Choosing the right electricity plan for your home is one thing, but finding the best electricity rates for your small business is just as important. Small companies don’t have as much margin for error as larger businesses. For that reason, it’s even more critical for small businesses to save money on their monthly utilities. Electricity is one of the most expensive monthly bills that businesses get saddled with, making it important to find the best rate for your small business. In this article, we’re going to discover just how to do that!

Small business electricity rates are the electricity rates that your company gets charged on a monthly basis. In order to be considered a small business in Texas, you must have less than 100 employees. Whether you own a small, medium, or large business, however, getting a quality electricity rate is important.

Texas’s average business electricity rate is between 8 and 9 cents per kWh. However, the average electricity rate throughout the United States is closer to 11 cents per kWh. A big reason why energy is cheaper in Texas is because of deregulation.

Deregulation basically turned the energy market in Texas into a competitive, capitalistic venture. Rather than the government deciding who your electric provider is, Texas residents and business owners are allowed to choose their own providers. While deregulation has made electric providers more accountable in what they charge, it’s also made choosing the right small business electricity plan very difficult.

Business electricity rates are set up with a system of three different costs and we’ll discuss each one below.

The wholesale cost associated with your small business electricity rate has to do with the production and operating costs to deliver electricity to your business. This includes the construction and maintenance of power plants, power lines, electric poles, electric meters, and any other components that take electricity from a plant to your business.

Wholesale cost also deals with the operating costs that these plants and utility companies have to deal with. Personnel, equipment, repairs, and maintenance are all factored into the wholesale cost of your electricity. Each of these factors will also have an impact on the electricity rate that you pay.

Supply costs deal with the cost of creating, producing, and distributing electricity to your business. The cost to supply electricity to you is a significant factor when it comes to your electricity rate. It’s factored into the monthly bill you pay and goes towards making sure that the companies responsible to deliver electricity to you can operate correctly.

Finally, you’ll have to consider the delivery fees of getting electricity to your business. Delivery of electricity is made possible by your electric company (REP), but it’s actually done by your Transmission & Distribution Utility (TDU) company. Your REP works in conjunction with your TDU to make sure that electricity makes it to your home or place of business.

Each of these fees is factored into your monthly electric bill, and you’ll likely see what each component costs. Essentially, you end up paying three different companies when you pay for your electricity rate. The entirety of the bill goes to your REP, but they then have to pay your TDU and the company that created your electricity.

A major pitfall that many small business owners fall into is thinking that the cheapest rate is the best rate. Unfortunately, that simply isn’t the case. If it were, then everybody would simply sign up for the cheapest rate possible and be done with it. So, if the cheapest rate isn’t the best rate, what is?

Something that power companies love to do is trick you with their electricity rate. For example, you might sign up for a plan that has a listed rate of 7 cents per kWh. That’s an extremely low rate and you’re probably thrilled with it! Without giving it a second thought, you sign the contract and lock yourself into a 2 to 3 year deal.

What you likely didn’t realize in the midst of your excitement is that the plan you signed up for has tiered rates. This means that while you pay 7 cents per kWh for the first 1,500 kilowatt-hours of electricity, you pay 12 cents per kWh for anything over the 1,500 mark. Businesses are notorious for using large amounts of electricity, which means that you’ll likely surpass 1,500-kilowatt hours each month.

Let’s say that you use an average of 2,500-kilowatt hours per month. You only pay $105 for the first 1,500 hours, but you pay $120 for the last 1,000 kilowatt-hours. You would have been better off signing up for a plan that charges you a straight-up fee of .085 cents per kWh.