Halloween may be spooky, but your pricing models shouldn’t be. Our energy pricing experts recommend taking these extra steps to tighten up your pricing process and close more deals.
Retail Energy Pricing is not for the faint-of-heart. One seemingly small mistake can have major implications on cash flow and profitability.
At TRUELight, we support our REP clients' pricing activities with our market-tested Licensed Retail Pricing Model as well as Pricing Model Audits and Price Verification Services.
Here are 3 common pricing mistakes we see in the marketplace that can lead to poor deal performance;
1. Using Ancillary and Risk Premium curves that don’t account for the seasonal fluctuations.
These costs vary throughout the year and a common mistake is to simplify the calculations and use a flat Risk Premium or Ancillary curve. This often results in an over- costing of these components that inhibits a REP’s ability to win deals.
2. Pricing by Blocks instead of Hourly.
Costs vary both seasonally and by the time of day. We often see REPs that price all cost components by blocks; e.g. Peak, Off-Peak, 5X16, 7X8 or 2X16. While energy is traded by block, how a REP will actually realize costs from the ISO will vary on an hourly basis. Pricing by block can lead to mispricing of cost components, particularly when pricing an interval usage customer, which can lead to underwater deals.
3. Using Transmission and Capacity curves that are out of date.
These costs are fluctuating frequently, in some cases on a schedule (e.g. ISONE FCM Reconfiguration Auctions) and in other cases with little to no logic (e.g. PJM TEC charges). Keeping track of all of these changes can be daunting, but is a vital step in ensuring that the pricing you offer to the market is as accurate as possible.
So there you have it! Halloween may be spooky, but your pricing models shouldn’t be. Our energy pricing experts recommend taking these extra steps to tighten up your pricing process and close more deals.