Managing Your Business Like A Professional

3 Factors That Affect Commercial Energy Rates

by Sherri Robinson

Energy is a vital resource that no commercial building can function without. Business owners don't always understand how the rates charged for commercial energy are calculated. This misunderstanding can make it challenging for a business owner to budget for fluctuating energy costs effectively.

You may be surprised to learn which factors can have a direct impact on energy costs over time.

1. Capacity Charges

The primary goal of any energy system is to ensure that there is enough energy in reserve to fuel all homes, businesses, and other buildings connected to the system at all times. This can be a challenging goal when the demand for energy skyrockets on a very hot or extremely cold day.

Capacity charges are determined by the amount of available energy within an energy system. When reserves dip, capacity charges can go up. The closing of antiquated plants can reduce energy capacity, which can also result in an increase in the cost of commercial energy.

You can budget effectively for capacity charges by planning on a rate increase during peak usage periods.

2. Transmission Costs

Energy must move from the plants that generate it to the substations that distribute it throughout an energy system. The cost of moving bulk energy between plants and substations is referred to as a transmission cost.

Transmission costs are regulated by the Federal Energy Regulatory Commission (FERC). There have been several transmission cost increases approved by FERC in recent years.

While transmission costs are out of your control, you can keep tabs on the current approved rate to help budget for your energy costs more effectively.

3. Energy Surcharges

Energy production and distribution benefit a wide range of business owners and consumers. It is the responsibility of all those connected to the energy network to maintain the energy system properly.

Energy surcharges are typically added to each bill sent out by an energy company. These surcharges are meant to provide financial resources that energy companies can use to improve the safety and reliability of their energy delivery systems.

Surcharge costs can fluctuate over time, so you will need to closely monitor your energy bill to determine how surcharges are impacting the cost of your commercial energy.

Commercial energy rates are influenced by many factors. An understanding of these factors will allow you to create a more feasible budget for your company's energy costs, allowing you to avoid any surprise energy cost increases over time.