Energy Matrix Rates & How To Use Them
In the energy broker industry, consultants and brokers make a living finding low-cost energy supply for their commercial and industrial customers.
And since there are hundreds of retail suppliers and offerings in the market, it can be quite complex to navigate all supplier rates to find the lowest offer for a customer. The most successful energy brokers in the country are masters at knowing how and when to price customer accounts.
One of the major factors differentiating successful brokers is the ability to quickly tell if a customer is best-fit for a matrix price or a custom price. In fact, a seasoned energy broker can look at a single bill copy and know in seconds how to obtain the best pricing for the customer.
To truly understand how to find the lowest rates for your clients, you must understand the key differences between matrix and custom energy pricing, and about energy pricing in general.
Why It’s Important To Understand The Difference Between Matrix vs. Custom Pricing For Your Customers
There are many differences when it comes to energy matrix rates vs. custom energy rates. Let’s explore the key differences below and understand how to utilize both pricing methods for your commercial customers.
What is Matrix Pricing?
In the retail energy sector, energy suppliers rely heavily on energy brokers for commercial customer acquisition. In fact, today the majority of commercial energy supply transactions are executed through an energy broker. In order to streamline pricing operations for brokers, most retail energy suppliers publish matrix pricing that allows brokers to obtain price quotes immediately. Matrix rates are a list of prices offered by a supplier that can be sold directly to customers without having to contact the supplier for a price quote. Here are some of the things you need to know about matrix rates:
most suppliers publish matrix pricing daily
matrix pricing goes up and down with the price of the energy market
matrix pricing is typically sorted by several factors including utility, kWh usage, rate class, start date, contract term
suppliers sometimes put certain requirements on matrix deals (size, load factor rating, customer type)
The Types Of Energy Matrix Rates
Retail electricity suppliers offer different energy rate options on their matrix pricing. Some of the types of energy matrix rates include:
Fixed Rates (with transmission adjustment passthrough charges)
These are standard fixed energy rates that have contract language allowing the energy supplier to pass through transmission adjustment costs to the customer in the middle of a contract. Most energy suppliers have defaulted to these types of fixed rates on the matrix plans.
Super Fixed Rates (with no adjustments)
In response to the negative feedback on transmission passthrough charges, some larger suppliers are offering super fixed rates that contain zero mid-contract adjustments. These rates tend to be higher as suppliers charge a risk premium.
Energy Only Rates
Although more popular in custom rate scenarios, some energy suppliers offer energy-only rates where the energy portion of the supply rate is fixed and the transmission, capacity, and other ancillary costs are passed through at true cost. These are popular with customers that are planning future energy efficiency projects as they can double benefit from the energy reduction and lower transmission and capacity costs.
Fixed Adder Rates
Fixed adders are index market energy rates that are calculated using the wholesale cost of electricity each month plus a fixed profit margin for the energy supplier and broker. These are ideal for customers looking to take advantage of downturns in the market.
NYMEX+ Rates (natural gas)
Similar to fixed adder electric rates, NYMEX+ rates are index-based natural gas rates that follow the ups and downs of the NYMEX natural gas market. These rates are calculated each month by taking the last day’s NYMEX settlement price for the month and adding a fixed amount to the rate. The adder includes the supplier and broker margin plus any basis costs, which are the difference between the NYMEX market price and the regional price at the customer’s location.
The Pros and Cons of Matrix Pricing
Matrix pricing has many benefits but can also have its downsides. When considering whether you should use a matrix rate or custom price for your customer, there are several factors to consider. Let’s start with the upside:
Pros
Easy to use and scalable
Fast pricing turnaround time
Great way to predict custom price trends
No need to contact suppliers for quotes
Great for accounts with poor load factors
Great for small commercial customers
Cons
Can be higher than a custom rate
Not all customers qualify
Limited customization
Standard contract terms – no special language
Not great for larger customers