Education

Swing

Swing allows a retail electric provider (REP) to charge additional costs to a customer when their usage is above or below the usage that was forecasted. Electricity contracts typically cover an expected or predicted load that is derived from historical usage (normally the trailing 12 months) or an estimated electricity load for a new user/meter. Loads are unique to each meter; all meters combined create a total annual load for a contract. Many electricity contracts will include a provision to allow an electricity provider to charge the difference in the contracted load and the current market costs when this variance occurs. Swing will come with a defined threshold before these extra charges are applied. For some customers, this new charge on a bill may seem like an unexpected cost even though this is in the terms and conditions of the electricity contract. We offer options that do NOT have swing restrictions and therefore eliminate any swing-related charges. That said, some attractively low offers tend to inherently come with these potential extra costs. Therefore, it’s important to understand your potential risk of additional costs when comparing plans. We can help you analyze your load, options, and risks to ensure you have the best information to make an informed decision.

Example: Let’s say a contract allows for 25% swing tolerance. On a month when the customer was expected to use 100,000 kWh but instead used 150,000 kWh, they would be charged the difference in the contract rate and the current market rate for the 25,000 kWh’s that were outside of the 25% swing threshold. If the market rate was 9 cents and the contract rate was 6 cents then the customer in this example would pay ($0.03 x 25,000) $750.00 in addition to their normal bill.

Material Adverse Change (MAC)

Much like Swing, material adverse change allows the retail electric provider (REP) to charge for usage variations. However, it includes set limitations that further define when this variation is recognized as a “material change” in an electricity contract. Commonly providers will define a pattern of usage variation that qualifies a material change. This may be defined as a pattern over consecutive or non-consecutive months depending on the contract. We offer options that do NOT have MAC restrictions and therefore eliminate any MAC related charges. That said, some attractively low offers tend to inherently come with these potential extra costs. Therefore, it’s important to understand your potential risk of additional costs when comparing plans. We can help you analyze your load, options, and risks to ensure you have the best information to make an informed decision.

Example: Let’s say that a contract has a 25% MAC clause and a limitation of 2 months. If a customer’s usage varied outside the 25% for 3 months, then a material change is recognized, and the charges would be assessed. On the third month the customer was expected to use 100,000 kWh but instead used 150,000 kWh, they would be charged the difference in the contract rate and the current market rate for the 25,000 kWh’s that were outside of the 25% MAC threshold. If the market rate was 9 cents and the contract rate was 6 cents then the customer in this example would pay ($0.03 x 25000) $750.00 in addition to their normal bill.

Material Usage Change (MUC)

Material Usage Change (MUC) is a change in usage at a given meter due to a major change in business operations. Examples of material usage change would be customer equipment outages, shutdowns, on-site generation or changes to operating hours. A Retail Electric Provider (REP) will pass through related charges to the customer and may charge extra retail costs when applicable. REPs can work with a customer to make changes to an existing contract if they are given notice of the expected change. This is normally at the discretion of the provider. We offer options that do NOT have MUC restrictions and therefore eliminate any MUC related charges. That said, some attractively low offers tend to inherently come with these potential extra costs. Therefore, it’s important to understand your potential risk of additional costs when comparing plans. We can help you analyze your load, options, and risks to ensure you have the best information to make an informed decision.

Add / Delete Language

Add / Delete Language is the ability for a customer to add or remove an entire ESIID/meter(s) during the service term of the contract. The load that can be added or removed is expressed as a percentage of the total annual contracted load. This is great for customers who may need to expand to new locations and are facing a potentially rising market. The qualified added meters would benefit from the grandfathered rate of the contract even in a higher market. This effectively allows the customer to gain new meters, within the load limit, at prices that are no longer available in the market. Customers who need to eliminate (delete) a qualified ESIID/meter can do so within the load limit with no early termination fee. Add / Delete language can be a valuable benefit to cover future plans or unknowns.

Post-Term Service

Post-Term Service in ERCOT means once a customer’s contract expires, they remain with the same REP but are now subject to market rates if a new contract has not been signed. A market rate is effectively a variable rate exposed to market conditions and no longer affords the customer the protection of a fixed contracted rate. We recommend not allowing yourself to be exposed to market conditions as poor timing can have a dramatic impact on the cost of electricity.

Hub to Zone Congestion Cost

Hub to Zone Congestion Cost is a component of an energy rate that can be included in the rate (known as a zone price) or passed through as a separate line item to the customer (known as a hub price). Congestion is the cost for the delivery of electricity from the trading hub (where the electricity is purchased) to the load zone (where the Customer’s facility is located). These are the two most common fixed electricity plan options in ERCOT.

Assignment

Assignment is utilized to either move (or assign) an electricity contract from one entity to another or reassign power from one ESIID to another. Entity assignments will often be used to transfer the contract in the event of the sale of a company/location or a tenant taking over the payment responsibilities at a leased location. ESIID assignments are often used to transfer service from one meter to another. A good example of this would be an oil and gas client moving service from one well to another. This reassignment can help prevent termination fees at the well that is being shut down as well as mitigate new market costs at the well coming online. Not all contracts can be assigned based on the terms and conditions of the contract. Please contact us if you need help understanding if your desired agreement is assignable.

