What you should know about changing energy prices.
Why Prices Change
As a customer in a deregulated energy market, you are often told how competition helps drive down prices. And it’s true. That’s because energy suppliers, like Spark Energy, buy units of energy in a competitive open market from companies that either generate electricity or process natural gas. We’re pretty good at it too. You pay less because we pay less.
The prices you see on our rate plans today reflect our projections on what a fair and reasonable price would be for the term of the contract based on present market conditions. However, energy prices go up and down over time with changes in the market.
How Fixed Rate Plans Work
At Spark Energy, our customers are able to “lock-in” a set price on each kilowatt-hour or therm for the duration of a contract. Contract terms range from 3 to 24 months.
Why Rates are Different for Different Contract Lengths
The rates we quote on any given day are ultimately determined by how much we anticipate paying for gas or electricity over the length of the contract. The longer the contract, the more we may need to anticipate a higher swing in price over that time. That’s why those prices may reflect a marginally higher rate.
While today’s shorter term contracts may have a lower unit price than today’s longer term contract, this may not be the case when it’s time to renew.
Shorter term versus longer term contracts:
How Should I Choose?
When considering what length of contract to select consider the following:
- If you prefer the peace of mind that comes from knowing that your price won’t change for a long time, then a longer contract might be for you.
- If you feel like it's a hassle to sign a contract and shop around for the best price, the longer contract may be the answer.
- If you move often or don't want to worry about early termination fees, shorter contracts may be your best bet.
- If you always like to find the lowest price, then shorter contracts might be what you're looking for.
But remember, it's very difficult to anticipate the future movement of the market and it's not necessarily cyclical. It's also driven by many factors. Be careful when trying to anticipate market movement when deciding on the term of your contract.