Energy Matrix Rates & How To Use Them
In the energy brokerage industry, consultants and brokers help businesses find the most affordable energy supply. With hundreds of retail suppliers and pricing options, navigating the market to secure the best rates can be challenging. The most successful energy brokers excel at knowing when and how to price customer accounts. One key skill that sets top brokers apart is their ability to quickly determine whether a customer would benefit more from a matrix or custom price. Experienced brokers can often glance at a single utility bill and instantly recognize the best pricing approach. To consistently secure the lowest rates for your clients, it’s essential to understand the differences between matrix and custom pricing—and how energy pricing works as a whole.
Why It’s Important To Understand The Difference Between Matrix vs. Custom Pricing For Your Customers
Regarding energy pricing, matrix rates and custom rates have distinct differences. Understanding these differences is key to helping your commercial customers make informed decisions. Let’s explain how each pricing method works and how to use them effectively.
What is Matrix Pricing?
Suppliers depend on brokers to acquire commercial customers in the retail energy sector. Energy brokers facilitate most commercial energy transactions today. Many retail energy suppliers use matrix pricing to simplify pricing, allowing brokers to access price quotes instantly.
A matrix rate is a predefined list of prices brokers can offer directly to customers without contacting the supplier for a quote. This system streamlines transactions and improves efficiency.
Key Facts About Matrix Pricing:
- Updated Daily – Most suppliers adjust matrix pricing every day.
- Market-Driven – Prices fluctuate based on energy market conditions.
- Categorized for Convenience – Rates are organized by utility provider, energy usage (kWh), rate class, contract start date, and term length.
- Supplier Requirements – Some suppliers impose restrictions based on contract size, load factor rating, or customer type.
- Broker Tools – Energy brokers, like Great Energy 1, offer tools to quickly sort and analyze hundreds of matrix pricing files.
Matrix pricing speeds up and simplifies energy procurement, helping brokers and customers navigate the complex energy market.
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The Types Of Energy Matrix Rates
Retail electricity suppliers offer various pricing options through their matrix rates. Some common types include:
1. Fixed Rates (with transmission adjustment passthrough charges)
These are standard fixed energy rates, but they include contract terms that allow suppliers to pass through transmission adjustment costs to customers during the contract period. Most energy suppliers use these rates by default in matrix plans.
2. Super Fixed Rates (no mid-contract adjustments)
Due to customer concerns about passthrough charges, some larger suppliers offer super fixed rates, guaranteeing no mid-contract adjustments. However, these rates are higher because suppliers include a risk premium to cover potential cost fluctuations.
3. Energy-Only Rates
In custom pricing plans, energy-only rates fix the supply rate’s energy portion, while transmission, capacity, and other ancillary costs are passed through at actual cost. These rates are popular with customers planning energy efficiency projects, as they can benefit from reduced energy consumption and lower transmission and capacity costs.
4. Fixed Adder Rates
These rates are based on wholesale electricity market prices and include a fixed profit margin for suppliers and brokers. Since market conditions fluctuate, fixed adder rates allow customers to benefit from price drops.
5. NYMEX Rates (for natural gas)
Like fixed adder rates for electricity, NYMEX rates are index-based natural gas rates that follow the NYMEX market. The rate is calculated monthly using the final NYMEX settlement price plus a fixed amount. This fixed adder includes supplier and broker margins and basis costs—the difference between the NYMEX market price and the regional market price at the customer’s location.
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The Pros and Cons of Matrix Pricing
Custom pricing offers advantages and disadvantages, so it’s essential to consider your options carefully before setting a price for a customer’s account. Remember that some retail energy suppliers restrict access to their matrix rates once an account has been custom-priced. This prevents brokers from switching to lower matrix rates if custom pricing is less favorable.
Pros:
- Simple and scalable – Easy to implement and manage as your business grows.
- Quick pricing turnaround – No long waits for quotes; pricing is generated instantly.
- Predictable pricing trends – Helps anticipate price fluctuations and plan accordingly.
- No supplier quotes needed – Eliminates the hassle of contacting suppliers for every transaction.
- Ideal for accounts with poor load factors – Works well for customers with inconsistent usage.
