Jun 18, 2018 | Trends

Fixed-Pricing Solutions: Stable Energy Prices and Reduced Risk

Risk is part of everyday life. Navigating highways during rush hour is a risk. Taking a boat onto the open seas poses its owns risks as well. Navigating your business through the choppy waters of today’s market can be quite risky too.

Running a business presents many challenges. Keeping profits high and expenses low are the most obvious. Creating a team of dedicated employees as passionate about your company as you are can be challenging as well. Managing everyday expenses is an ever-evolving challenge. Smart companies strive to eliminate risk wherever possible.

What is a Fixed-Pricing Solution?

Managing your business’s energy budget is no different. Weather, natural gas and electric prices, and other factors can all affect your utility budget. So, how can you stabilize at least one aspect of your budget? Fixed energy pricing is the solution.

Fixed-pricing gives businesses the ability to secure a set price per kilowatt-hour throughout a designated contract term. The kilowatt is the standard unit of measure for electricity. A kilowatt-hour is the unit of energy that is expended in one hour by one kilowatt of power. This fixed-pricing also applies to natural gas therms. Since natural gas meters measure volume and not energy content, a therm factor is used by natural gas companies to convert the volume of gas used to its heat equivalent, and thus calculate the actual energy use.

Fixed-pricing applies to the price you will pay for electricity in Kilowatt hours. With fixed-pricing, there is some risk involved. If you lock your business into a fixed price, you do run the risk that electricity prices may drop and you will end up paying more than the current rate. It’s also important to remember that even though your rate is fixed, if your energy consumption increases due to extreme weather or other unexpected conditions, your energy spend will increase too.

Look at this example. If the current electricity rate is 6.5 cents per kilowatt hour, you may lock into a future contract where you pay a rate of 6.75 cents per kWh. The rate is slightly higher than the current price, but you are betting that electricity rates will increase over the term of your current contract. If prices increase, (as they usually do) you win. There are other benefits to consider as well.

Benefits of Fixed-pricing

For many businesses, the benefits of locking in a utility price outweigh the risks. These include:

• Reduced exposure to market volatility. The market is constantly in flux due to weather conditions, high demand, operational costs, and other factors. With a fixed rate, your business is not affected by unexpected upswings in utility rates.

• Accurate budgeting tool. Knowing the amount your business will spend every month on utilities helps you to more easily balance your budget. If you desire budget certainty, fixed pricing is your best alternative.

• Flexible contract lengths. Supplier contracts are generally between 12 and 24 months but can go as high as 60 months if desirable. A 12-month contract will allow you to try Fixed Pricing to see if it suits your business’ needs.

How Albireo Can Help

If you are not certain whether your business would benefit from fixed-pricing, we are available to discuss your concerns. Partnering with an energy management consultant such as Albireo is the first step to finding energy management solutions that optimally fit your needs. Our experts are available to meet with you and discuss our services. Reach out to us today at [email protected] or call 800-201-3153. Trust Albireo to power your business.

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