Stay Away From Variable Electric Rates
< Unless you are a large commercial facility you want to stay away from variable electric rates. There is a good product out there called MCPE which is the index rate managed by the ERCOT grid but this is not available to small commercial businesses or residential customers. The variable market rates being offered by the residential electric companies right now are made up of a fixed energy rate and partially a variable rate that follows natural gas. Many people stop here thinking, "Aren't we talking about electricity? Why are you bringing up natural gas?" The reason electric companies have their energy rate follow natural gas is because the electric rates are actually primarily created by natural gas at the generation plants. When the retail electric providers sell you their electric rate they had previously gone out on their trading desk and bought large natural gas futures contracts. They hedge this energy price and sell it to you as an electric rate. What many providers have begun to do is sort of trick their customers. They will offer you a 12 month electric rate. Many people will think great I will sign up for this great 12 month fixed rate. The problem is that you must read what you are signing. The 12 month rates being offered by some of the providers are actually a variable rate plan that you lock yourself into for 12 months. This means that although the rate looks good on the 1st month you may be really hit hard with an outrageous electric rate during the term of the energy contract with no affordable way to escape.
But Won’t I Save Money If The Energy Rate Goes Down?
Most people see 12 months and think, “good I’m on a fixed rate for 12 months” but this is not the case always. Be sure to look at the facts label or contract and make sure they are offering a fixed rate. Also, ask the sales guy from the start if the rate is fixed. When you sign up for a great electric rate on a 12 month “variable” rate plan you are protected that month but the provider is protected the remaining 11 months. You are in no way protected on the upside although the provider is. If energy costs go up the electric provider just raises your electric rate and perhaps adds a little extra to the rate for profit sake. If the rate goes down you benefit but this type of deal is already available by certain energy companies where you are not locked into a contract and can get out at anytime. If you do sign up for a variable energy rate make sure you are not locked into a contract unless you are a large commercial business signing up for an MCPE index rate.
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