Electricity is one of the biggest expenses small business owners encounter, and getting the right electricity plan is critical to keep operational expenses low. Additionally, more and more consumers are searching for eco-conscious businesses. However, it's not always easy to navigate the maze of providers and plans to find the best small business electricity rates.
We will guide you through the things you should consider when shopping for a business electricity plan. We’ll talk about provider reputation, plan types, energy sources, rates, and getting the best small business electricity rate. We'll also show you how to use ElectricityRates.com marketplace to shop for small business electricity plans.
Table of Contents
- How Do I Compare Business Electricity Rates?
- Setting Up Electricity Service
- Small Business Electric Provider Reputation
- Understanding Small Business Electricity Rates, Demand, Range, and Load
- Types of Small Business Electricity Use Rates
- Types of Small Business Electricity Plans
- Small Business Electricity Contract Length
- Energy Sources For Small Businesses
- Why are Home and Business Electricity Rates Different?
- Small Business Electricity Rates Conclusion
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How Do I Compare Business Electricity Rates?
By default, the local utility company provides the electricity supply for your small business. If you live in an Energy Choice state, you have the right to shop and compare electricity plans from alternative suppliers.
As noted above, your meter type determines your TDU delivery rates and whether or not you will have a demand charge. Your TDU delivery charges will remain the same regardless of the electricity supplier you choose. The key is focusing on the price per kilowatt-hour for supply, or sometimes called the energy charge.
If you're in charge of managing energy costs for a large, or commercial business that has an average energy bill of $2500+ per month click here to learn how to compare commercial electricity rates. We will help you find the best commercial electricity rates for your medium or large business.
When is the best time to shop for business electricity?
To keep control of your business electricity costs, it’s important to lock in a new rate before your contract expires. Otherwise, you will be switched to an index rate or month-to-month variable rate.
Electricity contract rates for businesses fluctuate based on the season. Typically, rates are elevated during the summer and lower in the winter. However, businesses have the option to secure their electricity rates up to six months ahead of time.
Suppose your contract is up for renewal in January. In that case, you can browse for new electricity rates as early as June. This way, you can obtain a reduced electricity rate and take advantage of the best electricity rates for small businesses.
Setting Up Electricity Service
It can be a bit challenging to establish electricity service for a new business because pricing is usually determined by usage, load factor, and demand. The electricity supplier might find it difficult to calculate your electricity pricing since you are just starting.
To calculate your usage, they can consider the occupancy rate and customer demand of the previous tenant or a nearby competitor. They will also take into account your square footage and business category.
Another important consideration is credit, which will be discussed later. If you are a new business, you may not have an extensive credit history. However, there are some business electricity providers that have more flexible credit requirements. Additionally, if you are a sole proprietor, some suppliers may accept your personal credit check.
If you’re moving into a new space, it’s possible that you’ll need a city permit for electricity. This depends on what city your business operates in. Speak with your landlord to determine what permit requirements exist if you’re renting. If you’re building a new property, your builder will have contacts with the permitting office. They will handle everything as part of your occupancy permit.
Whether you’re searching for the best business electricity rates texas, the cheapest commercial electricity rates in Pennsylvania, or small business electricity rates in another state.
The types of utilities your business requires depends on the nature and type of your operation. Additionally, each state has their own specific regulations. Most small businesses that have a building and employees are required to provide electricity and running water.
To get started, Google how to set up electricity service for my business in [Insert your state]." There you will get a breakdown of the process and any permits needed. Additionally, you can contact your local Department of Energy official to learn more about small business energy programs and requirements.
Small Business Electric Provider Reputation
When shopping for an electricity plan, it is important to research the reputation of the providers. Not all providers are created equal, and some may have a bad track record of service or customer satisfaction. It's essential to read online reviews and check the provider's rating with the Better Business Bureau (BBB). You need a reliable provider that supports your small business and keeps it running smoothly.
Fortunately, at ElectricityRates.com we have already done all of the research for you. Just contact us at (888) 480-7758 to speak with a small business energy consultant who will listen to your needs and help you quickly find the perfect plan!
Understanding Small Business Electricity Rates, Demand, Range, and Load
Electricity plans come in different types of rates, demand, range, and load. Understanding these factors will help you choose the best plan for your business.
Demand charges refer to the amount of electricity your business uses at peak times. Range and load refer to your business’s electricity needs on a daily or weekly basis.
The types of rates are non-time-of-use (TOU) and time-of-use rates (TOU). TOU rates vary according to the time of day when electricity is used. Depending on the needs of your business, one of these plans may be more cost-effective than others.
