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How Is Energy Pricing Done?

by Matt

Energy costs money. You will have to pay for gas or electricity consumption at home or office. One way of lowering the bills is through understanding the energy pricing. With this knowledge, you can understand various aspects of energy pricing and lower your bills. This guide will help you understand how business energy prices are determined.

Introduction

Before you embark on your shopping, it’s important to get the basics right.  Familiarize yourself with the variables that can affect the pricing. Remember, the energy industry is highly dynamic. It requires people who can study the industry trends. You need to know the factors that affect the market pricing of different energy. Understanding the factors will help you select the right energy plan and supplier.

Understand The Market

Price fluctuations are influenced by market forces. These include the demand and supply curve. This means that the price will change depending on the demand out there.

Market Cycles

You cannot store electricity. That’s a fact. That’s why the price of electricity is highly unpredictable. Plus, price fluctuations cannot be alleviated by the market. The pricing will be influenced by the demand and supply on the market. According to experts, the trends in the electricity industry are guided by 2 discreet cycles. They include:

The seasonal cycleDuring the winter and summer, the demand for electricity tends to rise.  People want to stay warm indoors during the winter. Likewise, more electricity is used to cool the interiors during the peak season of summer. The demand will drastically drop when the spring and autumn season kicks in.

Market Cycle—This is a situation in which energy prices tend to rise as well as fall over a certain period of timer—usually over a 4–8-year period. Here, you will witness different cycles, including:

  • Low and rising
  • Falling and flat

 The spring starts in March and ends in May. On the other hand, the summer stats are on June all the way to August. The fall is from September to November while Winter kicks in December and ends in February.

Natural Gas Cycles

There are 4 patterns involved when it comes to the prices of natural gases. They include:

The Seasonal Cycle

The demand for natural gases is high during cold months. That’s why the demand is high for natural gases when winter kicks in. This is the time when the prices are high. It’s also important to note that some people tend to use natural gas to generate electricity. Most people use more gas to generate electricity during the cold seasons. That’s why the demand for gas is high during these times.

Storage Cycles

Transmission lines are used to produce and ship natural gas to customers. In most countries, the production of gas is enough during the spring. However, when the fall approaches, the demand goes up. Companies love storing natural gases during off-peak seasons.

The Bottom-Line

Before opting for any energy supply option, it’s important to get the basics right. You should understand how you will be billed. You should familiarize yourself with how you can lower energy costs. The above guide will help you understand how energy pricing is done.

 

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