FAQs/Docs

Comparability of competitive electricity price offers has always been challenging, due to the large number of underlying components that get rolled into a bundled price per kWh, along with the complexity of the typical contractual Terms & Conditions which are usually multiple pages of confusing energy jargon.  Unfortunately, that difficulty has gotten considerably worse over the last few years.

Due to a steady diet of regulatory changes coming from PJM (the transmission system and wholesale market operator) and the FERC, there have been cost components that suppliers have chosen to handle differently.  Some suppliers are not transparent about what is and is not included in their price, so if you don’t know the right questions to ask, comparing several “fixed prices” will not be a true comparison, and may not even be truly a “fixed price”.  Suppliers may add on certain charges as a “pass through” cost, such as reliability must run (RMR) charges, transmission enhancement charges, balancing congestion costs, reactive service charges, and others.  Some suppliers may also adjust the contract price mid-contract if your assigned Peak Load Contribution (PLC) goes up when it is calculated each year, or if your usage deviates from historical norm by more than a preset limit or “bandwidth”.

It’s very difficult for most organizations that may deal with electricity contracting as a side responsibility once every year or two, to be fully knowledgeable of the electricity market intricacies and how different suppliers handle these issues.  Berkshire Energy Partners can make sure the price evaluation leads to the true best price and avoid surprise costs.

There have been a lot of questions and frustration on the part of electricity users over the number of additional charges to their electricity bills in recent years.  Most all electricity suppliers have contractual clauses that cover “change in laws” situations, where a law, regulation or tariff change increases cost for the supplier to serve the customer’s electric load.  In this case where a customer has a “fixed” price contract, the supplier generally has the contractual right to add these costs, referred to as “pass thru charges”, to the customer’s bill.

Years ago, the instance of these added pass thru charges were not that frequent, usually limited to covering transmission cost changes approved by the FERC.  The last few years has seen a steady diet of different pass thru charges due to continual regulatory and market rule changes driven by the transmission system and wholesale market operator PJM, including capacity performance, balancing congestion, reliability must run, and other charges. 

There are numerous electricity contract structures available as an alternative to an all-in fixed rate.  These include fixing energy but passing through at cost, some or all of the other charges such as capacity, transmission, and ancillary charges.  For organizations able to tolerate potentially significant price volatility, energy can be indexed at hourly market rates, or partially hedged through either a block structure or load following share.  Berkshire Energy Partners can review the specific situation and goals for your organization, and structure an appropriate contract to meet your needs and risk tolerance.

For some organizations with a tolerance for rate volatility, an hourly market Index contract can be a very effective contract structure over the long term.  For this type of contract, simply comparing each supplier’s fixed adder component will probably lead to a gross mistake on the relative competitiveness of the offers, depending on how each supplier handles line losses and what loss factor they use.  On an Index price, some suppliers will bill line losses as a separate item, some will gross up the metered volume to account for losses, and some will build losses into the Index adder.  The loss factor can vary between suppliers depending on whether they use a derated loss factor.  Berkshire Energy Partners will evaluate bids by modeling each supplier’s billing process to determine the lowest actual contract cost.

As part of our services, we will evaluate what your options are with your Utility and determine if it is more cost effective to contract with a supplier.  Utilities will provide supply service according to their approved tariff, unless you elect to contract with a market based supplier.  The default options between Utilities varies widely, some offering fixed rates only to very small loads such as less than 100 kW demand, and sometimes the default rates are adjusted frequently such as every three months so there is little long term price certainty.  Other utilities will provide a fixed rate for periods as long as 12 months and for loads up to 500 kW or more.  Generally, large customers have only the default option of a market Index rate which varies hour by hour, so if they want price certainty then they must contract with a supplier.   Berkshire Energy Partners will work with you to determine the best alternative for your organization.

Berkshire Energy Partners will help lower your electricity cost by generating supplier competition for your load, and recommending opportune timing in the market for contracting, but there is another potentially important avenue to reducing electricity cost for organizations that have some flexibility with their usage.  If an organization is able to reduce their usage during occasional periods of up to a few hours at a time, typically during hot summer afternoon hours, there can be significant savings available either through a Demand Response program or through peak management.  Berkshire Energy Partners can review these options to see if it is a good fit for your organization.

The most common gas contract structure is a Fixed Price, which fixes the commodity and basis cost per million BTUs.  Similar to electricity contracts, there are alternative structures depending on the goals and risk tolerance of each organization.  

A middle risk structure is commonly referred to as a “NYMEX Plus” contract where the basis charge is fixed but the commodity floats either until each monthly futures contract settlement, or the commodity is “triggered” or hedged prior to monthly settlement.     

For organizations able to tolerate potentially significant price volatility, an alternative would be an Index Contract with the price pegged to a daily spot market published index.  This can offer significant savings in the non-winter months but also can be extremely volatile in the winter heating season, and is only recommended for those with high risk tolerance for budget instability.  

Berkshire Energy Partners can review your organization’s goals and risk tolerance and determine an appropriate contract structure, and assist with a commodity triggering plan if that is a good fit.

The term “Swing” in a gas contractual context refers to the actual usage volume tolerance as compared to the monthly contracted quantity.  Contracts typically state monthly contractual volumes, usually based on past usage history.  A contract with zero swing would buy or sell at market rate instead of contract rate, any volume deviation above or below the exact contract volume.  A contract with 10% swing would buy or sell at market rate instead of contract rate, any volume deviation above 110% or below 90% of contract volume.  A full plant requirements contract would charge the contract rate regardless of any deviation from the contract volume.  

In the event that gas is bought or sold at a market rate, it is preferable to have the market rate pegged to a published index price.  Berkshire Energy Partners can recommend an appropriate structure and evaluate the overall lowest cost for your requirements.