Have energy rates gone down since you signed your last energy contract? A blend and extend option can help you work out a win-win solution with your energy provider to lower your costs.
If you’re no longer satisfied with a contract that you just signed, it rarely makes sense to just break it. The first reason is that most energy contracts contain hefty early termination fees that could cost you far more than you’ll save on energy costs.
The second reason is that your energy provider may have a legal claim for breach of contract against you. This could potentially leave you paying for legal costs on top of whatever you would have owed under the contract.
The blend and extend option is best for businesses locked into a long-term fixed contract at energy rates higher than current market rates. The two rates are blended together, and the energy supplier gets the benefit of a longer contract.
The first thing to understand is that there are several different factors that affect energy prices. In addition to changing market conditions such as for natural gas, energy suppliers also have their own fixed costs, marketing costs, and other expenses. When an energy supplier sets a rate, they set it to be profitable but understand that they’re taking the risk of having their wholesale costs rise.
Just as you wouldn’t want to break your contract if energy rates had gone up, an energy supplier has nothing to gain by simply lowering your rates if market rates fall. This is where the extend portion comes in. By extending the contract, the energy supplier now has the guarantee of your long-term business to offset the revenue they’ll lose in the short-term by agreeing to a lower rate.
For example, assume that you have one year left on a contract with a 10 cent rate but current energy market rates are 8 cents. In addition to paying an extra 2 cents now, you’re also worried that energy rates will rise again in the near future. A blend and extend solution might immediately reduce your rate to 9 cents in exchange for increasing the remaining time on the contract to two or three years.
Actual energy rates and future expectations change daily, so you’ll need to do your homework on the actual numbers, but the process remains the same. If you work with us, we constantly monitor energy trends and already have this information ready to go.
Does an Energy Supplier Have to Agree to a Blend and Extend?
An energy supplier would be within their rights to insist on sticking with the original contract. The only way to get a blend and extend is to come to a mutual win-win agreement.
Most energy companies, including the ones RK Energy Group does business with, are willing to renegotiate as a way of increasing customer satisfaction and retention.
To learn more about the process or to get started, contact RK Energy Group today.