What changes rates from business to business in the same zip code? Or, as my customer put it, “What gives? Am I paying a higher rate than my neighbor?”
Great question. Knowing that we shopped his rate with 13 suppliers who like muti-metered accounts (this customer is an RV park owner discussing a neighboring RV park up the road), I suspected that his neighbor’s “lower rate” does not necessarily mean he has a lower bill. The way to know for sure is to get from the neighbor a bill copy, a utility usage file, and a copy of the contract he signed. This might be intrusive unless you are really great friends so in the end it can be hard to know for sure.
Instead of staying awake at night scolding yourself with what you should have done better to get a lower rate, try this instead: Realize that maybe you have a great rate, after all. There are plenty of good reasons why rates vary between businesses!
So here it is, 13 Reasons Your Neighbor Might Seem to Pay Less for Their Power:
- Number of Meters – The number of meters you have can make your location more or less desirable to a supplier depending on who the supplier can better service. Some suppliers are better suited for multiple metered facilities. Generally the more meters you have, the higher the rate (unless there are per meter fees.)
- Seasonal Usage – If you use most of your power in a few months, your rate can be higher. This information can be found on your utility usage file.
- Load Zone – This has to do with where the power is delivered to. Even if just a few blocks away from each other, supply charges can vary based on location.
- Load Profile – This information is also found on your utility usage file. If you have a “low load” profile and your neighbor has a “high load profile” then his pricing might be lower.
- kWh used – Generally the more kWh’s your business consumes, the sharper the rate.
- Meter Fees – As I mentioned above, there might be hefty meter fees as high as $15/month per meter, hiding behind that seemingly lower rate.
- Portals or Other Ease of Use Tools – These handy supplier tools are not free! If you can log in and turn meters on or off in a portal to avoid hefty delivery charges when the meters are not in use, that can save you a fortune over time in delivery charges, but calling the supplier and the utility every time to manage this can be really difficult. Some suppliers offer programs for users with multiple/seasonal meters, and the pricing for programs like this can be higher.
- Billing Differences – some states give you an option to bill with your utility (Single billing) or get a separate bill from your supplier (Dual billing). Generally the rate will be lower if you opt to let the supplier send you a separate bill (Sorry Texas, not you guys!)
- Credit – if you are less of a risk, you will have less of a bill! Be sure to know how you fare with Dunn and Bradstreet.
- Contract Language – some suppliers offer a dirt cheap rate, but there are items in the contract that allow for them to change the rate without any reason at all – and sometimes, they do! It is always better to go with an established supplier if the rates are comparable.
- The contract is with a bad player. Bad players might not hedge properly, are gaining market share for an upcoming acquisition, or plan on changing your price or selling your contract in the months to come. Supplier reputation matters!
- Term – if your neighbor signed for a different term, they will have different pricing. A lot of the time, a longer term means a higher price, but this is not always the case. Also on certain days, there is sweet spot pricing where an odd term is significantly cheaper. It is important to get back to your broker when they reach out to you with offers – you may miss the boat if you wait even a week. A good broker will be keeping an eye out for your renewal prices up to a year before your end date to make sure you get the best deal waiting for you when your current contract ends.
- Start Dates – If your neighbor had a more favorable start date for their contract, or bought at the right time in the past, they could have had access to cheaper pricing. You can’t compare your pricing to your neighbors unless you have similar usage profiles, and signed for the same product, term and start date at the least.
- Type of Product - Are you fully fixed? Did we go with a block product? Is your neighbor enjoying a blend and extend product? Index? Even if they say they are “fixed” that can mean different things.
I understand the feeling of trusting your broker only to find out that you may have been “had.” Because our power bills can be our main expense, it is the one place we can really save money. Locking in for two years on a wing and a prayer can be exhausting. But take heart! Just because your neighbor is bragging about his rate does not mean you did not also get a fabulous deal. They say the devil is in the details, but so are the savings! It is important to know where these savings can hide, and Shop My Power wants to make sure you feel good about your contract so that you don’t get rattled by fear in this marketplace. And by the way, if we find your neighbor has a great deal with a supplier we don’t work with, we will actively pursue that supplier to include their pricing in your future offers.