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How to Get Best Commercial Electricity Rates in Texas

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How to get Best Electricity Rates in Texas Revealed

In Texas, energy is one of the most volatile commodities you can buy. Finding the best Texas electricity rates depends on market timing, the reputation of your retail electric provider, contract term length, renewable energy content to meet your sustainability goals, and negotiating a host of other terms and conditions. Easy, right? Oh, and don’t forget how much weather patterns and state regulations impact energy prices. Without knowing how to navigate through the hundreds of electricity plans from dozens of energy providers, a buyer of electricity can end up paying far more than they should.

The real secret to getting the best electricity rates is to find an advisor you trust.

If you’ve made it to this page, there is a good chance that you’ve reviewed several other websites. So how do you figure out which one to use? Why would the same supplier have different rates on multiple websites? In a world that could soon be dominated by artificial intelligence, your best advice will come from humans who have proven track records with helping other humans. 5 Digital Energy is a website built by energy experts, not an energy site built by web developers.

How do you find cheap electricity? Advice from experts

We have over 850 years of combined energy experience and know a thing or two about helping clients navigate these waters. As energy advisors, our services extend much farther than just showing you today’s electricity price. We don’t have a one size fits all approach, each client has different budget and sustainability objectives. 5 Digital Energy has different advice for different types of clients. We will treat a donut shop in Dallas differently than a commercial office building in Houston, and differently than a school district in Corpus Christi. With that being said, here are some considerations we take when helping our clients with their energy plans:

Market Fundamentals and Energy Trends

Did you know that it’s usually not a great idea to wait until your contract expires before you get a renewal agreement into place? If not, you’re not alone. The vast majority of small and medium businesses have a million things to worry about. They are only reminded to take care of electricity when they get a crazy expensive electricity bill because their contract expired and they unknowingly rolled over to onerous variable rates. Unless you are watching the natural gas and electricity markets every day, you’re subject to a reactive electricity purchase – in other words, you have to take whatever the market gives you at the time you decide to shop around.

5 Digital Energy takes a more proactive approach. Once you partner with us, we reach out to you when there are opportunities in the market. For some clients, that means contacting you months, sometimes years, in advance of your contract expiration to recommend looking at future energy options for the best electricity plan.

Our team of analysts keeps a pulse on different energy market drivers and communicates to our clients with actionable information. Things like weather, natural gas prices, geopolitical conflicts, and regulatory changes have huge impacts on electricity prices and we want to arm you with the information to make wise decisions for your business.

Reputable energy providers

Since the beginning of electricity deregulation, Retail Electric Providers have created competition in the marketplace to drive down energy rates and increase options for Texans. There are dozens of suppliers serving commercial and residential electricity, so how can you tell which one to pick?

The first step is to understand the difference between a Retail Electric Provider and a utility company. Utilities like Oncor, Centerpoint, AEP and TNMP are the Texas electric companies regulated by the Public Utility Commission of Texas (PUCT). These are poles and wires companies, also known as transmission and distribution utilities (TDUs), that are responsible for the delivery and transmission of electricity to your home or business. The utility is who you call for a power outage! Though there are State regulated fees for maintaining the power grid that are passed to Texas residents and business owners, TDUs are not in the business of selling electricity.

Suppliers, or Retail Electric Providers, are the companies who buy and sell electricity to the end-users. These are companies like Reliant, Constellation, Engie, Gexa Energy, TXU Energy, Cirro, Green Mountain, and many many more. Not all suppliers are created equally. We have a lengthy vetting process for the suppliers that we choose to represent. After conducting thousands of transactions with the suppliers you see on our site, we are confident in recommending them as reputable energy providers for your home or business. These suppliers have withstood the test of COVID, the 2021 Winter Storm Uri, and many other volatile market movements. If you see them on 5 Digital Energy, you can feel confident that their terms and conditions have been reviewed and negotiated by our energy analysts.

Types of electricity plans

If you have a TV, radio, or Facebook page, you’ve most definitely heard of electricity plans promoting something free. Free nights and weekends, Free gift cards and bill credits, Free hugs on Tuesdays! Nothing is ever free (well, maybe the hugs). Suppliers will give all kinds of energy offers to incentivize you to sign with them and stay with them for as long as possible. Though they may be a little boring, fixed-rate plans are many times the best electricity rate structures for smaller consumers transacting on 5 Digital Energy.

Fixed-rate plans

This energy offer is exactly what it sounds like: a rate that is fixed for the duration of the contract. For most supply agreements executed online, regardless of electricity usage (measured in kilowatt-hours), your rate will remain the same. Rates change with the market every day, so when signing a fixed-rate plan, you are locking that rate in for the term of the agreement.

Even for fully fixed-rate plans, there can be some confusion and even deception. Since all suppliers are buying in the same wholesale market, we would expect their energy offers to be similar. If you run across an energy plan that is considerably lower than the competition, make sure you read the fine print. The lowest energy rate does not always equal the lowest energy bill. That supplier could be passing through certain components, like hub to load zone congestion, to your electricity bill.

