Electric Rates in Houston Back Down Again

by Donny on March 27, 2009

This week we saw electric rates and natural gas prices in Houston make a significant spike up. This high spike in prices had many electricity consumers concerned and encouraged those energy consumers waiting on the sidelines to lock in to an energy contract to go ahead and follow through and complete the contract signing process. Then as of Thursday and Friday of March 26,27 2009 Houston electric rates headed back down again following natural gas prices.

We had one customer who signed up in the beginning of the week when electric rates spiked up call us to ask if he could cancel his commercial energy contract and sign up at the now lower electricity prices being advertised. That is like asking a stock broker to buy a stock one day and then calling back a few days later asking that he change the price because the stock has moved against you and you don’t like the price anymore. The reality of the matter is you just can’t catch the bottom of the market. No one can accurately predict just how low a stock or energy index or futures price will go. Warren Buffet can’t do that either but he does have stops and limit orders in place so that he at least hits a target price he has a goal for.

An energy customer can break their electricity contract right after they sign it but for commercial energy customers the cost is significant enough that you would lose money in the deal when renegotiating at the slightly lower electricity rate you were trying to sign for. A residential electricity customer in Houston could break their contract early but you will likely pay a cancellation penalty depending on the Houston electric company anywhere from $200 Р$300. The electricity provider you break your energy contract with will likely not want to take you back again as they might flag you a bad paying customer. If you try to sign up on that providers discount electricity price again they may ask for a steep initial deposit to discourage you from signing up with them again.

The problem with a customer who signs up on a Houston energy contract only to then break it a few days later is that the electric company has to hedge the energy they sold that customer to offer them a fixed electric rate. The amount of back office work and support for hedging energy, selling as an electricity service contract and then reversing the whole process is not worth it to electricity providers that work on large volumes just to make a profit. A smarter choice when you lock in at a price you end up not being very happy with is wait it out and try again when your contract expires. This way you may find that the electric rate is even lower then what you may have been lusting over when your energy price made a small dip below where you locked in at.

Don’t be one of those Houston energy consumers that breaks their energy contracts for an extra $50 – $100 savings over the course of the year. It is just not worth it. You end up being labeled a credit risk customer to the electric provider you were dealing with. You make it much harder to sign up with that Houston electric company ever again and you spend excess time worrying about a miniscule $50 trying to lock in at the bottom of the market not recognizing that a price trend downwards could end up being more like¬† a $500 if you wait it out a whole year until your current energy contract expires.

Compare Current Houston Electric Rates

If you are a large commercial energy customer in Houston then the concept of renegotiating your electricity agreement makes more sense. Many energy companies have option known as blend and extend contracts that allow you to blend the current market rate based on how far out your contract price is at and the price you locked in at. Many providers also offer the ability to change a fixed rate into a variable MCPE rate if electricity prices on the variable index become much lower then what a fixed rate is set at. These flexible Houston energy choices are only available to commercial customers and only particular Houston electric companies offer electricity rates like what we mention here.

If you are a Houston commercial business and would like to be taken out to bid to multiple Houston electric companies in a commercial bid reverse auction then please feel free to complete our form using our compare tool. An energy consultant in Houston will get right back with you and will be glad to explain your options and answer any questions you may have.

Leave a Comment

Previous post:

Next post: