A common question you’ll receive from customers is, “When is the best time of year to lock in my energy pricing?”
Of course, the answer to this will vary depending on the customer, what they are currently paying, and their goals. But in general, the best time to lock in pricing will always be when the demand is low.
Like most commodities, the demand for natural gas rises and falls throughout the year. This is often weather-related so price changes tend to occur in predictable patterns.
As an energy broker, this predictability is an advantage. You can use this information to help you as you are talking to customers and helping them choose the right energy plan.
Understanding Seasonal Market Cycles
If you were to monitor the energy markets on a daily basis, you’d find they are quite volatile. The prices fluctuate on an hourly basis depending on any number of factors.
However, if you look at the energy markets on a seasonal basis, you’ll see that they are actually quite predictable.
For example, demand for electricity tends to follow two distinct cycles. The demand for electricity rises every summer and winter and then drops back down during the spring and fall.
Unlike natural gas, electricity can’t easily be stored. This means there isn’t any buffer for the market to help minimize price fluctuations.
Natural gas also follows a fairly cyclical market cycle. Commercial and residential customers use natural gas for heating during the winter months, so demand is highest during the cooler months.
Natural gas is also used to generate electricity. So when demand for electricity spikes, natural gas prices tend to rise as well. Like electricity, demand for natural gas goes down in the spring and fall.
Natural gas is stored during the off-peak seasons. However, if there isn’t enough natural gas to draw from during the cooler months, this has an impact on the energy market pricing as well.
When Should Customers Lock in Their Rates?
Here are four different scenarios when it makes sense to advise your customers to lock in their energy rates:
1. They are on a fixed budget
You should always keep a customer’s goals and budget in mind when you are trying to find them the best plan. For customers that need to stay within a certain budget, locking in a fixed rate plan will be their best option.
2. They are about to enter a peak season
Always encourage your customers to lock in their pricing during the spring and fall seasons. Even if the prices aren’t quite as low as they might like, they can look into getting a short-term fixed rate plan.
3. They live in an area with a lot of seasonal shifts
It’s impossible to predict what the weather will do but you can make an educated guess based on where your customers live. Customers that live in areas that tend to experience extreme temperatures during the summer and winter months should consider locking in their pricing during the shoulder months.
4. Consider recent price trends
Always encourage customers to take advantage of low-price opportunities. If natural gas and electricity prices are the lowest they have been in months, it’s probably a good idea to lock in a fixed rate plan.
Consumers that live in deregulated markets have a huge advantage because they can shop around and find the best rates. This allows customers to choose an energy plan that supports their financial and business goals.
With a little strategic timing, you can help your customers limit their exposure to skyrocketing prices.
By partnering with Broker Online Exchange, you’ll have the resources you need to help your customers find the right plan. With our energy broker software, you can instantly access pricing and the insights of energy experts.