing and power purchase decisions that guide your business goals and ensure you leverage the relationship with your supplier. Maintain a basic understanding of the energy market and keep abreast of market changes and supplier regulation. Don`t fall into the trap of sticking to the same energy deal for several years. You will only be “locked up” if the contract includes an early departure fee. These are usually referred to as “exit fees,” but you may have already seen the terms “cancellation fee” or “interruption fee” to describe them. You can see if your electricity company has an exit fee by looking at the electricity price brochure. Natural gas has a fairly cyclical market.

So if you`re not already tied to a contract, you can use seasonality to determine when prices are most likely to be the lowest. As people consume more natural gas during seasons of high demand, market prices will rise. So the best time to secure natural gas prices is in the months of low demand. This article gives an overview of some of the market fundamentals and types of pricing plans that can help you shop at a competitive price. You`ll learn the important terms and components that make up most electricity and natural gas prices to better understand what might need to be clarified and which offerings make the most sense for your business. Most suppliers give you the option of not having a fluctuation, 10% fluctuation or 100% fluctuation associated with a solid or variable natural gas product. Swing allows your business to go above or below the amount to be delivered, often referred to as the “contract quantity,” while being billed or credited for a used or unused volume at your fixed or indexed price. Index priced products can be beneficial because they allow you to avoid the markup that can be charged for fixed price products. Index prices offer a higher degree of flexibility to take advantage of market lows until the time and market conditions are more favorable to enter into a long-term contract with a fixed price. Companies that use index-priced products can also benefit from “usage time” by scheduling off-peak activities when prices are low. This type of plan tends to work best for companies with a higher risk tolerance. Utilities sometimes offer two main ways to pay for your electricity.

For many, blocking electricity rates makes a lot of sense. But you may be wondering, “Should I block my electricity rate or pay the market price every month and take the risk that prices will go down?” The answer depends on how you consume electricity and the level of risk you are willing to take. So it`s worth taking some time to weigh your options. When you get a quote for electricity or natural gas from an energy supplier, there are usually three main positions: The three factors that determine the market price of electricity can be very different. Some power plants are simply more expensive to operate than others, making the electricity they sell more expensive. Another important factor is the season. When there is high demand, such as in the summer, when everyone turns on their air conditioners at the same time, energy companies are forced to buy more electricity – and more expensive. This also usually happens in winter, when we leave the lights on longer and turn on the heating.

The more the energy company pays, the more you, the consumer, pay. That is, unless you lock in your prices in advance with a fixed-price plan. Combination products offer ultimate flexibility in power purchase, giving you access to wholesale market prices while offering the ability to repair or float parts of your natural gas to your liking based on your company`s risk tolerance and business goals. The first thing that speaks in favor of energy rate lock-in is that you can fend off inevitable rate increases. So if your neighbors pay higher prices at certain times of the year, you will continue to enjoy the same price and save a lot of money. Electricity market offers may include a “performance period”, which can also be referred to (confusingly) as the “contract term”. A service period refers to the period during which you receive a discount – this does not mean that you are bound by a contract for that period. For example, a contract may have a performance period of 12 months.

This means that all applicable discounts are only valid for the first year after registration during the performance of the contract. You can see sample plans with conditional discounts using our energy comparison tool below. Under Texas law, you can terminate your contract without penalty up to 14 days before your contract deadline expires. “Growth in domestic natural gas production leads to the development of LNG export terminals,” March 4, 2016, U.S. Energy Information Administration, March 4, 2016, www.eia.gov/todayinenergy/detail.php?id=25232 utilities can offer two types of plans to pay for electricity. One option is to block electricity rates at the same pre-contractual price for a certain period of time. This plan is a so-called delivery schedule with a fixed interest rate. Fill out the form below if you would like to receive an email reminder when your contract is about to expire. If you already have a contract, we can help. Combined products are a hybrid offer of fixed and index prices purchased under a single contract. They give you the choice to secure the base share of your natural gas at a fixed price and float NYMEX stock at market prices.

Some providers may allow you to decide when you want to lock it, and others may offer products that lock the floating part for you when the market reaches a predetermined low or high. With a combined product, your company can continuously manage the risk-cost strategy, depending on the changing risk appetite and cost opportunities of natural gas. Combined products can offer the best benefits of both products at a price. If you`re already on an energy blocking plan, but at a high rate, you may want to change when rates are lower. But the lock usually comes with a certain period of time over which the rate will prevail. You will have to wait for the plan to complete before you can upgrade to a new lower lock rate. If you`re thinking about the best time to set a fixed price for natural gas or electricity, you need to understand what a shoulder month is. .