Electricity Procurement

Standard Power of America offers a number of solutions for our clients’ electricity procurement needs. SPA consults with each client to select the correct plan based on usage profile, level of risk tolerance, and current market conditions.

Fixed Rate All-Inclusive Plan

This type of electricity supply contract has a set cost-per-kWh for a set amount of time. This type of plan provides predictability with a fixed price that's guaranteed for a given term. Fixed Rate All-Inclusive Plans includes all costs and services associated with power at a fixed price. This includes electricity and all related retail components, such as charges from your regional transmission organization (cost of energy, capacity, congestion, Daily RMR, renewable portfolio requirements, reserves, regulation, and all other ancillary expenses). It allows the customer to seek price certainty to budget their electricity costs with confidence, avoiding sudden spikes and decreasing exposure to costs that may impact their bottom line. This is the best type of plan for customers with low risk tolerance for price volatility.

 

Fixed Rate with Pass-throughs

Similar to the Fixed Rate All-Inclusive model, The Fixed Rate with Pass-Throughs option allows the customer to fix the cost of supply and term of the contract while allowing for certain ancillaries to be passed-through. The forward costs of Capacity, Congestion and/or Daily RMR can be removed from the fixed price component of the contract and are paid for by the customer on a cost pass-through basis. This option is for customers that want to fix a large majority of their energy costs but are willing to accept some degree of price uncertainty in order to pay no more than the cost incurred by the supplier for those services.

 

Variable Rate Plan (Index Rate Plan)

The index rate (price) is determined each hour based on the electricity market clearing price. Therefore, with the Variable Rate Plan, the price of electricity fluctuates depending on the day-ahead and/or daily index rate for supply (represented as a monthly average for billing purposes). The additional price components (ancillary and capacity) are fixed (sometimes referred to as a fixed price “adder”). Under most variable rate plans, customers can convert some or the entire variable priced component to a fixed price at any time. Variable rate plans are useful when the cost of electricity is predicted to decrease in the future and therefore customers do not want to be locked-in at a higher fixed rate. This is also beneficial for businesses that can curtail their energy use during periods of high prices. Customers choosing this product, however, accept all risk for market price volatility including the possibility of general increases in market prices and the possibility of significant price spikes when system conditions are stressed.

 

Trigger Pricing Option

This product option is for customers who believe the market will fall, do not want to lock-in at current market prices, and are willing to risk the index price in the interim. Standard Power of America will monitor market conditions and lock-in the pre-defined price as soon as the forward market falls to “the trigger price”. The Trigger Price option is restricted to certain usage minimums and not available in all geographic areas.

 

Block Plan (Block and Index Pricing)

A Block Plan allows the customer to lock-in a portion of their load at (i.e. fixed rate), while letting the remainder of the load float with the market (i.e. variable rate). A Block and Index model allows customers to capitalize on market declines, but at the same time limit their exposure when market prices rise. Essentially, the block plan creates a hedge position for the customers by combining the security of a fixed price with the benefits of a variable price. This product is right for customers who do not want to have their entire energy portfolio locked-in at a specific rate. It allows for customers to be partially exposed to market price volatility, while hedging the remainder of their load at a fixed rate. The size and make-up of the block is at the customer's discretion and will depend on the customer's risk tolerance.

 

Heat Rate Plan

A heat rate plan links the customer’s electric power price to the price of natural gas. The result is a monthly electric price that reflects the gas market (NYMEX Henry Hub monthly settlement price). There is a range of how non-energy charges are handled for Heat Rate Solutions Plans. Depending on customer needs, the plan can include non-energy charges in the forward power price based on assumed power consumption, include them in a fee based on the volume used, or directly bill the customer for the regional transmission organization and retail related charges. A benefit is of the Heat Rate Plan is the ability of the customer to watch the gas market closely (NYMEX) unlike power market index plans. Heat Rate Plans are not available in all states.

 

Tranche Pricing

With Tranche Pricing, the customer’s load is divided into separate tranches (or portions of the whole) and fixing the rate of each tranche at different times. Tranche Pricing is based on the investing methodology of dollar-cost averaging. The customer the determines the times when they would like to lock-in a percentage of their overall load while utilizing Index Pricing for any tranches not locked into a fixed price. The concept behind the product is to remove the variable of "timing the market” (i.e. attempting to lock-in a rate at the absolute low point in the market). It employs a strategy of partially hedging against volatile short term market swings, while preserving the ability to capture downturns in forward market prices later. Tranche pricing has minimum usage and geographic requirements.