Electricity demand refers to the amount of electrical power your business requires at any given time. It is typically measured in kilowatts (kW) or megawatts (MW). Understanding your electricity demand is crucial as it influences the size of the electrical infrastructure your business needs to support its operations.
Factors influencing electricity demand:
- Business size: The larger your business, the higher your electricity demand is likely to be.
- Equipment and appliances: Energy-intensive equipment, such as machinery, refrigeration units, or HVAC systems, can significantly impact your electricity demand.
- Operating hours: Businesses operating longer hours or around the clock may have higher electricity demand compared to those with limited operating hours.
Electricity range refers to the amount of electricity your small business consumes over a specific period, often measured in kilowatt-hours (kWh) or megawatt-hours (MWh). It represents the total energy consumed within a given time frame.
Factors influencing electricity range:
- Business activities: The nature of your business operations and the energy consumption patterns associated with it determine your electricity range.
- Seasonal variations: Certain businesses experience fluctuations in energy consumption due to seasonal demands. For example, heating or cooling needs may increase energy usage during extreme weather conditions.
Electricity load refers to the power consumed by your business at any given moment. It represents the actual electrical demand at a specific point in time and is typically measured in kilowatts (kW) or megawatts (MW).
Factors influencing electricity load:
- Peak usage: The highest level of electricity consumption during a specific period is considered the peak load. It’s important to understand your business’s peak load as it may affect the pricing structure of your electricity plan.
- Time of use: Electricity providers often offer different rates based on the time of day. Understanding your load patterns throughout the day can help you optimize energy usage and potentially save costs.
Types of Small Business Electricity Use Rates
The two types of electricity use rates for businesses are non-time-of-use (TOU) and time-of-use rates (TOU). TOU rates vary according to the time of day when electricity is used. Depending on the needs of your business, one of these plans may be more cost-effective than others.
1. Non-Time-of-Use (TOU) Rates:
Non-TOU rates offer a fixed price per kilowatt-hour (kWh) of electricity consumed, regardless of the time of day. This rate structure is typically suitable for businesses with relatively stable and consistent electricity consumption patterns throughout the day.
Here are examples of businesses that may benefit from non-TOU rates:
a) Retail Stores: Retail businesses often have regular operating hours and consistent energy usage patterns throughout the day. Non-TOU rates can provide cost stability and predictable electricity bills.
b) Offices: Businesses operating in office spaces, such as administrative offices, professional services, or small consulting firms, usually have standard working hours and a relatively constant electricity load. Non-TOU rates can be advantageous for these businesses.
c) Small Restaurants/Cafes: Restaurants or cafes that have consistent lunch and dinner hours may find non-TOU rates more suitable. The energy usage during these operating hours tends to be relatively stable, making fixed-rate plans more predictable.
2. Time-of-Use (TOU) Rates:
TOU rates vary based on the time of day and the demand on the electrical grid. These rates have different pricing tiers for peak, off-peak, and sometimes shoulder periods. TOU rates can be advantageous for businesses that have flexibility in their energy usage and can shift certain operations to off-peak hours.
Here are examples of businesses that may benefit from TOU rates:
a) Manufacturing Plants: Manufacturing businesses that have the ability to adjust their production schedules to off-peak hours can take advantage of lower electricity rates during those times. By shifting energy-intensive processes to off-peak periods, they can potentially reduce costs.
b) Large Restaurants/Catering Services: Restaurants or catering services that have flexibility in meal preparation schedules may benefit from TOU rates. By scheduling food preparation during off-peak hours, they can take advantage of lower electricity rates.
c) Data Centers: Data centers often have high electricity demands but can adjust their cooling and server maintenance processes to off-peak hours. By utilizing TOU rates, data centers can optimize energy usage and potentially reduce costs during lower-demand periods.
It’s important to note that the specific rates and availability of non-TOU and TOU options may vary depending on your location and electricity provider. When comparing plans on ElectricityRates.com consider your business’s operations, peak usage hours, and the feasibility of shifting energy-intensive activities to off-peak hours to determine which rate structure would be most cost-effective for your business.
Types of Small Business Electricity Plans
There are four major plan types for energy consumption. Fixed-rate plans, indexed rate plans, variable month-to-month plans, and block & index electricity plans. Each plan has its benefits and drawbacks. Ultimately, it depends on your business needs on which plan you choose.
- A fixed-rate plan is an electricity plan that offers a fixed rate for energy consumption over a set period, usually 6, 12, or 24 months.
