What Impacts the Price of Electricity and Natural Gas?

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What Impacts the Price of Electricity and Natural Gas?

At CES we help you find the best rate for your electricity and natural gas in the current market. Now, you might ask, what does that mean actually?

Well, the fact is that pricing of electricity and natural gas is constantly changing. So a quote you get today might be different next week.

Typically, up to 30% of a business’s expenses come from energy costs. So anything a business owner can do to manage or even lower the amount of money spent on energy can result in significant savings.

Let’s examine some of the factors that impact the pricing of electricity and natural gas.

It’s important to understand that electricity cannot be stored. It is produced at the exact moment of demand. So energy suppliers have to predict as accurately as they can how much energy to generate over specific periods of time.

Electrical power is a true “supply and demand product.” Any factors that can influence the supply and demand of electricity will have an immediate impact on the price. The suppliers have to consider things such as at this moment are businesses and schools closed for a holiday? That’s less demand. Is the wind blowing strong? Is there a hurricane or an ice storm or some other weather phenomenon happening that could create an outage? Is the price of coal, gas or oil rising? These are used in the production of electricity and if their price goes up, so does the price of electricity.

An additional factor is the supply depends upon the generation capacity of individual power plants—how much can specific power plants generate in a unit of time? What condition are these plants in? What overhauls do they have planned and what will those expenses be? There are also unplanned outages to consider.

A global economic crisis can reduce demand. A global dramatic demand for energy can cause a big increase in prices.

All these factors and more can have an effect on the price of electricity or natural gas on a daily basis.

This chart shows you some of the factors that can impact prices.

price-factors-Chart

Chart from RWE.com

With all the above factors in mind, the pricing of electricity has six main elements:

  1. The cost of the electricity itself.
  2. The costs related to predicting a sufficient generation of power in accordance with the capacity of the power plant to supply the demand.
  3. The service charges involved with the maintenance of the power grid. This has to do with the control centers that operate and synchronize the transmission and distribution lines between providers and consumers.
  4. The actual transmission costs. This is the cost of moving power from a supplier (generator) to a local distribution company.
  5. As power is moved there are losses associated with that. So those costs are also factored in.
  6. There are also costs related to procuring power from renewable energy sources—such as wind and solar power.

When you sign up with an Energy Supply Company in a deregulated state you will have the choice to have your electricity (or natural gas) contract with them for a specific period of time: one year, two years, perhaps even three years. This will also impact your price. Because it gives the suppliers prediction of the demand expected. Add to that your usage and there is a very complete picture of what you may be using over the next year, two years or three years.

Now as a business owner or a purchaser in a very busy company you could contact several suppliers in your area and ask for different pricing configurations to compare your options. However, sometimes working with different suppliers, you will find the data given is not like comparing apples to apples and it can be difficult to decipher.

You may also want to work with a supplier who can meet your billing and service needs along with your price requirements.

This may not sound like exciting work to you. Well, the good news is that here at Consumer Energy Solutions we do that all day long. We basically do the shopping for you. And that’s what we mean by the statement: At CES we help you find the best rate for your electricity and natural gas in the current market.

We work with major suppliers in deregulated states and we know current pricing and factors that are affecting that pricing. We can guide you to the best program to suit your needs!

 

  1. Call 1-866-253-9600 today to get a Free Rate Reduction Analysis!

By | 2017-09-26T12:03:36+00:00 October 5th, 2015|Electricity, Natural Gas, Uncategorized|0 Comments

About the Author:

Patrick J. Clouden is the Chief Executive Officer of Consumer Energy Solutions, Inc., one of the nation’s top energy consulting firms. Consumer Energy Solutions was founded in 1999 and represents some of the largest energy suppliers in North America. CES has enrolled over 2.5 million residential and 300,000 commercial customers across the United States and Canada including many Fortune 500 companies.

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