Market volatility isn’t just a buzzword—it’s a real challenge for commercial businesses managing their energy budgets. For example, commercial customers often see their bills impacted by multiple components: not just the cost of electricity itself, but also demand charges, transmission fees, and growing capacity costs. Recently, the PJM Interconnection—a regional transmission organization that serves much of the Northeast and Midwest—has announced notable increases in capacity costs, which are passed directly onto customers and can account for as much as 30-40% of a total energy bill in some areas.
However, there are alternatives that can help you. By exploring different contracts or working with a competitive energy service provider, you can access more flexible pricing structures and risk management strategies that support your bottom line. Understanding how wholesale energy market fluctuations impact your costs is the first step in building a resilient energy strategy and keeping more money in your pocket.
How Wholesale Energy Markets Affect Your Utility Bill
Wholesale energy prices are shaped by various factors, including weather events, fuel costs, and fluctuating demand. For example, extreme weather, like hurricanes or massive storms, can disrupt supply chains and infrastructure, causing sudden spikes in wholesale prices. Shifts in natural gas prices also set the marginal cost for electricity, meaning that when gas prices rise, so do wholesale electricity rates. Seasonal changes also play a role, with winter generally having higher prices due to increased heating demand.
While most commercial customers pay prices based on seasonal averages rather than real-time wholesale rates, sharp increases in wholesale costs eventually pass down, leading to bigger bills for businesses. This is especially impactful for energy-intensive industries (think healthcare or manufacturing), where even minor price swings can significantly affect operating budgets.
Why a Solid Energy Strategy Matters
Given this volatility, relying solely on traditional utility contracts can expose your business to unpredictable costs. Utilities often charge a “last resort” or “default service” rate for customers without a supplier, which can often be higher than the rates available through competitive suppliers because the utility must buy power at current market rates (with its volatile spikes)—often leading to much higher energy costs for your business.
Innovative businesses are increasingly treating energy as an asset, not just an expense, by adopting strategies that provide more security and predictability. These include:
- Reducing overall usage through targeted energy efficiency measures.
- Negotiating fixed-rate contracts to lock in prices and gain budget stability.
- Investing in on-site generation, such as solar or cogeneration services, to reduce reliance on the grid.
How Catalyst Power Can Help
Catalyst Power specializes in helping commercial customers navigate this volatility with customized solutions. Our approach blends retail energy supply with on-site generation! You can choose from a variety of pricing structures, including our fixed-rate plan for budget certainty. We also offer on-site generation solutions—like our Connected Microgrid ®—to help you reduce peak demand charges and shield your business from market swings. Plus, these strategies support your ESG goals while lowering long-term costs.
A proactive energy strategy with the right provider is essential in a volatile market. Catalyst Power’s suite of products and services empowers your business through budget protection and cost savings, turning energy from a cost center into a competitive advantage. Ready to unlock new value in your business? Our Energy Experts are ready to help.
