Lowest Price, Highest Priority? Not so Fast!
Everyone likes saving money. Capturing instant savings is a prompt reward for your efforts of locking in a lower electricity rate. However, is the contract you are signing going to eventually cost you thousands more than if you simply pay a little bit more per KWh?
While finding an ideal price is important, you also have to consider several other factors besides the rate you see up front. Here are several questions to ask yourself before taking the plunge:
When is your lease up?
If you don’t own the location in question, make sure your lease doesn’t end mid-contract. If you are unsure about renewing a lease, look into pursuing rollover or termination options in your contract. Certain suppliers work better than others with these types of deals.
Do you have tenants moving in and out?
Many property managers do not want to deal with procuring energy and distributing bills amongst tenants. However, during vacancy periods, the power needs to keep flowing and switching meters on and off can be very costly if the right contract is not in place.
Do you tend to pay bills late?
While this may be a miniscule issue, some suppliers have no mercy for late payers. Whether you have fallen into late bill pay habits or your overhead bill pay is timed late every month, you need to be sure your contract allows for late payments. Penalties add up and can be substantial depending on the supplier.
Does your electricity usage vary significantly?
When I was signing up for my personal electricity contract last month, I saw a $.086 rate and a $.089 rate, both assuming monthly usage over 2500 KWh. With the lower rate, if my usage drops below 1000 KWh, my price actually jumps to around $.11. With the “higher rate” I was looking at around $.091. How often will I use over 2500 KWh living alone in an apartment? Probably never. You will encounter this “fine print” situation in both residential and commercial situations. Furthermore, with commercial contracts, some suppliers will actually charge penalties for not using as much power as anticipated.
When contracting for electricity, it’s not as black and white as winning a pricing war. You need to consider many things besides just the price of your electricity. Many businesses’ needs can be very complex and it is essential for your consultant or broker to understand your business before prompting you to make a move. Often, when you come to understand the importance of conveniences and cost avoidance measures to your business, it makes sense to go for a slightly higher price to limit risks of high penalties and fees.