Texas businesses buying electricity in today’s climate of high energy prices face a tough question: is now the right time to lock-in a price, or are high prices temporary, and is a better deal just a few months away?
For customers willing to accept a bit of risk in the short-term, Texas energy suppliers offer a product that lets customers ride the market, and avoid the prospect of locking-in a high price, only to see electricity rates fall a month later.
It’s called buying on the Market Clearing Price for Energy, or MCPE for short, and essentially means the customer accepts the floating wholesale price for electricity in Texas , rather than locking-in a fixed price for a set term.
While the mechanics of MCPE can be a bit complicated, finding an MCPE plan isn’t. Eight energy providers are waiting to compete and offer their best MCPE product to customers through SaveOnEnergy.com , whose unique commercial portal lets customers receive competing bids for their power needs through just one click of the mouse.
The basic principle behind MCPE is that the customer is never out of the market, and is never paying more for power than what they could get that day. This allows a customer to test the market, and watch prices before choosing a long-term deal. If the customer thinks prices are currently too high, and expects them to fall in a month or two, then buying on MCPE lets the customer wait before locking-in a better term deal for electricity .
However, the MCPE product is not without risks. First, there is no guarantee that prices will go down, and waiting to buy a term product may increase the eventual price paid under the term deal. Second, the MCPE can be volatile given the nature of the wholesale market, and does expose customers to the potential of very high price spikes.
The Texas wholesale electricity market is run by an organization called ERCOT, and a new price for power, the MCPE, is set every 15 minutes, based on the interaction of buyers and sellers. The MCPE varies greatly throughout the day, and is typically lower when people are using less power (such as nighttime), and higher when people are using more electricity (such as during the late afternoon). The MCPE can also spike for short periods of time when there is a shortage of power, just like how gasoline or food prices can sharply rise when there is not enough supply. Customers buying electricity at a fixed price avoid these risks, but buying on MCPE means the customer could pay much higher prices at certain times.
Energy suppliers offering an MCPE product typically price it at the wholesale MCPE plus a “retail adder.” The adder covers the provider’s overhead costs, and also some “ancillary” electricity costs at the wholesale level which aren’t counted in MCPE. The adder is essentially what differentiates each provider’s MCPE product, and is what electric companies compete on.
Depending on the energy supplier and the product the customer wants, the customer could receive a bill based on true MCPE calculated every 15 minutes, or a daily, weekly or monthly average of the MCPE.
Texas electricity providers offer a suite of customized MCPE products as well. For example, if a customer wants to ride the market for a bit, but wants to be protected from a price spike that’s too high, energy suppliers can build a “trigger” into the MCPE product. The trigger allows the customer to move to fixed-pricing at certain times or under certain conditions, such as a price point. Such a product protects customers against abnormal spikes in the MCPE, which may be caused by a power plant or transmission line outage, while still letting them ride the market.
Buying on MCPE comes down to a customer’s risk appetite, and the best way to judge MCPE products is by comparing different options from competing suppliers. The quickest way to get eight quotes from vetted, reputable energy suppliers is to use SaveOnEnergy.com's online commercial portal, which allows business owners to shop for power on their schedules and at their convenience.
Business owners can simply enter their monthly bill payment on SaveOnEnergy.com and tell the suppliers that they’re interested in an MCPE product, and the eight energy suppliers will compete head to head for the customer’s business. Electricity providers will contact the customer directly with their best offers, putting the customer in charge.