Energy Contract Renewals

As with many commercial properties, you likely have existing fixed-rate energy supply contracts with your energy providers. With energy costs comprising 20%-30% of an office building’s annual operating expense, energy contracts have a significant impact on your building’s profitability.

·       What is a fixed-rate energy contract?

These agreements between commercial users and energy providers ensure supply and energy cost stability for large energy users, allowing accurate and dependable expense budgeting and cash flow management. When shopping for commercial rates, there are options not offered to residential customers. One of the most attractive options is a future-dated fixed-rate energy contract that has a start date well into the future. This allows you to take advantage of market conditions and lock into an advantageous energy rate well in advance of the contract start date.

·       What happens when you don’t renew your fixed-rate energy contract?

In short, nothing good will come of it. Energy suppliers will likely auto-enroll you into a new, higher fixed or variable rate that is at the discretion of the supplier and their terms.

·       Best time to renew

It is advisable to start the renewal process at least 12 months before your current energy contract ends. Obviously, the best time to renew your energy contract is when the market price is low. Market volatility is influenced by world events and an enormous amount of variability, so managing the deal on a new contract well in advance of the expiration date allows time to anticipate market volatility, evaluate provider options and avoid rushing into a late-hour decision.

·       Switch or renew your contract

You’ll need the services of a good energy broker or energy consultant who will shop the market on your behalf. I recommend using multiple brokers to bid on your business, so you have the advantage of comparing a range of provider, price and terms options.

·       Energy brokers

Using a qualified energy broker to help manage your energy contracts can give you peace of mind knowing that you have an expert in your corner. The market knowledge of an energy broker can anticipate upcoming volatility and help you to stay organized so that you do not miss out on a renewal opportunity or renew too late and ensure that the changes go smoothly.

·       Compare options

When you’re ready to renew your contracts, there are several things you need to know when comparing renewal offers from energy providers and be well-positioned to secure the best deal for your business without exposing your company to any risk. 

·       Start/end date

Energy contracts have a start date, end date, and term (in months). Typically, energy suppliers will start new contracts during a particular month on the customer’s meter reading date. It is common to have different meter read dates within your building, the exact beginning and expiration of your contract can be complicated. The energy broker you choose will assist with this. If you sign a new contract with a start date that is too early, it could expose you to early termination fees.

·       Apples-to-apples scenario

It’s essential to compare all of the terms of your renewal offers side by side to ensure that they include all the same price components. There may be special taxes on energy rates, and some suppliers to prefer to quote rates with or without tax. Making sure that you fully understand your renewal options is critical to ensuring that there are no surprises down the road.

·       Terms

Read and make sure to fully understand the terms and conditions of your new supplier’s contract in detail. Be aware of any hidden contract language that allows for pass-through charges, auto-renewals, or other adverse elements. 

·       Be diligent in tracking your utility meters

Commercial office buildings have multiple utility meters that serve various building systems, such as elevators, HVAC, boilers and furnaces, lighting for common areas, garages and lots, vacant suites and other locations. Keeping an organized, up-to-date inventory of your property’s utility meters and maintaining a history of energy usage by individual meter will speed the process as you negotiate terms of your upcoming contracts.