Tom Cummins Has Some Answers
Tom Cummins knows that when customers are looking for a supplier, a big question that arises is… Should I get a fixed or variable rate? Yesterday We at American power and Gas shared some information on Deregulation. So When Choosing a supplier, what do you need to know? Tom Cummins wants us to break down what fixed and Variable Rates mean.
Tom Cummins Explains What Fixed Rate Are
Fixed rate is an agreed upon rate for an agreed upon time. Some suppliers allow consumers to negotiate the rates and time frames, and other suppliers just offer standard rates and time frames. The agreed upon rate and time frame will typically involve a contract with fairly strict guidelines. The guidelines will often consist of penalties should the consumer break the contract and cancel. These fees can be quite hefty. Some customers like to know that their rate will stay the same for an extended period of time. The problem with locking in a price is that when rates decrease… you will pay more. The idea of a fixed rate is to protect you from increases, but the market fluctuates (goes up and down) so depending on the fixed rate you choose, you could pay more in the long run.
Tom Cummins Explains How Fixed Rates Work
Suppliers are able to pre-purchase electricity and gas in advance for customers based on previous years usage, and load factors (on peak and off peak use). Pre-purchasing enables a supplier to give consumers a specified rate for six, twelve, twenty four, or even thirty six months. The best strategy for a supplier purchasing energy is to purchase in bulk when there is a dip in the market. This is where the penalties arise in contracts, when a supplier expects to delegate a certain amount of electricity to a consumer, and that consumer cancels, the supplier is left with the energy to be re-sold on the market. This can result in a loss for the supplier, and then an expense for you or your business.
Tom Cummins What Variable Rates Are:
Tom Cummins is aware that Gas and Electric market rates fluctuate. A variable rate fluctuates on a monthly or quarterly basis. Suppliers need to save consumers money in order to retain a consumers business. As long as a supplier values a consumer’s business, they can earn it every month by competing with other available market rates. There are not usually cancellation fees holding consumers down with a variable rate supplier so the supplier only keeps a consumer’s business by providing a like-able service and savings.
Tom Cummins Explains How Variable Rates Work
Because the energy market changes often, energy buying on a monthly or quarterly basis must be done strategically. Buying power (bulk buying) contributes to lower rates on energy prices, so suppliers purchase electricity in bulk for variable rates when there are dips in the market. Whole sale rates are more competitive against other market rates all throughout the year, not just when rates are up. Variable rates give the opportunity to keep in trend with the market on a consistent basis. With a variable rate a supplier has the opportunity be competitive every month against other rates. The bad news with variable rates is if market rates increase, consumers rates may increase.
Just Some More Advice From Tom Cummins
Consumers should think about influences from the weather. Gas and electric is a commodity. Commodity prices fluctuate, and the fluctuation is typically based on demand. Consumers know that during the winter time gas prices rise because people use more gas to heat their homes. During the summer when consumers use more electric to cool their homes electric prices rise.
There are other factors that influence increase and decrease on the market, such as an elimination of a source that contributes to the generation of energy. For example, the increase and decrease of coal use effects the energy pricing. Capacity (a line item included in generation) fluctuated in 2014 and 2015 which affected Ohio supplier pricing. Unexpected Polar vortex’s (extremely cold weather for extended periods of time) have caused both gas and electric pricing to drastically increase. When drastic increases take place on the market sometimes even fixed rate contracts will be broken. When the usage exceeds the amount that was pre-purchased to satisfy the contract and suppliers have to purchase problems arise. Some incidences that cause pricing to increase and decrease are rare, some factors are a constant.
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