Contract Term

Contract Term refers to the length of time contracted for electricity delivery. ERCOT service does not simply terminate when a contract ends. One must sign a new contract or terminate service outright, otherwise power will still be delivered but at a post-term (out of contract) market rate.

Early Termination Costs

Early termination costs (ETC) are the penalty for not fulfilling an electricity contract. When a retail electric provider (REP) procures the electricity for a customer’s contract, they take on risk that is offset by the customer paying for the electricity over the course of the contract term. If this contract term is not fulfilled, then the REP will have to liquidate the energy that they purchased for that customer. The difference between what the energy was bought at and then sold for can cause the REP to have a net loss. This loss is typically how most REPs will determine an ETC. Depending on how the market prices have changed this could be as low as no charge or as much as what the market price dictates. Occasionally some REPs will have a set ETC per month of remaining contract term, but this is less common and typically found in small commercial or residential contracts.

Blend and Extend

Blend and Extend is available in some electricity contracts and allows a customer and the respective retail electricity provider to effectively renegotiate the electricity rate before or during the contract term. This renegotiation is tied to extending the contract term to blend the extending period’s rate offering with the current contracted term’s price for electricity. The net result is a new rate that would apply to the current and extended term typically starting the very next billing cycle. In our experience, customers who appreciate this component typically see it as a way to cover their bases when contracting for a longer period.

Renewable Energy Credits (RECs)

Renewable Energy Credits (REC) are the industry’s way of transacting renewal energy generated on the grid. RECs are tied directly to a renewable generation source and are “retired” after they are utilized to offset a delivered electrical load. Typically, you will not see a claim to green, or renewable energy as a percentage of the grid generation for your consumption without these RECs. A company who wants to “go green” can sign a contract with RECs attached to their load, or can purchase these after the fact, to achieve their sustainability goals. Please contact us if you would like RECs to be integrated into your next electricity contract.

The Electrical Grid

The electrical grid is comprised of generators that produce electricity through sources such as coal, natural gas, nuclear, hydro, wind, and solar. These generators supply electricity through transmission & distribution systems made up of transmission / distribution lines, substations, and transformers that deliver power to customers.

ESIID (Electric Service Identifier Identification)

An ESIID (Electric Service Identifier Identification) is a meter’s unique identifier with the utility. This is not to be confused with a meter number, which is different from an ESIID. When signing for an electricity contract use the ESIID number, not the meter number. ESIID numbers do have a unique prefix that is associated with the relevant utility that services the address. If the ESIID number is unknown, it can be found on an electricity bill or by contacting the utility company.

Utility ESIID Prefixes:

• Texas-New Mexico Power: 10400
• Oncor: 10443 or 10176
• CenterPoint: 10089
• AEP Texas Central: 10032
• AEP Texas North: 10204

Meter Number

A Meter Number is the identification number on the physical meter at the service address. This is not the ESIID number. An electricity contract uses the ESIID number, not the meter number when signing up for service.

Market Securitization Charge

Market securitization charge is a new line item on electricity bills created to address the financial crisis caused by the winter storm of 2021 that affected all of ERCOT’s grid. This charge finances bonds that will pay down the extensive debt incurred by market participants that defaulted on payments during the event. Moving forward all ERCOT electricity users will pay a fee that is either a line item on their bill or included in their rate until this debt is eliminated.

Default Securitization Charge

Default securitization charge is a new line item on electricity bills created to cover the approximately $800 million in unpaid amounts owed to ERCOT by certain market participants.

ERCOT Contingency Reserve Service (ECRS)

This service was added in June 2023 and requires eligible generation to be available for dispatch within 10 minutes for up to two consecutive hours. The extra dispatchable generation creates grid reliability and as a result can help combat extraordinary costs during events of increased demand due to extreme circumstances. ECRS is an additional cost passed through to all ERCOT customers.

Provider of Last Resort (POLR)

Provider of last resort (POLR) is a retail electric provider (REP) that is designated to be a back up electric service provider in the event of failure of another REP. Typically, if an REP fails and the account goes to a POLR, the account will switch to a market rate and in most cases a new electric service contract will be required to obtain a fixed rate again.

Overview

ERCOT supplies electricity to businesses and homes through local utilities. This is accomplished by facilitating transactions from energy generation companies that supply the grid and the retail electric providers (REP) that serve customers. The REPs role is to customers a choice in deregulated markets. When purchasing electricity to serve their customers’ loads, each provider has terms and conditions and proprietary hedging practices. The net result of these REP strategies is a market that gives the customer competitive pricing with service that fits their needs.

Generation Costs

Generators supply bids to sell or buy their power for given intervals for each area of Texas that ERCOT serves. ERCOT accepts these bids starting from the lowest bid price offered. All participating generators receive the highest bid accepted to fulfill that time frame’s need. This can lead to extremely low prices for electricity when demand is low but can also drive prices up towards the market cap of $5,000 a MWh when demand is at its worst. A variable rate each month is billed as a weighted average of all these price points. A fixed price customer has a rate that is based on the forecasted market for the term of the contract. A customer can project future costs with more certainty with a fixed rate and remove many of the pitfalls that otherwise come with a variable rate.