Tired of high electricity bills at your business? You can save big by understanding commercial energy rates. Let’s talk about what they mean and how your company can pay less.
What Are Commercial Energy Rates?
Commercial energy rates are the prices businesses pay for electricity or natural gas. They are different from residential rates. Businesses often use more power, so they get different pricing plans.
Think of it like buying in bulk. If your business uses a lot of energy, you may get a better rate. But it depends on your plan, location, and time of use.
Why Do Commercial Rates Matter to Your Business?
Let’s start with a simple truth: energy costs are rising. In fact, U.S. commercial electricity prices went up 6.5% in 2022, according to the U.S. Energy Information Administration. That may not sound like much, but if you run a business, every dollar counts.
Here are the most important reasons why commercial energy rates matter:
- Monthly savings: Even a small discount on your rate can add up fast.
- Budget control: Knowing your rate helps plan your expenses.
- Green energy options: Some plans use wind or solar power – great for the planet and your brand.
How Are Commercial Energy Rates Set?
Many things affect how much you pay for energy.
Your Location
Energy costs vary by state. For example, in 2023:
- Hawaii businesses paid the most at 39.2 cents/kWh
- Texas was around 8.6 cents/kWh
- Illinois averaged 9.45 cents/kWh
Why the huge difference? Multiple reasons:
- Local fuel prices
- Power plant costs
- Power grid demand
Your Usage
Businesses that use more energy (factories, restaurants, etc.) may get a lower rate per kilowatt-hour. But there’s a catch.
These businesses also face “demand charges.” This charge is based on your highest use in a 15-minute window. Even if it happens once a month, you pay.
Time of Use
Some companies pay more during peak hours (like 2 PM to 6 PM) when everyone is using power. Off-peak times, like at night, are cheaper.
These are called Time-of-Use (TOU) rates. They encourage you to shift your usage to cheaper hours.
Contract Type
Your energy deal can be:
- Fixed-rate – same price per unit for the contract term (stable but may be higher)
- Variable-rate – changes with the market (risky but can be low)
- Indexed rate – based on energy market prices, plus a fee
Smart businesses compare all three types.
How to Lower Your Commercial Energy Rates
Let’s get to the good stuff. You want to save money. So here are ways to lower the energy rates your business pays:
Shop Around
In deregulated energy markets (like Texas, Ohio, Illinois), you can choose your energy provider. That means they compete for your business.
A 2021 report showed small to mid-sized businesses saved about 15-20% annually by switching providers. That’s real cash.
Use comparison sites or speak to brokers who help you find the lowest rates.
Lock in a Lower Rate
If rates are low now, consider a fixed contract to lock in those prices for 12, 24, or 36 months.
Energy futures suggest prices may rise over time. A fixed plan protects you.
Manage Your Demand Charges
As mentioned earlier, demand charges are like a ‘peak penalty.’ Here’s how to reduce them:
- Stagger Equipment Use: Don’t run everything at once.
- Set Energy Alerts: Some providers warn you before you hit peak demand.
- Install Smart Systems: Smart thermostats and timers can spread your load.
One California warehouse chain reduced their peak charges by 27% by simply training staff to use machines at different hours.
Boost Efficiency
Reducing how much energy you use helps a lot. Some quick wins:
- Upgrade to LED lights
- Use Energy Star appliances
- Shut down machines after work
- Fix leaks in air or cooling systems
Not only will you lower your usage, but your provider might also offer rebates for these changes.
In New York, a bakery cut their energy bill by 40% after switching to efficient ovens and adding timers.
Try Renewable Energy Options
More suppliers now offer green energy plans. These plans use power from sources like wind or solar.
They sometimes cost more, but not always. In fact, in Texas, wind power is cheaper than gas on some contracts.
Plus, going green helps your reputation. A 2023 Deloitte study found that 56% of consumers prefer eco-friendly brands.
Understanding Your Energy Bill
Ever looked at your bill and felt confused? You’re not alone. Let’s break it down simply.
Key parts of a commercial energy bill:
- Supply Charges: Cost of the electricity you used
- Delivery Charges: Cost to bring power to your location
- Demand Charges (if applicable): Based on your highest usage
- Taxes and Fees: State and city taxes or service charges
Knowing what you’re paying for helps you find areas to cut costs.
A Real-World Example
Let’s take a look at a real case.
Company: Midwest Auto Shop
Size: 15 employees, 6 bays for repairs
Old Energy Bill: $2,100/month
Problem: Too much usage during peak hours
Solution:
- Switched provider for 11.1 cents/kWh fixed
- Added timers to limit AC use
- Trained staff to turn off equipment
Results:
- Cut usage by 18%
- Saved $460/month
- Locked rate for 2 years
That’s over $11,000 saved in just 2 years — with no major equipment changes!
What If You’re in a Regulated Market?
In some states like California or Florida, you can’t choose your electricity provider. But you can still:
- Use energy more efficiently
- Ask provider for any available discounts or audits
- Join local business energy programs
Local utilities often have programs to help you reduce usage and get rebates.
Final Tips for Lowering Your Business Energy Bills
Saving on commercial energy doesn’t mean you need to buy new machines or install solar panels right away. Start small.
Here are 3 smart steps to take today:
- Check Eligibility to Switch Providers: If you’re in a deregulated market, compare and choose a better rate.
- Review Your Bill Monthly: Find patterns in your usage and peak-hour habits.
- Lower Peak Usage: Stagger activities, train your staff, and use automation.
Even a few small changes can make a big impact.
Stay smart, ask questions, and watch your savings grow.