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Bill Gates

Electricity

Customer Classifications

Competitive Markets

Retail Strategies

Timing

Competitive Market Features

Service

Electricity and natural gas are the same irrespective of the retail provider; however, contract provisions and service options can vary significantly depending upon the provider.

The energy transportation provider (i.e., wires company for electricity and pipeline company for natural gas) is a common carrier and often a different company than the energy supplier. Charges for energy transportation are regulated and are usually a pass-through cost.

Service features important to most businesses include energy supply when and as needed, price certainty, billing format and timing, payment terms, termination and transfer provisions, price change provisions, and transparency of pass-through charges.

Large commercial and industrial customers can often obtain consolidated billing (one invoice per month containing all meters) and payment terms up to 30-days.

Price change provisions are often linked to regulatory changes, major usage swings, and/or variable price indices and can be loosely worded and vary widely from one retailer to another.

Contract Options

All providers require a contract with the customer before they will provide service. Contracts for businesses are not standard among providers and should be reviewed carefully.

Definitions of price and any conditions that can result in price changes are often different among providers and understanding them is critical for insuring predictable costs.

Early termination and transfer provisions are important to businesses subject to change. Transfers must usually be formal and depend upon transferee credit. Early terminations can result in significant penalties depending upon market conditions.

Price

Energy prices can be fixed or variable; variable prices are usually tied to a published index.

Fixed prices for electricity are usually based on future natural gas prices and quotes can change every day hence a fixed contract price has to be locked in on the day quoted.

Variable electricity prices can be indexed to natural gas prices or market spot prices such as real time (15-minute interval) or day ahead wholesale rates.

A blend of fixed and variable pricing may be an option for large users desiring to take some price risk to save money or for users that cannot predict their future usage accurately.