How to Find Lower Energy Rates in an Upmarket

Finding Lower Energy Rates Amidst an Increasing Energy Market If you’re reading this article, I assume you’re trying to

Finding Lower Energy Rates Amidst an Increasing Energy Market

If you’re reading this article, I assume you’re trying to find the lowest energy rates possible.

Well, here’s two things to consider, a) you’re not alone and, b) energy deregulation makes that possible!

Because energy rates are connected to the energy market, which in turn is connected to the general rules of supply and demand, finding lower energy rates can get tricky.

Case in point, tell me if you’ve ever run into this scenario:

It’s time to renew your company’s energy contract but you’re not finding those same low rates you had two years ago, meantime indications show the energy market may continue to increase.

Trying to find lower energy rates, you’re stuck between a rock and a hard place because waiting to see if rates will come back down could end up costing you a lot more money!

See, it can get tricky.

The big question is, does the risk of increasing energy rates in the near future out weight the gain you could get by waiting to see if energy rates go slightly lower?

In this article, I’m going to briefly discuss how to shop for competitive energy rates in an up-market.

Are Energy Prices Increasing?

To help provide more insight into the energy market, I want to discuss electricity prices, and their general increase. 

Like all markets, electricity rates follow the basic principles of supply and demand.

If you’re not currently on a fixed-rate contract, you’ll have experienced that throughout the year rates dip and rise depending on general demand.

Just today, I was speaking to a business owner here in Florida who told me “I dread summer energy bills”. Unfortunately, Florida is still regulated energy-wise.

When finding lower energy rates, your energy contract not only guards you against the seasonal fluctuation in energy rates but also protects you against the fact that electricity rates have been steadily increasing for the last two decades.

When shopping for lower energy rates in a competitive or upward-trending energy market keep in mind that electricity rates are generally increasing year over year. 

As you can see in the below chart, in the last 20 years, there have only been three years where electricity prices went lower, while for the other 17 years they’ve consistently increased at an average of about 4% per year.

What Causes Energy Prices to Increase?

So, what causes electricity prices to increase?

In addition to the basic concepts of supply and demand, there are multiple other factors that help determine energy pricing.

To help paint the full picture, I’m going to discuss what’s behind the actual production of electricity, commodities such as natural gas and coal – the physical substances needed to produce the electricity you buy and use.

While we are seeing more and more energy produced from renewable sources, renewables only generate a small portion of the US’ total energy demand, so we still depend on basic commodities, each of which has its own supply and demand factors and their own market.

In the below chart you can see the major sources used to produce electricity in the U.S.

us electricity generation by source

Natural gas and coal produce about 60% of our electricity.

Natural gas is currently the single largest source for electricity generation, generating about 40% of all electricity in America.

Keeping a close eye on these markets, namely the natural gas market, can help you predict and understand what electricity rates will be in the near and long-term future.

A major increase in natural gas rates will most likely result in future increases in electricity prices as well.

Here’s an example:

While 40% of U.S. electricity is produced using natural gas, 40% of all the natural gas currently comes from residual gas that is produced when drilling for oil.

While 40% of U.S. electricity is produced using natural gas, 40% of all the natural gas currently comes from residual gas that is produced when drilling for oil.

With President Bidens recently placed restrictions on drilling, the U.S. has experienced less natural gas production than usual. With less supply on hand, natural gas and consequently energy prices are predicted to increase as electricity demand increases when hotter weather starts this summer.

Even as I write this, the Energy Information Administration is increasing their prediction of future natural gas prices to reflect supply and demand:

The agency projected Henry Hub spot prices would average $3.14/MMBtu for full-year 2021 and $3.16/MMBtu in 2022, compared with the previous month's estimates of $2.95/MMBtu in 2021 and 3.27/MMBtu in 2022.
EIA Logo

The above is just a current example of how natural gas and related commodities can have an impact on electricity pricing and consequently your electric bill.

When you’re looking for lower energy rates, you can run into a situation where the rates you find today are not the same low rates you found last year, or two years ago when you signed your last energy contract.

At Energy Professionals, we have a commodity analyst who closely monitors the energy market, including the natural gas market, and publishes timely updates to help keep you tuned in on what’s happening. CLICK HERE to read our most recent energy updates.

The rates you find when looking for new energy rates will very heavily dependent on the market.

If you are looking for lower energy rates but are getting back rates that are higher than you were previously paying, it’s important to consider:

  • The current position of the natural gas/energy market.
  • Its direction.
  • Its potential future.
  • It’s past behavior patterns.

Securing a competitive rate in an upmarket can protect you again a significant energy rate increases in the future.

At Energy Professionals, we work to educate you as much as possible as to the current energy market so that you have all the information you need to make an educated decision about your next energy contract.

James Lightning

James Lightning
Senior Editor, Energy Professionals
(844) 674-5465

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