It’s January 2nd, and Your Energy Budget is Already Wrong
Variance
in energy spend broadly comes from two sources: changes to energy costs
and changes to energy use patterns. For most customers, energy costs
are driven by tariffed rates, which change throughout the year. In
California, for example, both PG&E and SCE filed for rate increases
of about 5% in June 2012. Customers who buy electricity from third-party
providers can face even greater price uncertainty, depending on how
much market volatility they are exposed to through their purchasing
agreements. We’ll delve more deeply into the details of price volatility
in a future post, but the basic outlines of the story should be
familiar to any energy professional. Price risk has been an essential
feature of energy purchasing since Thomas Edison’s Pearl Street station
opened.
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