Combining Block and Index Contracts with Demand Response Programs to Avoid Costly Summer Energy Bills

When temperatures begin to rise in the summer months, so does the demand for electricity and real-time energy costs. Extreme weather patterns often result in sky-high power bills that businesses aren’t fully prepared for. There’s no better time than the present to reexamine your company’s energy strategy to ensure you have the right power-saving and budget-friendly measures in place.

One way for organizations to combat seasonal price fluctuations is to leverage block and index energy pricing contracts with a Demand Response (DR) program. By implementing this strategy, businesses can not only reduce their electricity expenses but also gain more control over their energy consumption. The following will explore how pairing these two energy management strategies can effectively allow companies to reduce their monthly summer electricity bills, maintain necessary operational power consumption and conserve energy to help stabilize the grid during peak demand periods.

Block and Index Contracts Explained

While there are many types of energy procurement strategies available, determining which one is best suited for a certain business can depend on a variety of factors, including organizational objectives, energy spend/budget, risk resilience, sustainability goals and more. Three of the most common energy purchasing contracts include fixed pricing, indexed and block and index.

• Fixed Pricing Contracts: These are completely fixed electricity pricing plans where a customer is locked into a set fee that lasts for the duration of the agreement, regardless of market volatility. This model can offer cost certainty and helps customers avoid monthly price fluctuations in regions where energy costs are on the rise but are priced at a premium.

• Indexed Contracts: This type is the opposite of fixed contracts. All components in this model float and are passed down to the customer at a market rate. While this pricing strategy tends to serve customers who want to take advantage of lower prices and manage for peaks, businesses run the risk of overspending due to market price fluctuations – and leads to varying electricity bills from month to month, which can cause budgeting difficulties.

• Block and Index Contracts: This strategy combines aspects of both fixed and indexed price contracts, with fixed-priced “blocks” for consistent load being placed throughout the contract term and index for more variable usage.

The block and index approach mixes the best of both worlds when it comes to contract types for most businesses, and not only offers greater utility bill predictability but additionally minimizes the amount of load exposed to sudden energy price increases like those that are often seen and felt during hot, summer months.

Tapping into the Power of Demand Response for Summer Energy Savings

DR programs are also an important summer staple in your energy strategy, as they allow businesses to automatically reduce power usage when the grid is threatened during periods of peak demand or when real-time energy prices are higher. DR program participants are incentivized to modify their power usage through financial rebates or reimbursements from electricity providers. Opting in for DR allows companies to lessen overall energy consumption during peak demand without impacting customer or employee comfort or day-to-day business operations.

Some energy management providers even offer unique avoidance tools for added savings opportunities. These allow users to set a price cap within their DR platform by triggering building management and on-site SCADA systems to reduce consumption when electricity costs exceed the predetermined threshold, which is especially useful during extreme weather months.

Pair Block and Index with a Demand Response Program to Maximize Summer Energy Savings

Organizations should consider combining block and index with DR as a hybrid energy management approach to effectively navigate significant summertime market price fluctuations and maximize utility savings. Businesses that utilize such a pairing can virtually manage specific operational loads that are vulnerable to market volatility. For instance, if a customer has a peak load of 250 KW, in a DR event with preset specifications, they can automatically reduce 15 – 20% of that energy usage when demand or prices spike. This minimizes spending when the market is unpredictable and when the business’s block and index contract is exposed to higher real-time costs.

Pairing DR with block and index contracts increases price predictability, offers controlled precision over the business’s energy strategy, saves the organization immensely on utilities, reduces the company’s carbon footprint and conserves energy year-round— and even more so when seasonal patterns fluctuate and create grid strain.

Start Preparing for Summer Utility Costs Now By Partnering with Enersponse

During the high temperature season, it’s crucial to have a strong energy plan in place. Combining DR with a block and index contract is a seamless way for businesses to get ahead of rising energy costs, manage their power consumption and avoid painful summer electricity bills. In addition, utilizing this approach allows businesses to contribute to a more sustainable and resilient power grid.

With careful planning and the right energy resource management platform, like Enersponse, businesses can beat the heat by taking control of their power bills and reap the rewards of a more efficient and cost-effective summer season.

Enersponse’s DR programs are at no cost or risk to customers and will support your company’s bottom line, especially when unprecedented weather patterns hit throughout the year. Users gain access to financial earnings and savings while participating for free on their own terms. Companies can save even more on utility bills while reducing their carbon footprint this summer by opting in for Enersponse’s Price Response™ or Clean Response™ DR avoidance tools.

If you’re ready to level up your business’s energy strategy to save big this summer, contact our service team today to learn more.