Many customers lack the expertise to understand that term length and the timing of their signature on an energy contract can greatly influence the price they pay for their power. This is especially true when looking to secure a fixed price; most customers prefer fixed-rate agreements, as they offer budget certainty and help with financial planning.
This means the commodity used to generate the power is directly tied to the price of the power itself. Thus, with gas prices being extremely volatile – pricing indices such the NYMEX can fluctuate every 15 minutes – securing a fixed rate at the right time is a prerequisite for achieving a cost-effective deal.
Power and natural gas prices are closely linked to supply and demand. Huge swings can be witnessed depending upon natural gas storage reports (supply) and weather conditions (which drive demand). As the primary source of heat, natural gas prices often rise during the winter months. Colder than normal winters drive prices further. Summers are usually the lowest demand periods for natural gas, although extremely hot periods during the summer can spike demand for natural gas as it is used to generate electrical power also. For this reason, the best times to lock into a fixed-rate agreement are during shoulder months. Shoulder months generally comprise anytime during late September, early November, March, end of April to the middle of May. However, these may fluctuate if unseasonal or extreme weather occurs. Opportunities for substantial savings will frequently arise for those who move swiftly and decisively. This is an area where Diversegy’s in-house team of experts excels.
Let’s consider an example where, hypothetically, you need to renew your agreement by August of this year. Unaware or unguided, you may opt to sign up in July – a peak month where available prices are likely higher due to seasonal demand – or you could elect to renew in April, a shoulder month where prices are generally lower. This decision will make a huge difference in your energy spend.
The length of the term of your contract is extremely important since it offers price protection and predictability. Suppliers base the price you pay on the average of the season’s varying prices, so an 18 month contract with 2 peak seasons would have a more attractive price than an 18 month contract with 3 peak seasons. This is also where timing also comes into play, as the beginning and end dates of the service will determine how many peak months are covered.
Diversegy’s specialty – what we’re better at than just about anyone else in the industry – is creating customized procurement strategies that account for both factors detailed above. We advise on the pricing structure and term length that would be best for our customers, as well as the optimal timing for contract execution. We are expert at negotiating competitive contracts at the most opportune points in the market. With prices often only available for hours at a time we ensure all information sent through to you is as clear cut and concise as possible to help facilitate your decision.
Don’t pay more than you have to for your power. Contact us today to discuss your goals and receive your complimentary bill analysis.