Energy Information
Heat Wave Pushes Cost of Energy Up for Those Choosing Market-Based Rates.
Across the nation, the heat is on! What does this mean for energy prices? As temperatures break records around the country, so follows the price of electricity. For those purchasing their energy on an index or at market-based rates, it means they will pay more as well.
Background
In the summertime, if it's hot, energy use is up. One of the main reasons for high electric prices is that more gas turbines are being used to meet the additional electric demand.
What this means for your company.
If your company currently purchases energy on an index or at market-based rates, you will be faced with much higher energy bills throughout the cooling season! Indexed pricing is based on energy prices that can change from month to month. As energy prices fluctuate, those changes appear on customers' energy bills.
The above graph represents average hour ending prices per Megawatt over a typical year. Notice the dramatic increases during the July and August months.
Typically, electric prices are higher in summer months due to the increased use of seasonal equipment such as air conditioning. Be aware that prices not only go up during this period, but your facility uses significantly more energy as well - a double whammy!
Electricity is the world’s most volatile commodity, primarily because it can’t be stored. Electricity suppliers generate an amount of power to match the demand for power at that time. When demand drops, these lower month by month spot prices can be tempting.
However, companies must be aware that the spot price for that power will be much higher during times of high demand. If a company uses significantly less power during the summer than at other times or has the ability to curtail or displace load with on-site generation, indexed or market-based rates may be a viable choice. For most others, fluctuating prices mean higher energy costs.
How can your company avoid these costly monthly energy fluctuations?
Energy customers now have more options than ever before, due to changes brought about by energy deregulation. Some options for the energy-astute customer:
- Enroll in a fixed price plan avoids the volatility over the course of the year.
- For those facilities ready to become proactive, take advantage of low off-season and off-peak prices and hedge against the on-peak prices with peak shaving generation, voluntary interruptions and/or options to buy at set prices.
- Identify and implement energy efficiency measures to reduce energy consumption. This includes projects such as simple lighting retrofits to a full scale, peak shaving/back-up system installation.
- Contract for pricing options that move your company away from a calendar year pricing cycle when everyone else is shopping for power. Also, opt for a contract that covers a longer time frame, up to 36 months for example, to avoid price spikes for more competitive pricing over the long term.
- Shop for energy wisely. American PowerNet is dedicated to providing energy procurement management expertise for commercial, industrial and government entities. An independent company, we have quickly positioned ourselves as the leader in providing energy procurement services to clients in deregulated states across the country. American PowerNet currently manages the electric and natural gas procurement for thousands of accounts nationwide.