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Energy Contracts: 10 Things to Consider.

September 12, 2017

Even if your energy contract isn’t up for renewal, it’s important to know what factors you should consider when that time comes. Our viewpoint is that there are several factors to consider – beyond length of term – when committing to a contract. Here’s our “Top 10”:

  1. Length of the contract – this is a good starting point for sure. Start by making sure your contract’s length is at least in synch with the time you expect to occupy your facility. An attractive five-year rate won’t be so attractive if your lease expires in three years.
  2. Current product structure – evaluate this to ensure it still meets your risk profile when thinking about a renewal. Perhaps your current product structure is one that allows for more risk but consider future needs, as well.
  3. Overall price – it’s important to look at this in context with your business and the product you are currently on. Is it working? What are your company’s long-term goals? Are you getting what you need out of the product and provider? Are you looking for budget certainty? Are you willing to take on risk with a new product?
  4. Contract language – details matter. Re-read your current contract to see if it still meets your future needs. Its language may need to be updated. Now is the time to review and potentially negotiate certain points.
  5. Experience – in a volatile and ever-evolving energy market, this alone can be the cause to switch providers. Guidance and perspective are valuable things.
  6. Relationship – consider the relationship you currently have with your sales representative and account management team. Are you receiving the help you need to navigate the renewal process? Think about your provider’s level of service. Is it exemplary? Are they available? Are they knowledgeable?
  7. Consumption Changes – this is a very important contract provision that could have a major impact as it relates to situations where your business undergoes a significant change in operations. Depending on your contract, this could also warrant a change in energy price. So be sure to consider whether your business could change and how your contract is worded in the event it does.
  8. Adding/Removing Sites – this also relates to the flexibility of your energy contract in terms how much volume can be added or deleted before a change in price is triggered. This is often stated in terms of the percentage of the load and should pertain to either a calendar or term basis.
  9. Early Termination – another “small print” factor and one that could have a big impact depending on how it’s stated and what your impact will be should you opt to back out of it before it’s been completed.
  10. Market conditions – just as your business is continually changing, so is the energy market. This creates another factor in terms of how flexible your contract is in relation to marketplace changes. A higher price may be a better “deal” if it comes with a structure designed to adjust with the market.