- Great for small commercial customers – Provides straightforward pricing for businesses with lower energy needs.
Cons:
- Can be more expensive than custom rates – May not always offer the best price for certain customers.
- Not all customers qualify – Some businesses may not meet the criteria for matrix pricing.
- Limited customization – Less flexibility compared to tailored pricing models.
- Standard contract terms – No room for special terms or language adjustments.
- Not ideal for larger customers – Bigger businesses may require more customized pricing solutions.
What Is Custom Pricing?
Unlike matrix pricing, which offers standardized rates, custom pricing is a tailored approach to energy pricing. With custom pricing, energy suppliers create a unique quote based on a customer’s specific energy usage patterns and business needs.
How Does Custom Pricing Work?
When requesting a custom quote, energy brokers typically wait between one to five business days for energy suppliers to evaluate multiple factors, including:
- Creditworthiness
- Energy usage history
- Peak energy demand
- Load factor rating
- Utility and rate class
- Business type and usage profile
A knowledgeable energy broker can quickly assess whether customers are best suited for custom pricing by calculating their load factor. Generally, customers with a load factor above 50% benefit from custom quotes.
Who Needs Custom Pricing?
Larger energy consumers:
Customers using more than 1,000,000 kWh annually or 100,000 CCF of natural gas usually require custom pricing.
Businesses with unique energy needs:
Suppliers avoid offering standardized matrix pricing to large customers since their energy usage varies significantly.
Custom Supply Products
Custom pricing is also essential for specialized energy products such as:
- Block + Index
- Load Following Block + Index
- Call Options and more
Brokers must request custom quotes from multiple suppliers for large energy consumers who require tailored solutions. To ensure accurate pricing, brokers follow a standardized process when submitting pricing requests.
Not Sure If Custom Pricing is Right for Your Business?
The Pros and Cons of Custom Pricing
Matrix pricing offers several advantages but also some drawbacks. When deciding whether to use a matrix rate or a custom price for your customers, weighing the pros and cons is important.
Pros:
- Potential for Lower Costs: Custom pricing can be more competitive than standard matrix rates.
- Ideal for High-Load Factor Customers: Customers with a high load factor may benefit from better pricing.
- Flexibility & Customization: Allows tailored energy solutions, including hybrid supply products.
- Special Contract Terms: Enables unique contract clauses that suit specific customer needs.
- Varied Contract Lengths: Offers flexibility in contract duration beyond standard terms.
Cons:
- Higher Costs for Low-Load Factors: Custom pricing may be more expensive than matrix rates if a customer’s load factor is low.
- Loss of Matrix Rate Eligibility: Once an account is custom-priced, it may no longer qualify for matrix rates.
- Longer Processing Times: Some suppliers take longer to finalize custom pricing.
- Complex Logistics: Custom pricing can be difficult to scale due to its complexity.
Answers to Common Questions
Frequently Asked Questions
Matrix pricing is a predefined list of energy rates brokers can offer directly to customers without requesting a custom supplier quote. These rates are updated daily based on market conditions and categorized by factors like utility provider, energy usage, and contract terms.
Matrix pricing offers several benefits, including quick pricing turnaround, scalability, predictable trends, and no need to contact suppliers for quotes. It’s beneficial for small businesses and accounts with poor load factors.
Custom pricing is best for large energy consumers (over 1,000,000 kWh annually) or businesses with unique energy needs. It allows for tailored energy solutions, flexible contract terms, and potentially lower costs for high-load factor customers.
Common matrix rate types include fixed rates with passthrough charges, super fixed rates (no mid-contract adjustments), energy-only rates, fixed adder rates, and NYMEX rates for natural gas. Each option provides different levels of cost stability and risk management.
Custom pricing may take longer to process, be more expensive for low-load factor customers, and make an account ineligible for future matrix rates. It also involves more complex logistics than matrix pricing.
Reach Out to Our Experts for More Details
Need Help Pricing a Commercial Energy Account?
Choosing the right pricing option is key to success as an energy broker. Retail energy supplier matrix rates offer convenience and fast transactions, but it’s important to understand the difference between matrix and custom pricing.
If you need assistance pricing an energy account, our energy pricing desk is here to help.
