Texas Commercial Electricity
Comparing Electricity Rates among the major providers
What we have seen when comparing electricity rates among some of the major electricity players in Texas is that most electricity companies wish to compete but the conservative energy trading policies in place do not always allow for them to lower or match a competing electric providers prices.
Problems a company may face when shopping for electric rates
Let’s make up a scenario, Let’s say John with ACME inc. decides to shop around for the cheapest electric rate. He goes to TXU and asks them to give him their best rates for 12 months, 24 months and 36 month terms. TXU comes back and quotes him some great rates. TXU even offers to give him theÂ possibility of an even lower rate if they can have the option to extend that rate out an additional year if they so choose. John doesn’t bite as that would mean he gets a good rate but he is in no way protected on the down side. If rates go down further he has to maintain his existing rate and do you really think TXU would excercise that option if the rates were to go up?
So John goes over to Reliant energy to see what they can do. They offer competitive electric rates but not good enough to beat TXU. TXU however is requiring a large deposit and Reliant is not requiring this. This makes John a little more inclined to go with Reliant but not until he checks out a few not so familiar electric companies.
Comparing multiple Electric Providers
John calls up Champion Energy, Spark Energy, and Green Mountain Energy company to see what type of deals they have going. Each company lags far behind TXU and Reliant except for one. It looks like Green Mountain Energy is willing to compete and has the energy trading policy that has them pricing near the bottom of the Retail margin available to make a profit. Green Mountain Energy is willing to make a small profit on the sale because they have been told by the customer what TXU is pricing at.
Going back to the best electric bid
John goes back to TXU and asks for better terms regarding the deposit requirement and a better price. Now TXU realizes this customer is beginning to receive some competitive prices. Because John is a facilities manager for a company that uses 10,000,000 kwh of powerÂ TXU decides toÂ price below the Retail Margin that they could have made a profit and collect an additional customer at absolutely no profit. The sales manager explains that these large sales are needed prior to a possible merger with another energy company and will look good on paper. They also assure that we may be ableÂ to add profit onto the Electric Rate when their term is up next go around.
Energy Risk Management and the likely outcome to working in this box
This is a typical behind the scenes look at what may go on during the process of obtaining a competitive electricity rate. Many times it doesn’t happen like this and the customer is confused as to why their appears to be no competitive fight from provider to provider. The Electric Suppliers are just not able to match prices as a Retail Product Chain could do because the energy market has a Risk Management side to it similar to someone buying stocks for their retirement portfolio. If they were to break their energy trading policy it would be similar to a typical bad investor who puts his money into random stocks only to see the stocks plummet beyond his means. Eventually, not only does the investor not make a profit he is liable for a margin call or mortgage payment on a house. The energy trader is liable to stock holders, the Board of trustees and management. If they were to break policy they could cause serious consequences to the company.