How to Shop for Business Electricity Rates

How to Shop for Business Electricity Rates

  • Written By: Kelly Bedrich

  • Whether you’re in business for yourself, an office manager, or a procurement pro, when you shop electricity rates for your business, it can be a confusing process. It’s something you have to do, but perhaps it’s not your full time job. We’re here to help you shop for business electricity rates. And that is our full time job! simplifies how you shop for business electricity rates, bringing you the best plans from reputable electricity providers.

    Shop online for small business electricity rates in Texas or get a custom quote for your business electricity in Texas, Connecticut, Illinois, New York, Ohio or Pennsylvania. As a licensed commercial electricity broker, we’re able to walk you through energy procurement for your company.

    Want to know how to get the best electricity rate for your business? Get ready. Because we’re about to tell you how. Your boss is going to be super impressed.

    (In a hurry? Jump right to Shop for Small Business Electricity Rates or Shop for Large Commercial Electricity Rates.)

    How to Shop Your Business Electricity Contract to Get the Best Rates

    Managing your business electricity is part of having energy procurement strategy. Here are the items you need to think about to get the best rates for your business.

    Utility or Competitive Supplier?

    In deregulated electricity markets, you can purchase your commercial electricity supply from the local utility, under their standard service offer. Or you can purchase your electricity from an alternative supplier.

    With the utility, your rate will change periodically and you have no control. With a supplier you’ll be able to secure your electricity rate, which helps with budgeting. Note: Texas is completely different. In deregulated Texas markets, you must choose a supplier, you can not purchase power from the local utility.

    Timing Your Electricity Contract

    People always ask us, “When is the best time to shop for business electricity?

    The simple answer? Before your contract expires. If you don’t lock in a new rate before your contract expires, you’ll end up on an index rate or month to month variable rate. That take control of your business electricity costs completely out of your hands.

    The more complex answer? Electricity contract rates for business vary by the season. Rates tend to be higher in the summer than in the winter. But, you can lock in your business electricity rates up to 6 months in advance. For example, say your contract expires in July. Instead of waiting until then, you can shop for your next electric rate in January. You’ll get a lower electricity rate for your business, plus you can take the time to compare business electricity suppliers.

    No matter when you shop, you’re looking for the best electricity rate for your business.

    Electricity Contract Term

    Contracts for business electricity rates can be month to month, 6-12 months or as long as 60 months. The best electricity plan for your business depends on your business needs.

    Many business owners go with a 12 month contract. This fits the annual business planning cycle. It also insures that you aren’t stuck with a big liquidated damage cancellation fee if your company needs to cancel due to some unforeseen changes..

    Depending on market conditions and your business needs, a longer term contract of 24 months or more may give you the lowest price. When the electricity commodity markets are backwardated (meaning wholesale costs for future power are lower than the current cost of power) longer term contracts are more attractive. Electricity commodity markets are currently backwardated, and long term plans offer a lower price per kilowatt hour than short term plans.

    Things to consider with a long or short term contract include:

    • Can I afford an early termination penalty if I need to cancel my contract?
    • Am I comfortable committing to a long term contract?
    • Do I want to match my electricity contract to my lease agreement term or our company budget cycle?

    Types of Business Electricity Rates

    There are a variety of plan types available for your business electricity. Below we review the most common business power plans.

    Fixed Rate Plan. This is our top recommendation for business electricity. Under a fixed price business electricity plan, you’ll pay the same price per kilowatt hour of power regardless of when you use it, or how much you use. This rate, taken in conjunction with your historical kWh usage, lets you budget your total electricity expenses for your business year. This is the most common type of electricity plan for small, medium and large commercial customers. It’s easy to manage, and it’s a “one and done” approach to energy procurement. The only way a fixed rate contract can change is due to changes in law, new legislation or changes in regulatory components.

    Indexed Rate Plan. An indexed rate plan offers a price tied to some other variable or formula to calculate your rate. For example, an indexed rate may be tied to the price of natural gas, or some other published commodity. These can offer low business electricity price per kWh. But there’s a big potential price risk if commodities spike (i.e. winter storms, summer heat waves).

    Variable Month to Month Plan. Businesses that are seasonal or don’t want to commit to a contract can select a variable business rate for their electricity. These plans are month to month which gives you a lot of flexibility. Just know that it also gives your electricity supplier a lot of flexibility too. Your rate will change monthly, typically with no limits to variability.

    Block & Index Electricity Plan. A block and index plan lets companies lock in a portion of their electricity by buying a fixed block of power. Then the remainder of the electricity costs float the market. This energy strategy is typically only used by large industrial electricity customers (like hospitals) with a full time energy procurement manager.

    Business Electricity Usage, Demand & Load Factor

    The next three items are a trio that all tie in closely — usage, demand and load factor. How much you use, how much you use at any given time, and how consistently you use that level.

