Unless it’s their birthday, most people aren’t too keen on surprises. This is doubly true for businesses. While nobody will look suspiciously at the occasional windfall, by and large, surprises mean trouble for business. Whether it’s a broken down piece of machinery, a delayed shipment, or a jump in the price of electricity, when things don’t go according to plan, it can cost a company money.
Unfortunately, in the business world at large, and the state of Illinois in particular, surprises happen all the time. The state budget that supplies a company with needed grant money isn’t passed. An unexpected snowstorm rips in off the lake and shuts down the highways. The polar vortex plunges the temperature to twenty below, keeping employees at home and sending energy costs skyrocketing. To cope with these challenges, companies must take all the steps they can to mitigate the risk surprises pose to their business. For instance, while nobody can control the weather, businesses can easily shield themselves from unexpected energy costs by switching to a fixed-rate energy plan from a third-party energy supplier.
Variable-Rate Energy Plans Keep Electricity Prices Volatile
Variable electricity rates have long been standard practice and most companies in Illinois still purchase their energy on a variable-rate basis. On a variable-rate plan, the price that companies pay per megawatt-hour of electricity fluctuates constantly based on the current cost of energy production. This fluctuation can occur over the course of 24 hours; a company could pay a lower rate for electricity overnight, when most electrical appliances across the state are turned off, then pay a higher rate for electricity around 9 A.M. when everyone in the office turns on their computer. On a seasonal basis, companies may pay less for their electricity during the fall, when the weather is pleasant, than during the summer, when most buildings are running their air conditioning full blast. What it boils down to is that under a variable-rate plan, electricity costs more when more people are using it. For businesses, that means electricity costs the most when you need it the most.
Electricity rates vary for a number of reasons. In part, it has to do with how electricity is produced. In Illinois, much of the electricity we use comes from nuclear power plants. These plants are able to generate a large amount of electricity steadily and cheaply. So long as demand for electricity does not exceed the amount supplied by these nuclear plants, electricity is cheap. However, it is slow, difficult, and expensive to ramp up or ramp down the amount of energy produced by nuclear plants. So, when more electricity is needed than these plants are producing, other power plants must make up the difference. These plants, which may be natural gas, biomass, wind, solar, or a number of other types, are typically more expensive to run than nuclear plants. So when they get turned on, the price of electricity goes up. Simple supply and demand affects prices as well. When there is more electricity produced than is needed, the price goes down. When there is less electricity produced than needed, the price goes up.
Third-Party Energy Suppliers Expand Your Options
While variable-rate plans have been common practice for many decades, they aren’t the only way to buy electricity. In the state of Illinois, companies are allowed to purchase their electricity from third-party energy suppliers. These third-party energy suppliers are licensed to compete with the energy utilities, opening up new choices for consumers. Both utilities and third-party energy suppliers buy their electricity from the same energy markets at the same prices. In order to differentiate themselves from utilities and provide more attractive options to the public, some third-party energy suppliers have come up with new and fresh ways to package and sell the electricity to business consumers. One of these ways is by offering businesses in Illinois fixed-rate energy plans.
Fixed-Rate Energy Plans Eliminate Energy Price Uncertainty
Fixed-rate energy plans provide an alternative to traditional, variable-rate energy plans. With a fixed rate, you will pay exactly that amount per megawatt-hour for the duration of the agreement, no matter what the going rate for electricity is. That means even if everybody in the state turns on their air conditioner at exactly the same time, driving the price of energy through the roof, a business on a fixed-rate plan stills pays the same price they were paying before.
However, the true benefit of a fixed-rate plan isn’t necessarily price reduction, but price certainty. The rate you pay will be calculated based on the historical average and your expected energy use for the length of the agreement. By locking in that rate, you will be able to calculate your energy expenditures month-to-month and year-to-year with a far greater degree of accuracy than under a variable-rate plan. This gives you the certainty you need to allocate your budgets more precisely and the electricity bill no longer comes as a surprise every month.
Liberty Power started out as a small business less than two decades ago and has since grown to become the largest independent energy retailer in the United States. We believe growing businesses are the backbone of the United States and that’s why we want to help other businesses to succeed the way we have. One of the ways we help businesses achieve their goals is by offering fixed-rate energy plans. These plans give businesses the ability to think ahead and shape their strategy without worrying about unexpected spikes in their energy costs. Contact us to learn more about the plans we offer for businesses in Illinois and how a fixed-rate energy plan can help eliminate budget uncertainty in your business.