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When searching for electricity rates for your home or business, you may have noticed that the rates differ for residential and business customers. Even if it is the exact same local utility and supplier. Energy companies rates will vary for a number of reasons:
To qualify for a business energy rate, suppliers will confirm a number of factors to authorize a plan. First, your business must be located in a commercial zoned building.
Second, the electricity service must be designated for a commercial operation. Something like a retail store, restaurant, manufacturing facility, warehouse, service based company among others.
If you work from home or have a home-based business, you will not qualify for a commercial rate. In these cases, energy suppliers will require you to sign up for a residential energy plan.
Business energy rates will vary just like residential rates. Price is based on annual energy usage, daily energy usage patterns, and of course, the terms in your contract.
Rates for a manufacturing facility that runs 24/7 will probably be much different than a service-based business that is primarily 9-5.
Since electricity rates will vary, it is very important to compare suppliers, plans, rates, and the contract term length to make sure you get the cheapest energy plan available for your business.
View more energy data using the Energy Information Administration's electricity data browser.
There are many variables that affect rates. In most cases you have no control over these. The most common are:
For businesses, you have additional factors that may affect your energy rates, including:
Business energy rates may vary by the type of business or industry. Energy supplies rely on complex models to mitigate their overall risk (by customer) and will want to know what type of business you operate.
Generally speaking, larger corporations have more buying power than small businesses as their energy usage will be much greater. Many small businesses will join local aggregator groups to gain more leverage on pricing.
Business energy usage varies by type of business and the time of day that the energy is consumed. To determine your rate, suppliers rely on a demand curve.
By signing up for a longer contract with a supplier (2 -3 years), you should be able to secure a lower rate. With longer terms, suppliers are able to forecast usage better. This allows them to purchase energy futures to balance supply and demand. Providers will often pass that savings on to you.
From 1996-2001, 17 U.S. states deregulated their respective electricity markets. The goal of was to create a competitive market. Suppliers were forced to compete for business for the first time. The goal was to lower prices for both residential and business consumers.
This is not a new concept. Energy choice has been around since the 1980’s. Since then, 27 U.S. states creating deregulated natural gas markets.
Overall, the market remains very complex. Some states have limited participation while others have maintained their regulated markets.
Suppliers offer many different types of plans for residential and business consumers. At a high level, the suppliers offer two types of plans: fixed rate or variable rate.
Each plan has its pros and cons. If you live in a deregulated market, it’s up to you to research the local suppliers and plans to find the best plan for your home or business.
It is important to weigh the pros and cons with your unique situation and select the right plan, fixed plan or variable plan, before signing a long term contract with an energy supplier.
The simple definition of a fixed rate plan is that you are signing up for a contract with a fixed rate. That rate will remain constant for the term of the contract. Regardless of weather, natural events like hurricanes, or market volatility, your rate will not change. In most cases, fixed rate plans will have a term length of 12, 24, or 36 months.
The simple definition of a variable rate plan is that you are signing up for a contract with a variable rate. The rate will change on monthly basis based on market factors. Variable plans offer more flexibility but also present more volatility in pricing which may affect your monthly electricity bill.
In a deregulated energy market, residential or business consumers can switch energy plans at any time.
If you are locked into a longer term contract with a supplier, you can still switch to another supplier. You will just pay a switching fee. Switch fee differ by contract and supplier. Before switching, take time to read the terms of your contract and do that math to figure out if switching will offer cost savings in the long run.
If you have questions about switching, contact our customer support team.