By Sarah Rousseau
When it comes to buying energy, decision makers usually go by two rules of thumb:
- Wait to buy until rates are at their absolute lowest, and
- Only buy in the “off-months” (winter for power, summer for gas).
These strategies may have worked in the past, but they aren’t conducive for today’s evolved energy market.
- Current energy rates are near historic lows, and we seem to have hit a price floor. Although it’s possible for rates to dip back down, chasing that mentality can leave you unhedged and vulnerable to an upward trending market.
- The monthly time windows no longer exist, especially as consumers switch to electric heat and natural gas continues to be used to generate electricity. In the graphs below, the lowest electric rates occurred between June and September, and the lowest gas rates were seen in January.
There’s no longer a “perfect” time to buy energy — so how do you know when to buy?
The secret: Always Be in a Buying Mindset.
1) Know your company’s risk tolerance.
Waiting for the lowest possible rate could cause you to miss out on current savings and leave you exposed to the upside of the market. If the market turns, you’ll be forced to pay a higher rate and face buyer’s remorse or management scrutiny.
To avoid this, set price triggers for rates above and below the current market price that match your risk tolerance, then execute when one is reached. In today’s backwardated market, the trigger price could be for a 36- or 48-month term, offering your company long-term protection.
2) Understand your company’s purchasing process.
Knowing how long it takes you to get a purchasing decision approved helps you determine when to start looking at rates.
- Can you execute a contract same day?
- Does your board takes months to make a purchasing decision?
Being able to answer these questions allows you to facilitate your internal processes and start the buying process sooner rather than later.
3) Be proactive, not reactive.
Exploring rates less than 3 months before your contract expires doesn’t give you enough time to evaluate your energy purchasing strategy — especially if you have a long internal purchasing process.
Be aware of when your contract expires and take the early call from your advisor, even if your contract isn’t up for 12 to 24 months. They can update you on market trends and help you develop a plan that fits your needs.
Don’t Wait for the “Best” Time to Buy.
Rates are near historic lows, and seasonality is gone. Take advantage of current opportunities in the market to protect your organization before the market turns. Call your energy advisor for a market update and discuss your buying strategy.
About the Author
Sarah has been in the energy industry for over 12 years. Her background is in customer care, account management, pricing, and energy solutions.
As the Director at Nania Energy Advisors, she oversees all internal core functions of the business, including marketing and client relations. Her specialty is her experience in energy pricing and understanding the evolving energy markets. She most enjoys being an advocate for clients and helping make things easier for them.
Sarah holds a Bachelors in Psychology from Illinois State University. In her spare time, she enjoys spending time with her daughter and family, practicing yoga, traveling, and watching college basketball.
Sarah can be reached at (630) 225-4553 or via email at firstname.lastname@example.org.