Electricity Contracting and Procurement with Shipley Energy
Business owners and operators may be familiar with the opportunity to choose an electric supplier for their home electric needs, but when it comes to procurement and contracting electricity for their business, the process is not as direct or simple. There are many more things to consider besides the price of electricity including capacity tags, risk tolerance, contract length, etc. In this article we explore these ideas and more to provide a foundational understanding of electricity contracting.
Shipley Energy’s trusted electricity procurement experts are here to guide you through the process of choosing an advisor, supplier, and creating a procurement strategy that best fits your organization’s needs. Get in touch today, or read on!
The electricity procurement process is quite similar to the natural gas process, as they are both utility-delivered products. Many of the steps and requirements are the same.
Step 1: Information Gathering
Every commercial client who reaches out is assigned a designated account manager who will be available every step of the way to guide you through the process of choosing a plan that is right for your organization. During your initial call or meeting, you may expect to answer some of the following questions:
Are you able to provide a recent utility bill?
A utility bill will provide your account manager with vital information such as usage patterns, tags, rate code, address, LDC#, and utility.
Are you able to confirm if you are in a current supplier contract? If so, when does this expire?
Our account managers will need to know of any current contracts to be certain there is no risk of double contracting, and to assess current utility and supplier charges. If you are paying sales tax and you are tax exempt, this is something we will want to make sure is corrected!
How do you typically prefer to procure your energy supply?
Do you prefer to work through a broker/consultant to shop for your energy supply, or do you prefer to work directly with a supplier?
Would you prefer a more hands on or hands off process?
How often would you like to receive market updates – Weekly? Monthly?
If you prefer to work through a broker/consultant, are you willing to sign a Letter of Authorization?
An LOA simply provides Shipley Energy with the authority to shop on your behalf with other suppliers and is non-binding. This document provides peace of mind to suppliers by letting them know that a consumer has agreed to share their usage and company information for procurement purposes.
What is your procurement timeline?
Is your electricity contract expiring in the next few weeks or do we have more time to help you decide and make decisions?
Do you have to receive board approval regarding energy contracting decisions?
How many people within your organization are involved in the decision-making process?
What is your risk tolerance?
Would you prefer to review options that are fully fixed (albeit any required PJM approved pass-throughs)?
Or are you open to market-based options? (More on this below)
These questions may feel overwhelming, however, with this information our account managers can quickly formulate a plan that best suits your business’s needs. We understand that every business operates differently, and one solution does not fit all situations.
Step 2: Designing Your Electricity Plan
Your newly assigned account manager will compile the data, and begin assessing and creating an energy plan, just for you.
If you choose to go the route of brokering your energy, we typically require 1-2 weeks. This provides us with sufficient time to consult with our reputable supply partners and compile price offers for presentation. If you choose to go the direct supply route, our team can typically provide an offer same-day, but may request an additional day or two to compile the data internally so we may provide your business with the most competitive pricing.
Once your account manager has price offers and plans ready, they will schedule time to run through these options and discuss the pros, cons, and long-term strategy. If you don’t like what you see right away and choose to see if the market will move in a more favorable direction, we can easily refresh offers and present them to you when both parties feel the time is right.
Once you are ready to move forward, your account manager will provide a contract representing the agreed upon price and the terms requested for your review prior to execution. We can provide a PDF version or we can easily send a linked contract to you for a quick e-signature.
Step 3: After Executing a Contract with Shipley Energy or Shipley Energy Advisors
The procurement team and you account manager at Shipley Energy will actively monitor your account and check in as often you prefer, whether that be with weekly market updates, quarterly check-ins, or even just once per year before time of renewal.
At the beginning of a new contract period your account manager will request a first bill to review. We always make sure pricing, taxes, and supplier charges are accurate.
Interested in Working with Shipley Energy but Not Familiar with Energy Contracts?
As mentioned, energy can be challenging and often time-consuming. Your account manager will be sure to discuss the many contracting options we have available to make sure you choose the right plan for your organization.
Electricity Contracting Options
Below is a list of the most common types of electricity contracts we see organizations using. This list is not exhaustive, but demonstrates the array of offerings we can provide as solutions.
All-In Fixed
Definition: A fixed price contract offers a set energy rate for a specified period, typically one or more years. Standard terms could include 6, 12, 18, 24, 36, or 48 months.
Benefits:
Predictable costs (other than pass-throughs that cannot be avoided!)
Budget stability
No exposure to market volatility
When to Use: Ideal for organizations with stable, predictable energy consumption and a desire for cost-certainty.
Index
Definition: Effectively a variable price that moves with the market; however, it’s justified each month as it is tied to an index (the market).
Benefits:
Opportunity to benefit from market price declines
The energy portion of the price floats, while the ancillary charges are fixed
When to Use: Best for customers who can manage price volatility and who are willing to be involved frequently and sometimes on short notice.
Capacity Pass-Through
Definition: A contract where the customer pays a fixed energy rate, but the utility passes through capacity costs incurred by the supplier.
Benefits:
Flexibility for both parties
Potential for cost savings if capacity prices fluctuate
When to Use: Suitable for businesses that expect their capacity needs to vary and prefer flexibility in passing through costs AND when capacity costs are unknown/uncertain.
Capacity & Transmission Pass-Through
Definition: A combined contract where both capacity and transmission costs are passed through to the customer.
Benefits:
Flexibility to adapt to varying transmission and capacity charges
Transparency in cost structures
When to Use: Best for organizations in areas with highly variable transmission and capacity charges, and who want to pay directly for these costs rather than a fixed rate, where capacity and transmission adjustments will most likely just be passed through anyway.
