Choosing between 24 and 36-month commercial energy contracts involves weighing more budget certainty against less flexibility. 36-month contracts provide the longest supply price lock, but expose you to ETF risk for a full three years. The right choice depends on your confidence in current pricing and your operational stability.
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Side-by-Side Comparison
| Factor | Option A | Option B |
|---|---|---|
| Price lock duration | 24 months | 36 months |
| Budget certainty period | 2 years | 3 years |
| Repricing flexibility | In 2 years | In 3 years |
| ETF exposure window | 24 months max | 36 months max |
| Protection from rising prices | 2 years | 3 years |
| Risk if prices fall significantly | Locked for 2 years | Locked for 3 years |
| Best for | Most stable operations | Long-term facilities, favorable markets |
The Case for 36-Month Contracts
A 36-month contract makes most sense when: current wholesale prices are at or below historical averages (you're locking in favorable rates for three years), your facility will be operating with similar usage for the entire period, and you want to eliminate procurement events for three years. For operations with stable, predictable load, three years of supply certainty is a real operational benefit.
The Risk Profile of 36-Month Contracts
Three years is a long time in energy markets. A 36-month contract starting in a high-price environment means you're locked above market for three years as prices fall. An operation that closes or changes significantly faces three years of potential ETF exposure. Suppliers typically price 36-month contracts at a premium to shorter terms.
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Market Timing and Longer Terms
The ideal time to sign a 36-month contract is when wholesale forward prices are at cyclical lows — you're locking in favorable rates for the maximum period. Signing a 36-month contract at or near market highs means paying a premium rate for three years while the market corrects below you.
36-Month in PJM vs. ERCOT
In PJM markets (PA, OH, NJ, IL, MD), where capacity market charges create more predictable forward pricing, 36-month fixed contracts can be well-suited for large industrial accounts. In ERCOT (Texas), where prices can be more volatile and unpredictable, shorter terms often make more sense for accounts without demand response flexibility.
The Right Analysis
We model 12, 24, and 36-month pricing simultaneously for every account. You see the price difference at each term and can make a decision with full market context. Sometimes the 36-month premium is negligible; sometimes it's meaningful. The analysis only takes minutes when you have competing quotes in hand.
Frequently Asked Questions
Is 36-month pricing significantly higher than 24-month?
It varies by market and timing. In a normal market, 36-month contracts carry a modest premium (often 2–5%) over 24-month pricing to compensate suppliers for the additional risk they're bearing. In a period of expected price increases, suppliers may actually price longer terms more aggressively.
Can I lock in a 36-month rate during my current contract?
Yes — you can execute a future-start contract up to 12 months before your current contract expires, locking in today's forward price for a future period. This 'forward pricing' strategy works best when you see an opportunity in the forward curve.
What happens if I need to exit a 36-month contract early?
ETF terms vary by supplier. Some charge flat fees; others calculate on remaining contract value. A 36-month contract with 30 months remaining could carry a substantial ETF for a large account. We review ETF terms before recommending any 36-month contract.
Do any industries benefit most from 36-month contracts?
Manufacturing, warehousing, and industrial accounts with predictable, stable load profiles benefit most from long-term fixed contracts. Healthcare facilities and government accounts also commonly use 36-month terms for budget cycle alignment.
How does a broker approach long-term contract pricing?
We pull competitive bids for all term lengths simultaneously, model the total cost difference at each length, and present the trade-offs. We never push a specific term — the decision depends on your market view and operational outlook.