Whether you are a business owner or an energy broker helping customers with their energy strategy, it is important to understand the different types of energy supply products in the market. Most energy suppliers offer fixed-rate plans, but other types of electricity and natural gas plans may fit your needs better. In this article, we will explain why these supply plans are important and how to choose the best option based on your energy needs.
Why Energy Brokers Should Understand Energy Supply Product Options
If you are an energy broker or energy consultant, it is very important to learn about the wholesale energy market and retail energy markets. You should also know the history of energy deregulation and understand the different types of energy plans. This knowledge makes you more valuable to your customers and to the market.
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Many businesses hire energy brokers to save money on energy, use green energy, manage contract renewals, and avoid the stress of handling energy costs. If a customer chooses your services, you must know enough to give them real value.
The best energy brokers know more than just how to sell plans. They understand energy bills, study business energy use, and know about transmission rates, capacity, and efficiency. These skills help them manage all the factors that affect energy costs.
Becoming an Expert in Energy Supply Products
If you want to grow your career, become a stronger energy broker, and earn a high income, you must become an expert. One important step is learning about the many types of retail energy supplier plans. This knowledge will help you succeed in the energy market.
Types of Energy Supply Product Structures
In deregulated markets, businesses can choose from many standard and custom energy supply products. Besides fixed-rate contracts, suppliers also offer index-based products, block and index products, load-following block and index products, and other mixed options.
Fixed Energy Rates
Fixed-rate plans are the most common type in the retail energy market. These plans are simple. The supplier agrees to sell electricity or natural gas at one fixed price per unit (kWh or CCF) for a set period of time.
- A fully-bundled fixed rate includes all costs, such as capacity, transmission, and extra services, in one price. This plan gives full budget control and is easy to manage. It is a good choice for smaller businesses or anyone who wants a simple energy plan.
- A fixed rate with pass-throughs works differently. In this plan, some costs, like capacity or transmission, are billed separately based on actual use. This gives more transparency, but customers must pay attention to market changes and manage their energy use carefully to control costs.
Index Rates
Index rates are the opposite of fixed rates. In an index contract, the supplier charges the wholesale market price of energy. This price can change every hour, day, week, or month. The supplier also adds a small markup.
Index rates can be very cheap when the market is stable. But they are risky when big events happen, such as a severe winter storm. In these times, index prices can double or even triple. Customers who choose index rates take on the full risk of the market.
These products are often used by businesses that can pass energy costs to their own products or services. For example, oil refineries usually buy electricity on the index market because they add the energy cost to the price of refined fuel.
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Hybrid Energy Rates
Some plans mix fixed and index rates. These are called hybrid rates. Large and advanced customers often use them to balance cost and risk.
Block + Index
A block and index plan lets a customer lock in a set amount of energy at a fixed price. The rest of their use follows the market price.
Load-Following Block + Index
A load-following block and index plan works differently. The fixed portion follows the customer’s usage pattern. This allows them to lock in a percentage of their energy use instead of fixed amounts.
Financial Products
Some very large energy users also use financial products such as hedges, collars, or options. These tools help control price risk and protect against big swings in the market. Often, these companies work with energy traders to manage these financial strategies.
Choosing the Right Product for Your Customers
Energy brokers must know how to match the right energy product with the right customer. This is key to guiding customers through the energy market.
1. Understanding Energy Risk Tolerance
The first step is to talk with your customer and learn about their risk tolerance. Customers who want full price certainty and no risk are better suited for fixed-rate plans. Customers who are willing to take some risk may choose index or hybrid plans to “play the market.”
2. Examining Usage Patterns
The next step is to look at how customers use energy. Some products work best for steady, predictable energy use. Others are better for customers with changing or unpredictable usage. For example, a block and index plan may not be a good choice for a manufacturer with irregular energy use. In that case, a load-following product could work better.
3. Considering Cost Forecasting
Energy brokers can add great value by helping customers forecast costs. By studying past energy use and market trends, brokers can give advice that supports both financial and operational goals.
4. Choosing the Right Supplier
It is also important to match the customer with a supplier who can handle their plan. Some suppliers cannot manage complex products like load-following block and index or financial hedging. Others may only offer simple fixed-rate plans. Choosing the right supplier ensures the customer gets the service they need.
What to Avoid
Even experienced energy brokers can make mistakes. It is important to know what to avoid.
Do Not Assume One-Size-Fits-All
Every customer is different. They each have unique needs and energy usage patterns. A single plan will not work for everyone. Do not assume that all customers want fixed rates. The best approach is to start with a consultation. Look at their risk level, past energy use, and budget goals before suggesting a plan.
Protect Your Business from Risky Contracts
Beware of Inexperienced Suppliers
Choosing the wrong supplier can create problems. A supplier with a poor reputation may cause billing errors or fail to meet expectations. Some newer suppliers may not have enough money to offer fixed rates for large energy loads. If the market changes quickly, these suppliers may not survive. To protect both your customer and your reputation, it is better to work with trusted suppliers.
Read Contract Terms Carefully
Always check the contract terms closely. Make sure they match the customer’s expectations. Pay special attention to auto-renewal rules, pass-through costs, material change clauses, and termination fees. The contract must reflect the actual rate and offer given by the supplier. This avoids surprises later and builds customer trust.
Need Help Choosing an Energy Supply Plan?
Whether you are an energy broker searching for the best plan for your clients or a business owner looking for the right energy option, our team can help. We guide you through the choices and make the process simple. Contact us today to explore your energy supply options.