    First, your total usage. Your total usage is just part of the package. It’s also important to consider what time of day and day of week you use it.

    Second, your load factor. Load factor is your average usage vs. the highest usage over a specific period of time. Customers that use power consistently have a high load factor / low demand and usually qualify for lower electricity rates for their consumption. Customers that use a lot of power over a short period of time have a low load factor but high peak demand. You’ll pay higher rates for both your power and your delivery charges.

    Third is your demand. Demand is the highest usage you have during a specific time period. Your demand will impact your price per kWh and your demand charges from the utility.

    The utility will designate your meter as high, medium or low load factor based on historical usage.

    Most small and medium business customers are low load factor. If you are in Texas, you can compare business electricity prices per kWh for high, medium or low load factor online.

    Read more about load factor and commercial demand charges in our article.

    If you’re shopping for electricity for manufacturing, electricity for oilfield services, electricity for hospitals and clinics, or electricity for restaurants, demand is a big component of your electricity bill. We have additional content on each of these industries.

    Early Termination Fees (ETF)

    Ah, the joys of things not turning out the way you expected. If you need to cancel your electricity contract, your early termination fee depends on whether you are a small business or a large commercial customers. Small business electricity contracts usually have a set fee to exit the agreement. Large C&I electricity contracts are usually based on liquidated damages. Your cancellation fee is calculated based on how much power the electricity supplier purchased on your behalf, and how much they can sell if for on the current market.

    When you are picking a contract term, think about whether you may be selling your business or moving to a new location. Most business electricity contracts can be transferred to a new owner if they pass a credit check. Or, you can include payment of your contract ETF in your purchase and sale agreement.

    Why are Home and Business Electricity Rates Different?

    Businesses and homes use electricity differently. Electricity suppliers use what’s called a “load profile” for each type of customer to price electricity. The load profiles come from the local utility company or, in some cases, the local regional electrical system operator.

    Each load profile shows what the average residential customer or small/medium commercial customer uses during each month of the year and time of the day. Load profiles are essential to pricing since the underlying cost of electricity is dependent on the time of year and the time of day electricity is used.

    Compare electric load profiles
    Load profiles of homes, small businesses, and large businesses are quite different.

    An electricity rate for a home assumes that 60% of usage is for heating and cooling, and that more power is used in June – August. Residential electricity rates also take into account what percentage of power is used at night when everyone is home. Compare that usage profile to a business operating Monday through Friday, 8am – 6pm. A business usage profile is very different from a home electricity usage profile, and is more consistent throughout the year and throughout the week.

    In Texas, another difference between electricity and residential electricity prices is how rates are quoted. Residential electricity in Texas is quoted including delivery. Business electricity rates in Texas are quoted as just energy supply. That’s because delivery rates for businesses vary by the type of meter and the demand level.

    How Do I Compare Business Electricity Rates?

    As noted above, your meter type determines your TDU delivery rates and whether or not you will have a demand charge. Your TDU delivery charges will be the same regardless of the electricity supplier you choose. The key is focusing on the price per kilowatt hour for supply, or sometimes called the energy charge.

    If you are using to shop for your business electricity rates, you can select plans to compare in a handy chart format to narrow your search. Each plan is displayed showing the price per kilowatt hour for supply, the number of months in the term, the type of plan (fixed, variable, index) and the percentage of renewable energy. You can shop online and compare business electricity rates online for Texas, Ohio, and Connecticut.

    Shop for business electricity
    When you shop for business electricity, focus on the energy rate per kWh, term, type of plan and percentage green.

    Ways to Shop for Business Electricity – Online, Broker, Phone & Door to Door Sales

    Now that you know what goes into your task of shopping for business electricity, you need to take the next step. How do you want to shop for electricity for your business?

    If you shop for commercial electricity on your own, you’ll need to contact multiple suppliers to get rates and contracts. Most providers don’t post electricity rates online, so that means you’ll be on the phone. You’ll want to keep a spreadsheet of your different offers. Then when you’re ready to sign your agreement you’ll need to get the prices refreshed, since the market moves constantly.

    Or, work with an electricity broker like ElectricityPlans. We are a business energy price comparison website that lets you compare business electricity suppliers online. If you spend more than $2,500 a month on electricity, call us for a custom quote.

    One note of caution. Don’t sign up for business electricity from an unsolicited phone call or a door to door sales person. Historically, these sales tactics will give you a higher electricity price, an indexed electricity plan or a long term agreement that you can’t get out of.

    FREE Energy Procurement Checklist: Getting organized is half the battle when you’re shopping for business electricity. Download this electricity procurement checklist to get organized. Then use to shop for business electricity rates. You can easily compare rates, pick your contract start month and execute an e-contract, all in a fraction of the time it normally takes to shop.

    Shop for Small Business Electricity Rates

    Businesses that spend less than $2,500 a month on electricity can shop for business electricity rates online and make a business rate comparison.

