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How to Get the Best Deal on Electricity? Here Are Five Tips

In the past few years, local business became accustomed to purchasing electricity from independent suppliers. However, companies concluding new agreements or renewing the old ones annually do not always get the best possible offer. Here are five tips of the independent electricity supply company Enefit to help you obtain the best deal on electricity on the market.

1. Get at Least 3 Alternative Offers

One of the main mistakes made by companies when purchasing electricity from independent suppliers is the ‘blind’ renewal of agreements with the current supplier. Since electricity price trends at the Exchange fluctuate pretty quickly, a customer can never be sure that the specific electricity supplier offered the best possible option without checking them regularly.

‘Prior to signing an agreement, it is recommended to obtain at least 3 alternative offers from different independent electricity suppliers. It is important to submit inquiries to suppliers at the same time and for the same period because this is the only way to compare them,’ claims Janis Bethers, Managing Director of Enefit.

This mistake is common with smaller companies, in which operating costs electricity does not constitute a large part of expenses. However, even in this case there is a possibility to get a price that is lower by 2–5 per cent and save several dozen to several hundred euro. It is best when the decision to purchase electricity is made by the head of a company or its financial director who can assess how savings can affect company finances.

2. Assess Forecast for the Future, Not the Past

You should note that fixed electricity rates offered by independent electricity suppliers for future periods is not comparable to historical electricity prices at the Exchange. Customers comparing these different-type prices without any reservations make a common mistake. First, you compare two different things – future and past prices. Second, Exchange prices for the period of barely one or two months may give you the wrong impression because they are prone to rather large fluctuations.

For example, the difference between the lowest electricity price at the Exchange recorded in March 2015 and the highest price observed in October 2015 was as high as 57 per cent (see the chart). Therefore, a fixed rate of EUR 45 for a megawatt-hour can seem very expensive as compared to the price prevailing in March and very cheap when compared to October prices at the Power Exchange.

‘When making a decision regarding the fixed rate and in order to get a fuller, more objective view, you need to assess the price prognosis going forward.

If a customer finds it inconvenient to monitor the developments at the Exchange, there is always an option to contact representatives of independent electricity suppliers or compare prices of several different offers,’ says the Enefit representative.

After the expiry of a fixed-price agreement, a company can compare how accurate was an independent electricity supplier in its forecast for future trends and if the price paid was consistent with reality. You can find historical data of Exchange prices here »

3. Take Agreement Period into Account

Obtaining offers from several independent electricity suppliers is only a part of job done. It is equally important to compare the terms and conditions of received offers. ‘In this case, buyers of electricity should pay attention to the period of agreement. Although usually agreements have a one year duration, in some cases suppliers offer agreements of shorter or longer duration and include the spring season in them, which is favourable to lower electricity prices,’ notes Mr. Bethers.

So, if the agreement validity period in two alternative offers is different, the price for a megawatt-hour of electricity indicated in them should also be different. For example, the electricity price in a 1.5-year agreement starting at the beginning of the year and ending in the spring of next year should be lower than in a 1-year agreement. Exchange trends in the past several years show that in average, electricity is cheaper during the first half than during the second half of the year.

It is also recommended to think about purchasing electricity at market prices. This approach to purchasing electricity, which is very common in Scandinavian countries, every year becomes more and more popular in Lithuania. By purchasing electricity at real market prices, customers can reduce electricity costs from 10 to 20 per cent.

4. Do Not Forget Details

Sometimes customers are so eager to get the lowest price offer that they forget to check other agreement details. As mentioned above, the agreement validity period is one of them. Nevertheless, there are also some other fine points that can turn into an unpleasant surprise.

‘In some cases, electricity suppliers include in their agreements clauses providing that, for one reason or another, they are entitled to change the electricity price unilaterally as long as the agreement is in effect. An agreement should provide the guaranteed electricity price that should not change during the entire term of the agreement,’ states the Enefit representative.

One more detail that could be disadvantageous to a buyer is the automatic renewal of agreement. There were some cases in the industry when a customer was notified about the expiration of agreement validity period and the lack of reply was considered the consent to renew the agreement with the same or even amended conditions. Therefore, before you sign an agreement, always pay attention not only to the lowest price but also to other terms.

5. Make Your Demands Known

Buyers of electricity are not the same and sometimes they care about different things. Therefore, companies should know that they always have a possibility to ask from independent electricity suppliers for things relevant specifically to them, such as individual settlement or agreement renewal terms, alternative products or purchasing of electricity produced using only renewable sources.

You can request an electricity purchase offer for next year on Enefit website »

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