A commercial electricity contract establishes the price you pay for the supply portion of your bill over a defined term. The structure you choose — fixed, variable, or indexed — determines how that price behaves over time and how much risk you're taking on.
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Fixed-Rate Contracts
A fixed-rate contract locks a price per kWh for the contract period — typically 12, 24, or 36 months. Your supply rate doesn't change with the wholesale market. Best for: businesses that need budget certainty, can't absorb price spikes, or have energy as a significant operating cost.
Variable-Rate Contracts
Variable rates reset monthly based on wholesale market conditions. In low-price environments, they can deliver savings. But they expose you to spikes — ERCOT Winter Storm Uri pushed variable-rate commercial customers to $9/kWh in February 2021. Most commercial accounts should not carry variable rate risk without a hedge or deliberate risk management strategy.
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Indexed Contracts
Indexed pricing ties your rate to a published wholesale price index — typically Day-Ahead market prices or NYMEX natural gas — plus a fixed adder (the supplier's margin). More transparent than variable, but requires monitoring. Best for: sophisticated commercial buyers with some price flexibility and interest in market exposure.
Contract Terms to Scrutinize
Auto-renewal clauses that default to variable or elevated fixed rates. Early termination fees calculated on remaining contract value (can be substantial). Demand charge riders that differ from your utility's tariff. 'Passthrough' language that allows suppliers to add capacity or ancillary costs on top of a quoted rate.
Contract Length Strategy
Longer contracts provide more certainty but reduce flexibility. In high-price environments, shorter terms let you reprice sooner. In low-price environments, locking longer captures favorable rates. The decision depends on your risk tolerance, market outlook, and operational flexibility.
Frequently Asked Questions
What states have deregulated commercial electricity?
The main deregulated commercial electricity states are Texas, Pennsylvania, Ohio, Illinois, New York, New Jersey, Massachusetts, Connecticut, Maryland, Michigan, Delaware, New Hampshire, Maine, Rhode Island, and several others with partial deregulation.
What does a commercial energy broker charge?
Nothing out of pocket. Broker compensation is built into supplier pricing and present in every offer regardless of whether a broker is involved. You get a competitive process at no additional cost.
How long does it take to switch electricity suppliers?
Supplier switches typically take one billing cycle — about 30 days. There's no service interruption. Your utility continues delivering power through the transition.
What's the difference between kW and kWh?
kWh (kilowatt-hours) measures consumption — the total electricity used over a period. kW (kilowatts) measures demand — the rate of consumption at a specific moment. Demand charges are based on peak kW; supply charges are based on total kWh.
When should I start looking for a new electricity supplier?
Start 6–9 months before your current contract expires. That window gives suppliers time to bid competitively and gives you time to make a considered decision without urgency.