One of the first challenges – and opportunities – in a deregulated market is selecting the right energy supplier for your business. Unlike regulated areas where you have no choice, here you might have dozens of suppliers eager for your business. But how do you choose? It’s not as simple as picking the lowest price on day one. This page will walk you through the key factors to consider and how to make an informed decision when comparing suppliers.
Don’t shop on price alone. It may be tempting to go with the supplier offering a rock-bottom rate, but remember the adage: if it seems too good to be true, it might be. You’ll want to look beyond the cents per kWh and examine what’s behind the price. Important criteria include:
- Pricing Structure: Understand the type of rate being offered. Is it a fixed price that will stay constant for your contract term, or a variable/index price that will fluctuate with the market? Some suppliers may offer both options or hybrid plans. Make sure the supplier provides the pricing model that fits your strategy (for example, if you know you want price certainty, lean towards those offering fixed rates over a time period you’re comfortable with). Weigh the pros and cons – we cover this more on the Fixed vs. Index Pricing page, which you should reference for deeper insight into which structure suits your risk tolerance. Also, check if the price is all-inclusive or has pass-through charges (more on that below and on the Energy Contracts page). One supplier’s quote might look cheaper but could exclude certain fees that another includes. Always get an apples-to-apples comparison by clarifying what’s embedded in the rate.
- Contract Terms and Flexibility: The fine print matters. How long is the contract duration? Common terms range from 12 months to 36 months, but you may see shorter or longer. Does the contract auto-renew if you don’t act at expiration (and if so, at what rate)? Be wary of contracts that lock you in and then roll you to a high variable rate if you forget to renew – mark your calendar well in advance. Also look at early termination clauses: if you needed to exit the contract early or significantly reduce usage (say you sell a facility or cut production), what are the penalties? Some suppliers have hefty liquidated damages for early exit; others might be more flexible or allow you to blend and extend (renegotiate if market prices drop). Additionally, check for bandwidth allowances – many contracts allow your usage to vary only within a certain band (e.g. ±10% of expected volume) before penalties or index pricing kicks in. If your operations are unpredictable, a strict bandwidth could be problematic. The Types of Energy Contracts page discusses contract structures (like fully fixed vs. pass-through) which ties into what terms you might prefer from a supplier.
- Supplier Reputation and Financial Stability: Price won’t matter if the supplier can’t fulfill their promises or, worst case, goes out of business (it has happened). Research the supplier’s background. How long have they been in the market? Do they have a solid credit rating or parent company backing? Check reviews or ask for customer references – are other businesses satisfied with their service? A supplier that’s financially strong is better able to weather market volatility without passing unexpected costs to you or defaulting. Meanwhile, a supplier with poor customer reviews for billing errors or bad customer service might cause you headaches even if their rate is low. Remember, this is a company you’ll be dealing with for potentially years – you want reliability not just in electrons, but in service.
- Customer Service and Additional Services: Consider how the supplier treats its clients and what extra value they might bring. Do they assign you an account manager you can call with issues or questions? Do they offer any online tools for tracking usage or budgets? Some suppliers provide helpful extras like online dashboards, consumption reports, or even advice on efficiency. Others might assist with demand response programs or renewable energy options (for example, some suppliers can include a percentage of green energy or source Renewable Energy Certificates for you – see the Sustainability page for why you might want this). If you highly value responsive support or particular services, factor that into your decision. Sometimes a slightly higher-priced supplier that offers these services could save you money or hassle in the long run through better management of your account.
Comparing Offers: Once you’ve gathered a few supplier quotes that meet your basic criteria (desired contract length, pricing type, etc.), line them up and do a fair comparison. Make sure you’re comparing total cost for the same usage assumptions. Key tip: confirm which charges are included vs. passed through. For instance, one supplier’s offer might include the transmission and capacity charges in the rate, while another might be giving you a rate for energy-only with capacity as a pass-through on top. One way to compare is to ask each supplier for an indicative bill or cost summary for your last 12 months of usage under their offer – that way you see the all-in cost. Also, consider timing: quotes are often only valid for a short period (wholesale prices change daily), so plan to gather and review offers within the same window so you aren’t mixing an old price from last week with a fresh price today.
Negotiation: Don’t be afraid to negotiate or ask questions. If you prefer Supplier A’s reputation but Supplier B has a slightly better price, talk to Supplier A – they may match or explain a value-add that justifies the difference. You can also negotiate contract terms: for example, requesting a “blend and extend” clause (ability to adjust your rate if market drops, by extending term) or better bandwidth percentages if you expect growth or change in usage. Larger customers might use an energy broker or consultant to handle this process (see our Working with Energy Brokers page for details on how that works and what to watch for). But even small-to-mid businesses should approach this choice thoughtfully – a little due diligence can prevent costly mistakes.
Red flags: Be cautious of any supplier that pressures you to sign immediately without giving you time to review the contract, or one that is vague about terms and additional charges. If a salesperson says “just trust me, it’s a great deal,” and won’t send the full contract or documentation, that’s a big warning sign. Also, if the rate is dramatically lower than others with no clear reason, it could be a teaser rate that isn’t fixed (perhaps it’s an introductory rate that will change, or reliant on assumptions). Transparency is key – reputable suppliers will be clear about what they’re offering.
Next steps: After carefully evaluating and choosing your supplier, you’ll sign a contract and eventually see the switch take effect (the utility will typically still deliver your power with zero interruption; the only change is who sets the supply price on your bill). Once you have a supplier, energy management doesn’t stop – you’ll want to monitor your bills and the market. Many contracts will need renewal after a term, so keep notes on when to rebid. Also, if market conditions change significantly (say, prices drop far below your fixed rate), you might explore opportunities to re-negotiate or at least strategize for the next round.
[For more about pricing structures mentioned above (fixed vs. variable, pass-through charges, etc.), head to Fixed vs. Index Pricing and Types of Energy Contracts pages. To understand the charges that show up on your bill from your supplier vs utility, see Understanding Your Electricity Bill.]