- The rate remains constant regardless of market fluctuations or changes in usage.
- The advantages of a fixed-rate plan include predictable monthly bills and protection against sudden price spikes in the market.
- However, the disadvantage is that you may end up paying more than necessary if the market prices drop significantly during your contract period.
- A fixed-rate plan is best suited for small businesses that want to budget their energy expenses and avoid unexpected costs.
Indexed Rate Plan:
- An indexed plan is based on an index that tracks energy prices in a specific geographical area. It is a type of electricity plan that fluctuates based on the current local market price of energy.
- This plan type offers a variable rate based on the wholesale market prices.
- The advantages of an indexed rate plan include the potential for saving money when market prices are low.
- The disadvantage is that you may end up paying more than necessary if the market prices rise significantly.
- An indexed rate plan is best suited for small businesses that are willing to take short-term risks and want to capitalize on market fluctuations.
Variable Month-to-Month Plan:
- A variable month-to-month electric plan is a type of plan that offers a variable rate each month.
- This plan type is subject to market fluctuations and changes in usage.
- The advantages of this electricity plan include flexibility and no contract commitments.
- The disadvantage is that the monthly bills can be unpredictable and subject to sudden spikes in the market.
- A variable monthly plan is beneficial for small businesses that wish to manage their energy usage closely. These businesses are comfortable with fluctuating prices.
Block & Index Electricity Plan:
- A block & index power plan is a type of plan that combines both fixed and indexed rate features.
- This plan type offers a fixed price for a minimum usage level, with any additional usage charged at the local indexed rate.
- The advantages of a block & index electricity plan include the ability to take advantage of market fluctuations while still having some price predictability.
- The disadvantage is that you may end up paying more than necessary if you exceed your minimum usage level.
- A block & index electricity plan is best suited for small businesses that have consistent energy usage levels but want to take advantage of market fluctuations.
Small Business Electricity Contract Length
When choosing an electricity plan, it’s important to consider how long the contract will last. Business electricity rate contracts can range from month-to-month to 6-12 months, or up to 60 months. The optimal electricity plan for your business will depend on your specific energy requirements and budget.
Most business owners choose a 12-month contract to match their yearly planning and avoid costly cancellation fees if unexpected changes happen.
Some providers offer one-year, two-year, or three-year contracts. If you choose a longer contract, the price may be cheaper. However, if you decide to cancel before the contract ends, there may be an early termination fee. A shorter contract may offer more flexibility, but the rate may be higher.
Energy Sources For Small Businesses
Another consideration for a business electricity plan is the source of the energy. Some providers offer plans based on renewable energy sources such as wind, biofuels or solar.
Renewable energy may be preferable for companies seeking to reduce their carbon footprint and meet corporate social responsibility goals. Depending on your business needs, it may also be possible to create a custom electricity plan based on specific energy sources.
Check out our Renewable Energy for Business page for more information.
Why are Home and Business Electricity Rates Different?
Electricity suppliers price electricity differently for businesses and homes based on their respective “load profiles”. You can obtain these profiles from the local utility company or regional electrical system operator.
Load profiles display the monthly and daily electricity usage patterns of residential and small/medium commercial customers. They are key in determining electricity costs as the price of electricity changes depending on when it is used.
The way that homes, small businesses, and large businesses use energy is not the same. Electricity rates for homes are determined by assuming that 60% of energy is used for heating and cooling, especially during summer. Residential rates also consider how much energy is used during nighttime hours when people are home. Businesses usually operate on weekdays from 8am to 6pm, and their energy usage is more consistent throughout the year and week.
In Texas, the energy market is almost completely deregulated meaning businesses are in total control of shopping for their electricity provider. Also, there is a difference in the way electricity prices and residential electricity prices are quoted. Residential electricity prices in The Longhorn State include the cost of delivery, whereas electricity business rates in Texas only include the cost of energy supply. This is because the delivery rates for businesses depend on the type of meter and demand level so it is a separate charge in your electricity bill.
Small Business Electricity Rates Conclusion
Choosing the right business electricity plan is essential to keep your operational expenses low and maintain a strong bottom line. Factors such as provider reputation, plan type and length, energy sources, business demand, range, and load, and types of rates all influence the total cost of your electricity.
By considering these factors and working with a reputable provider, your business can achieve cost savings and reduce its environmental impact. Use ElectricityRates.com to compare electricity rates for business and find the best electricity plan to meet your needs.
Call (888) 480-7758 for a free custom quote from our energy advisors and lock in a fixed-rate electricity rate today!