Block & Index
Definition: The market price of electricity tends to shift from month to month due to supply, demand, weather forecasts, new regulations, and more. Electricity is available at a lower cost some months than others, and a block and index pricing plan can help businesses find new opportunities to save. Shipley Energy offers block and index rates on electricity so companies can capitalize on the market when prices are low, but also have the safety of locking in blocks of their power at fixed rates to avoid the risky months. An index pricing contract ties the energy rate to a market index, such as a regional energy price index.
Benefits:
Opportunity to benefit from market price declines
Transparent pricing structure based on real-time market conditions
These plans provide the stability of locking in the price for a portion of electricity usage, while the price for the remaining usage floats at the current index (market price).
Delivery charges can be passed through or fixed, depending on your preference.
When to Use: Best for customers who can manage price volatility and have flexible energy consumption patterns.
Load Following Block
Definition: Your total electricity usage is purchased at a fixed price, allowing you to secure a predictable amount of power while providing flexibility to buy the remaining variable portion of your electricity needs based on market fluctuations, essentially “following” the market price for the remaining load not covered by the fixed block. A customer will typically choose a percentage of their total electricity usage to be covered by the fixed “block” price, with the remaining percentage fluctuating based on market prices. A contract would specify the fixed price for the block, the duration of the contract, and how the variable portion of the electricity will be priced based on market indications.
Benefits: Can protect your organization from sudden price spikes in the market while still benefiting from potential price drops on the remaining variable portion.
When to Use:
Great for businesses with fluctuating demand: Manufacturing facilities, retail stores with seasonal fluctuations, or businesses with unpredictable operating schedules can benefit from the flexibility offered by load following contracts.
Helpful to risk-averse customers: Companies looking to minimize price volatility and secure a predictable portion of their electricity costs can utilize load following blocks.
Demand Response: reduce or shift energy usage during peak demand periods in response to grid conditions or price signals.
Benefits:
Lower energy costs
Improved grid stability
Provides monetary incentives for participation
Common Demand Response Programs:
Voluntary curtailment / emergency program:
Shipley Energy Advisors partner with CSPs (Curtailment Service Providers) to bring this service to Shipley Energy customers. The CSP calls you, the consumer, to reduce or shift energy usage during peak demand periods in response to grid conditions or price signals.
Automated Load control:
A program that will curtail usage for a consumer automatically.
Peak Shaving: reducing overall demand at times when consumption is at its highest, typically by using backup generation or other load-reducing technologies such as battery systems, modified hours of operation, onsite-energy storage, or tracking usage and cutting back.
Benefits:
Reduces electricity demand charges
Minimizes the need for costly infrastructure upgrades
Avoids penalties for exceeding peak demand thresholds
Common Strategies:
Battery storage
On-site generation (e.g., gas or diesel generators)
Energy management systems (EMS)
Tariff Analysis: Is the utility billing you correctly?
We review your utility bills to compare current and historic #s and analyze demand, consumption interval data, tariff structures, and possible rate options. This can help reduce costs if there are errors in rates and tariffs.
Rate Code Analysis: Is the utility charging you the same as other customers of your size?
We review your rate code to determine if you are in the best rate class for your size, or if you should move up or down a rate class. Rate codes are factored into price offers and you could possibly benefit from a lower price by moving rate classes.
Site Selection and/or Expansion: we analyze your current needs and specific business model to assist with selecting the best possible location for a new facility or expansion. We take into consideration utility rates, regulations, & incentives to determine cost-saving opportunities to optimize efficiency and stability. We also look at grid stability, equipment, design, and permitting.
Substation Management: inspection and maintenance management, replacement of relays, implementation of metering systems (electric, gas, and water), and switching and tagging for substations and associated feeders.
PLC Management: Temporary changes to how you use power that result in lower costs for a year.
Submetering: Submetering involves installing individual electricity (or other utility) meters within a property to monitor and bill the usage of specific areas, departments, tenants, or even specific pieces of equipment. Instead of relying on a single master meter to measure total consumption, submeters track energy usage at a more granular level.
RFP Work: Providers, energy efficiency, metering, solar, anything electrical or natural gas.
If you have ESG goals that your organization wants to or is required to meet, we can help with contracting for electricity generated from green and renewable sources. For more information on what is possible visit our renewable energy page.
Why Are There So Many Contracting Options?
One-size does not fit all when it comes to energy procurement. If you are unfamiliar with the options above, your account manager is available for a call, video chat, or email whenever you may have a question.
How has Shipley Energy Assisted Organizations with Their Energy Management?
Testimonial: Ducklings Early Learning Center
“Shipley Energy has been a welcome partner in managing and controlling our energy expenses. They not only do the energy shopping for us, but also provide valuable forecasting information that helps us understand the direction of the energy market and associated costs. We love working with Shipley for their knowledge, professionalism, and they just make things easy!
Karlo G., Owner/Director of Business Development at Ducklings Early Learning Center
Ducklings Early Learning Center in Landisville, PA serves the local community, families, and children, by providing developmental education for children 6 weeks through pre-K.
Conclusion
Electricity procurement and contracting is complex and varies based on the unique needs and requirements of every business. We’re here to make the process straightforward, providing you and your business with the confidence needed to make an informed decision.
Ready to take the next step in your electricity procurement? Reach out to the Shipley Energy team today – call 717-771-0772.