    You can compare Texas business electricity rates online, shop Ohio business electricity or compare Connecticut commercial electricity rates online. We can also help you compare prices for New York business electricity, Pennsylvania small business electricity or Illinois commercial electricity rates.

    Shop for Commercial & Industrial Rates (Large Commercial Electricity Rates)

    How do you get industrial electricity rates or commercial electricity rates? Due to the volume of electricity purchased, and the steady, predictable level of usage, these commercial electricity prices per kWh are usually lower.

    So how do you get commercial rates? You can’t just sign up. You need to qualify for these large business electricity rates or commercial power prices based on a number of factors:

    • Usage
    • Meter type
    • Demand
    • Number of meters
    • Industry type

    It’s not enough to just say you want a custom quote for your business electricity. You need to qualify for one based on these criteria. If you are a large commercial electricity customer, you’ll want someone on your team that can understand contracts. (Or work with ElectricityPlans’ back office team of energy procurement experts.)

    You can start shopping large commercial electricity rates by calling our procurement team at 844-214-5559. Or, get online business electricity quotes by completing the request form on the links below. One of our energy consultants will contact you.

    How Much is Commercial Electricity per kWh?

    Electricity rates for businesses vary depending on the factors outline above. Here are recent business electricity rates per kWh in select states. This is based on EIA data from April 2021.

    StateCommercial RatesIndustrial Rates
    New York15.85¢/kWh7.39¢/kWh
    US Average10.99¢/kWh6.77¢/kWh

    You can easily compare business electricity rates online with just your address. Shop Texas business electricity rates, Connecticut business electricity rates, and Ohio business electricity rates online, or contact us at 844-214-5559 to get started.

    Switching Business Electricity Suppliers

    You’ll get a renewal notice from your current electricity supplier, usually 30-45 days ahead of your expiration date, based on laws in your state.

    But as we said above, you should monitor business electricity rates in your area and consider shopping around 4-6 months before your expiration date.

    Always compare electricity prices at renewal to ensure you are getting the best business electricity prices. After all, there are many business electricity suppliers to pick from. And, your new supplier will do everything to get you switched over from your old supplier. You don’t need to contact them or contact the local utility.

    Setting Up Electricity Service for a New Business

    Setting up electricity service for a new business is a little more complicated.

    Electricity pricing is based on your usage, load factor and demand. Since you’re a new business, the electricity supplier will have a hard time pricing your electricity. They may base your load factor and demand off the prior tenant. And they may base your usage on the type of business you are operating and your square footage.

    The other factor is credit (more on that below). As a new business you may not have a lot of credit history. Certain business electricity suppliers are more lax with their credit standards. And some other suppliers will accept a personal credit check if you are a sole proprietor.

    Lastly, when you are moving in to a new space, there may be city permits for electricity. This will depend on the city you are in. If you are leasing, work with your landlord to find out the permit requirements. If you are building a new property, your builder will have connections with the permitting office. And they handle that as part of your occupancy permit.

    Your best approach when setting up electricity service for a new business? Talk to an energy procurement expert that can walk you through it. Give us a call at 844-214-5559.

    What are the Credit Requirements for Business Electricity?

    When you buy electricity, you are buying in a “post-pay” agreement. You agree to buy power from a supplier, and they agree to sell it to you and to coordinate delivery to your location. The supplier or utility company then issues you a bill for the power and delivery after you have consumed it. Whether you pay them or not, the supplier is on the hook for the power you used. Because of this, most electricity suppliers and utilities will want to run a credit check on your business.

    You’ll provide your business Federal Employer ID number (EIN) or your DUNS Number during enrollment. If you haven’t been in business long, you may not have been able to establish small business credit.

    Or, maybe starting a business stretched your resources and you don’t meet the supplier’s minimum credit threshold. Each electricity supplier has a different credit policy.

    TIP: If you are a new company, call us at 844-214-5559 to discuss your energy needs. We’ll match you with a supplier that offers the best credit terms for your business electricity.

    If you don’t meet the supplier’s minimum credit standards, you may be required to pay a deposit.

    There are several options for satisfying a deposit. First, you can pay a deposit, typically equal to 1/5 of your estimated annual usage. Or, if you have had service at that location or a prior location, you may be able to provide a credit history from your current electricity provider showing that you pay on time. Some electricity suppliers make it even easier. They simply require that you submit 1-2 of your most recent electricity bills to prove that you pay on time. There are also suppliers that will let a small business owner use personal credit to guarantee payment.

    About Kelly Bedrich

    Kelly Bedrich co-founded ElectricityPlans in 2016 with the goal of simplifying the complicated process of buying energy. As president and chief technology officer, Kelly keeps our development team focused on providing a user-friendly website. When not reading the latest on technology and finance, Kelly enjoys celebrating Taco Tuesday, listening to live music at local venues, and hiking.

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