Contracting 101

When deciding to purchase competitive supply of electricity or natural gas from a Retail Energy Supplier, there are many issues to consider and questions to ask. Below are a list of key considerations when making this important decision.

When should I buy?

When to buy is always a delicate decision. Among the factors to be considered on when to buy are time, price, customer energy needs, utility default rates and the rules and regulations pertaining to competitive supply in your jurisdiction.

How long should I contract for?

How far into the future you contract depends on several factors: your assessment of future energy price expectations, the need for predictability of your future energy requirements and costs and organizational contracting constraints. The AOBA Alliance offers energy market monitoring with buying advice as well as utility market update meetings to assist you in your contract decision-making process.

What are my pricing options?

Suppliers typically offer a broad range of options to meet your energy needs. A fixed price is the most common option. Index and market-based floating options are also available.

What is included in the offer price? Are there any additional charges?

When entering into a competitive supply contract, you must be clear on what pricing option is being offered and what components of supply are included in the offer price. It is imperative to ask if there will be any additional charges not included in the offer price. Always ask if the price includes capacity, transmission, line losses, ancillary charges, storage (gas only), and balancing (gas only). Although it is the local distribution company (LDC) that is responsible for the actual delivery of electricity from the LDC to your meter, AOBA Alliance pricing includes that cost without adjustment to pricing or quantity used. Many suppliers either adjust price or quantity to account for this delivery. Be sure that the offer price includes delivery to your meter to avoid any additional charges or usage adjustments.

What are the terms and conditions of the contract?

Suppliers’ contract terms can and do vary significantly. Differences in contract terms will directly impact the comparability of prices and the risks to which you are exposed. Always compare contract terms and conditions before making your final decision. You must review the contract in its entirety including the base agreement, attachments, schedules, etc. Make sure all concerns are addressed in writing in the contract documents.

What are the risks of entering into a contract?

The risks of entering into a competitive energy contract include unexpected pass through charges or hidden costs, excess or insufficient use of contract volumes, supplier default, interest and penalties and automatic contract renewals.

What happens if I terminate my contract early?

Carefully review the early termination provision in the terms and conditions section of the contract. Many suppliers will charge the customer the cost of liquidating the remaining energy for the balance of the entire contract term plus an administrative fee. This can be a costly option for building owners and managers in the event of a sale of the property.

How will I be billed?

When you receive bundled service from your local utility company, you receive one invoice for all components of service. When entering into a contract with a Retail Energy Supplier, you typically have the option to receive consolidated billing (one invoice from the utility for all components service) or dual billing (the supplier sends you one invoice for generation and transmission and the local utility sends you a separate invoice for distribution).

What are your payment terms?

If you are receiving consolidated billing, payment terms are the standard utility terms. If you are receiving dual billing, the competitive supply invoice may have different payments terms than the utility invoice for distribution.

What kind of customer support can I expect?

All Retail Energy Suppliers will provide you with a contact for billing and customer service issues. However, in the event of a dispute, you may be caught between the supplier and the utility with no outside resources to assist you with resolution. The AOBA Alliance is unique in that it provides you support in the resolution of service and billing issues. The AOBA Alliance ensures that a resolution is found for all parties involved.

Do

  • Be prepared to make timely decisions.
  • Carefully review all contract terms and conditions, including the base agreement, attachments, schedules, etc., before signing.
  • Plan for a balance of price and non-price terms.
  • Purchase energy at least 6-8 months prior to start of contract.

Don’t

  • Enter into a contract over the telephone.
  • Accept automatic contract renewal provisions.
  • Put price over all contract terms.
  • Accept terms with which you are uncomfortable or don’t understand.
  • Accept terms that are biased in favor of the supplier.
  • Wait until your contract is about to expire before researching supply options.