By: L.M. Sixel |
The old saying that timing is everything also applies to buying electricity.
Many consumers choose the cheapest electricity plan they can find and typically sign up for a one-year contract. But a one-year contract may not always be a good idea, considering that power prices are typically higher in the summer when demand for air conditioning is strongest compared to the winter when temperatures are mild and usage drops.
You might get a better deal in the long run by choosing either a six-month or an 18-month contract rather than a 12-month one, depending on when you would come up for renewal. If you bought a 12-month plan in September, it would renew when electricity prices are still high. But a six-month or an 18-month plan would renew in March, a month when electricity prices are usually low. Think of it like a wavy line with a big dip during the winter and a big spike during the summer.
“You want to stay in the trough,” said Jim DeForest, director of commercial sales for Rhino Solutions, a Houston-based energy broker who negotiates electricity contracts on behalf of commercial and industrial customers.
At the moment, it’s cheaper to buy a six-month contract than it is to buy either a 12-month or 18 month plan, according to the state-sponsored Power to Choose website. Five companies are currently offering a six-month fixed contract for 8.3 cents per kilowatt hour, according to Power to choose.
The lowest priced 12-month fixed contract is 9.1 cents per kilowatt hour compared to 9.4 cents for the cheapest 18-month plan, according to Power to Choose. (There are cheaper plans available that involve confusing multi-tiered pricing and usage credits and fees but Power to Choose filters them out from standard searches.)
Many people avoid signing up for six-month plans because of the time it takes to shop for power. But it might be worthwhile one time if it means you renew in the spring rather than the more expensive summer.
Or bite the bullet and go for an 18-month plan. Even though it might be more expensive per kilowatt hour, you might come out ahead if it takes the next renewal to March 2020.