Electricity Purchasing
Fixed Price
The Fixed Price strategy involves locking in an all-inclusive $/kWh rate for the entire contract term, typically lasting one to five years. This approach provides simplicity and predictability, making budgeting easier and protecting against market price spikes. However, it can lead to higher costs if market prices fall.
This option is ideal for risk-averse organizations that prioritize stable and predictable energy costs over potential market savings.
Index (Market-Based)
The Index (Market-Based) strategy ties energy costs directly to wholesale market rates, such as the Day-Ahead or Real-Time index, plus a supplier adder. Prices fluctuate with the market, offering the potential for the lowest overall cost and full transparency. This flexibility allows customers to take advantage of low market prices, but it also introduces high volatility and unpredictable monthly bills. Active management and market awareness are essential.
This approach is best suited for businesses that are comfortable with market volatility and can shift operations to off-peak hours when volatility and prices are high.
Load Following Hedge
The Load Following Hedge strategy involves purchasing percentages of expected energy usage at fixed prices over time, rather than locking in 100% of the load all at once. This approach allows businesses to dollar cost average their fixed percentages, up to 100% fixed rate. The remaining open position will be market index rates. This staggered approach reduces the risk of locking in during unfavorable market conditions and provides a steady path toward price stability. By blending multiple purchases, businesses can smooth out market fluctuations and maintain some flexibility.
This approach is best suited for businesses willing to undertake risk but not being fully exposed to market index rates.