Energy Pricing: Understanding What Factors You Can Control

Are you interested in lowering your energy prices for your business? Did you know there are many factors that you can control to help reduce your utility bill? By understanding what factors affect energy prices, you can make a difference for your business.

Factors Affecting Energy Pricing

To get more profit from your enterprise, you must minimize inputs and maximize outputs. Here we’ll determine what energy price factors you can control and what you cannot.

Supply and Demand

In general economics, supply and demand is a crucial relationship that dictates the cost of every commodity (reference link). The demand for energy alters depending on technology, the economy, and efficiency. On the other hand, the availability of energy directly contributes to changes in price (reference link). Energy prices for your business will be lower when supply is high, and demand is low.

Climate Conditions

Extreme temperatures raise demand for cooling and heating, and the increased electrical need can raise electricity and fuel prices. During the rainy season, water is harnessed and used for generating low-cost hydropower. In addition, when there are high wind speeds, you can generate energy at lower costs. However, when wind speeds fall or there’s drought, reduced electricity output from such sources can increase pressure and prices on other energy sources. During the summer, when there is high demand, electricity rates tend to be higher, mainly because of air conditioning. If more consumers use more electricity, the requirement to effectively create and transmit it grows, and so does the cost.

Energy Prices Vary by Region

Energy prices are influenced by fuel and power plant accessibility, local pricing rules, and fuel costs. For example, electricity prices for all categories of electricity consumers in 2020 varied from 7.51¢/kWh in Louisiana to 27.55¢/kWh in Hawaii. Hawaii’s prices are high compared to other states because most of the state’s electricity is generated using imported petroleum fuels (reference link). In this case, you have to carefully consider where your business facility will be located to control the cost of energy.

Variations in the Exchange Rate

Like other globally traded commodities, currency changes can affect gas and electricity.Prices tend to reduce when the importing country’s currency is strong versus the exporting country since energy costs become less expensive. The relative earnings suppliers determine selling fuel internationally or domestically by gas prices and global oil. To some extent, all energy costs are linked.

Costs of the Distribution System

The network businesses charge energy providers for utilizing their distribution networks to carry electricity and gas across the country. They differ depending on the locale. Delivery and distribution systems must be developed, repaired, and maintained as needed. Prices fluctuate when there are challenges in transport.

Consumer Types

Industrial users pay less for electricity per kilowatt-hour than commercial customers because they can receive a more significant amount of power at once, making transport and generating faster and less expensive. Providing energy to consumers who use lower quantities, on the other hand, costs more labor, time, and, money (reference link). Therefore, you have to consider the difference between buying wholesale for bulk pricing and receiving a little at a time.

Get the Best Energy Pricing Deal for Your Business!

Obtaining quotations for corporate energy may be time-consuming and costly. Energy contracts for businesses are comprehensive, and internet comparison platforms aren’t always accurate. It would be best to negotiate gas and electricity supplies for your enterprises. Since switching is complex, many businesses disregard the market and are transferred to a worse offer. The most straightforward approach to switching your energy is hiring a professional who will provide you with financial certainty and help you save money. Don’t hesitate to get in touch with us to learn more about how we can assist you in reducing your energy bills and choosing a new energy choice today.