Oct 10, 2017 | Trends

When Should I Buy My Energy?

The number one question we get from customers is “When is the best time to buy my energy?”  Customers have been advised by other suppliers and brokers that the best months to enter future contracts are April, as summer approaches, or October, in anticipation of winter. However, this is not true. Customers should always be in buying mode and have a target price in mind in which to execute.

The optimal time to purchase energy is when expectations and reality are furthest apart, and that can happen in any month, for any reason.  For example, an unseasonably warm winter or an unseasonably mild summer will produce lessened demand and an overabundance of supply, resulting in lower pricing.

Buying energy is all about risk tolerance.  The highest risk is a fully variable contract that allows the price to swing with the markets. In good times the price remains low and advantageous while in bad times the price rises and can be exorbitant.  Over the past several years, the good times have been as low as 4-5 cents per KWH in the electric markets, and bad times have exceeded 20 cents per KWH in certain markets. Most customers cannot assume that extreme level of risk and therefore they opt for a fixed price. A risk assessment should always be the first step prior to purchasing.

Do not listen to anyone who is assuring you that they know where the energy market is going to trade in the future. No one can guarantee future costs with 100% accuracy. If they could, they would undoubtedly be billionaires. The proper way to evaluate the market is to determine how much risk are you willing to assume and for what reward.

When you have decided to go to market, you want to go with the best tools available. Albireo provides valuable options, including its online EnergyAuctions platform, which provides aggregation and competitive bidding. Our platform allows accounts to combine their loads with other accounts for maximum group benefit and then bids out these aggregations to compete among vetted suppliers.

The most effective way to purchase energy is to align with a provider that is constantly watching market conditions, speaks with you about your risk tolerances, and has the tools and services available to efficiently execute on your behalf.  Beware of any business relationship where you are buying energy simply because your contract is expiring. That will box you into a corner where you are forced to purchase energy based on time constraints, eliminating the potential to buy when the market is low.

Over the past few years, energy prices have remained relatively cheap. As a result, customers have been lulled into a false sense of security, believing that the markets will avoid volatility and remain low. However, it only takes one unexpected event for the market to regain its swings. The best approach is to be prepared, use the tools available to evaluate risk, and develop a plan to execute.  By applying these principles, you should be able to lock in a favorable deal.

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