For residential contracts, you will see an accompanying document called an Electricity Facts Label, or EFL. This document is used to try and standardize offers so the consumer can see how those passed-through components may add up to the energy rate. EFLs have to make assumptions on your kilowatt-hour usage in order to estimate those rates, so take them with a grain of salt. Not all commercial plans have this document, so it’s important to read contracts thoroughly.

Variable-rate plans

A variable-rate plan gives the supplier authority to adjust the rate as market conditions change or at their discretion. The cheapest electricity rates occur when there is little demand on the electricity grid, e.g., in the middle of the night, or during the spring and fall when not much air-conditioning or electric heating is used. This is why some suppliers offer “Free Nights” in exchange for a higher rate during the day – it’s much cheaper for them to provide electricity at night and they more than makeup for it in the afternoon when you’re blasting your A/C with a rate twice the market value.

An index or market-based product can sometimes yield the lowest electricity bills, but can also produce the most volatility with your invoices. Clients who were on an index-based contract during the massive winter storm that hit Texans in February 2021 were hit with energy bills up to 50 times higher than their normal invoices. This expense bankrupted many suppliers and businesses across the state. There are now regulations in place to prevent small business and residential electricity customers from inadvertently entering into these supply agreements. Conversely, for larger clients who can tolerate large swings in monthly energy bills, an index product may make sense.

Green energy plans

A renewable energy product is typically the exact same structure as a fixed-rate plan, with one exception. The power being purchased from the supplier comes from a renewable source, likely wind or solar energy. If you’re interested in 100% green energy, be sure to check the box on the rates screen to show supplier energy offers that come from 100% renewable sources. Green energy plans are becoming more common and more affordable and are a great option if you’re looking to lower the carbon footprint of your home or business!

Understand how your electricity usage impacts your energy bill

It’s obvious that the more electricity you use, the higher your invoice will be; but sometimes, how and when you use electricity can have more impact than you realize. There are two portions to every electricity invoice: the supply charges from the energy provider and the demand charges from the TDU, or utility company.

Residential electricity plans often lump these two components into one overall rate. Upon looking into the details, you’ll often see that that contracted rate is broken into a supply rate plus a fixed utility company monthly fee.

Commercial electricity plans, on the other hand, have more detailed TDU charges. While your supplier will charge you the contracted rate as your meter turns, you will have a completely separate portion of your electricity bill associated with fees from your utility company. The PUCT regulates the rates for each commercial tariff. Your meter falls into a particular tariff based on the amount of electricity you draw from the grid. For larger clients who demand a lot of electricity, the TDU charges can be as much or more than the supply costs.

Many of our larger clients are surprised to find out that they are being charged avoidable penalties from the utility. Don’t let a broker tell you “there’s nothing you can do about utility charges”. Yes, the rates are regulated, but there are operational strategies we can help you deploy for lowering their impact and decreasing your electricity bill. Contact us if you’re curious to learn more about power factor correction, demand response, peak load management or your whole health energy plan.

Beware of early termination fees

One of the main considerations for businesses as they enter into a supply agreement is the duration of the contract. COVID has proven that no business is bulletproof. To add insult to injury, you could be subject to an early termination fee from your electricity provider if you have to shut your doors unexpectedly.

Many residential electricity agreements have set cancellation fees for terminating the agreement early. This is a nice security blanket for consumers when choosing their plan. Commercial contracts, for the most part, do not have such black-and-white terms of service. Simply put, an early termination fee is a penalty assessed by the supplier to recoup their losses.

Penalty calculations vary from supplier to supplier; however, for the most part, an early termination fee is calculated based on the difference between the market price of electricity at the time of termination compared to the price of electricity at the time the contract was signed (aka “mark-to-market”). The cancellation fee is intended to compensate the supplier for the losses that are incurred for the period of the contract where you will no longer be taking delivery. A contract terminated with 3 months left on the agreement will likely have a much lower penalty than one that is terminated with 3 years left.

We rarely advise breaking a contract before it has reached its full term. If you fear your business may not outlive the duration of a supply agreement consider signing a shorter-term contract.

Our pick for the best Texas electricity rate

Spoiler: we don’t have one.

Better stated, we don’t have just one. The best electricity plan for you is going to be different than the best electricity plan for your neighbor. There are so many considerations that go into an electric supply agreement. Our mission is to arm you with the knowledge and confidence to make an informed decision about your energy. Yes, you can do this by yourself – but is it worth it?

It’s better to have an award-winning energy consultant sit on your side of the table and advocate for you. We get paid a small commission from the contracting supplier to evaluate all supplier offers and the commission is the same regardless of who we recommend or who you choose. Our 850 years of combined energy experience have already helped thousands of clients just like you. Contact us to learn more about how we can get you the best electricity rates.

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