With Memorial Day ushering in the unofficial start of summer, it also means Texas businesses will soon be using more electricity to run air conditioners, and paying traditionally higher summer prices. With energy prices still rising unabated, what are business owners to do?

Locking-in a fixed price contract will carry a premium, but buying power completely on the floating market price, called the Market Clearing Price for Energy (MCPE) is even more risky. Considering natural gas, the biggest driver of Texas electricity rates, hit a record $11.70/Mmbtu last week, and neared $12 in intraday trading, customers can expect a volatile summer of MCPE rates, especially at peak times. Natural gas prices were further pushed higher when federal weather forecasters at NOAA predicted nine Atlantic hurricanes this summer. Even one hurricane hitting the energy-producing Gulf Coast could cause energy prices to reach unthinkable levels.

Energy suppliers realize the quandary customers are in, and have developed special products meant to deal with the dual risks of locking-in prices at the wrong time, and volatile peak energy prices. They’re known as hybrid or blended products, and basically split a business’s power usage so that some is billed on a fixed price, and some is billed on the floating wholesale rate. The blended products give customers the chance to reap savings from potential decreases in the MCPE, while softening any price spikes, since only a part of their energy usage is exposed to volatile peak prices.

Eight energy providers competing head-to-head at SaveOnEnergy.com offer a variety of blended, hybrid and other customized products to insulate business owners from excessive risk, while still giving them chance to ride the market.

For example, many energy suppliers offer a hybrid product that allows a business to choose a percentage of their load to be billed at a locked-in fixed price, with the remainder on the prevailing MCPE rate. One supplier notes that over time, it’s rare that a customer can time the market and choose the best time to completely lock-in their load. And even when they do, the savings is often minimal, less than 1¢ per kilowatt-hour, compared with an over 1¢ premium they are paying for a fixed-price contract, plus the risk of locking-in a price just before energy prices fall.

Essentially, no one can predict electric rates. While summer prices are traditionally higher, last July was one of the least expensive months to buy on MCPE from a monthly average standpoint, due to much cooler than normal weather. And so-called "shoulder" months, such as March and October that are in-between summer and winter peaks and thus expected to produce lower prices, aren’t immune from wild MCPE spikes. While usage may be lower, many power plants shut down for maintenance during these months, meaning normally small transmission problems or an unexpected power plant outage could cause greater strain on the power grid, shooting prices upward. In fact, that’s what happened in April 2006, when unexpected outages and record heat caused rolling blackouts in parts of Texas. It almost happened again in February after a sharp decline in wind power and other power plant unavailability. That’s why a strategy which hedges a customer’s load between a fixed price and MCPE is preferable.

Another type of hybrid product is an on-peak/off-peak deal that offers a fixed price at on-peak times – those times when energy use is highest, such as late afternoon. MCPEs are highest and most volatile during these peak times because of the demand all customers are placing on the electric system, so a fixed price avoids wild price spikes caused by a power plant or power line outage at these critical times. At off-peak times, customers pay the MCPE, which is typically lower off-peak as fewer customers are using power and there is much less strain on the grid. There’s much less risk in any spikes in MCPE during these off-peak times. The product is best suited for customers who use more energy in off-peak times since they’ll be able to reap the most benefit of the lower MCPEs.

Most electric companies provide the opportunity for customers to convert their blended products into fully fixed products as well, if customers decide they want more price protection after experimenting with the MCPE.

Customers are a mouse click away from getting up to eight custom, blended pricing offers from eight vetted and certified energy suppliers at SaveOnEnergy.com. Customers can simply enter their information and request a blended or hybrid product, and receive the energy suppliers’ best quotes for their business.

Last week showed the dangers of choosing an energy provider without some qualified assistance, and why it’s essential customers get some help from a company like SaveOnEnergy.com before making an uninformed decision.

National Power Company of Houston did the unthinkable and tried to raise rates for customers on fixed-price contracts, citing a buried “material change” clause in customers’ contracts.

Customers who thought they were guaranteed a good rate of about 11¢ per kilowatt-hour shockingly started getting letters saying National Power was going to jack up the rate to 15.3¢, even though customers believed they had signed for a fixed price for as long as 18 months.

After customer outrage, the Texas Public Utility Commission pulled National Power’s listing from the state’s electric choice website, and started an investigation.

The experience – unfortunately not the first of its kind in Texas – shows the dangers of just picking the cheapest offer available in the market, regardless of provider.

With nearly 30 electric companies competing for residential customers (and about 100 for business customers), customers face a mountain of complex contracts and “Terms of Service” documents filled with legalese and technical jargon even some industry expects don’t understand.

That means customers need help when sifting through all the clutter to determine what really are the best deals.

SaveOnEnergy.com offers just such a service, blasting through the promises and marketing to give customers the best handful of products from a certified list of energy providers .

The experts at SaveOnEnergy.com vet each energy supplier to make sure each is consistent and honest with pricing, is highly regarded with strong business ethics and is financially stable.Only the best make the cut.

The energy suppliers on SaveOnEnergy.com aren’t going to pull a fast one on customers by trying to break a fixed-price contract.They’re reputable energy providers with a strong record in the marketplace that will be around for a long time.

It’s tough for customers to judge an energy provider themselves.The Public Utility Commission doesn’t publish complaint statistics, while local better business bureaus may have incomplete complaint info on energy providers .

That’s why it’s risky for consumers to just look at a list of prices and make a decision.Some of the electric companies offering the lowest prices are also the least known.

SaveOnEnergy.com takes the guesswork out of choosing an energy provider and gives customers peace of mind.It also offers a variety of products to fit customer needs, from renewable products to plans including airlines miles or gift cards, as well as different term lengths to offer customers the level of price certainty they desire.

While National Power has since backed down and promised to honor the 11¢ rates, its customers aren’t out of the woods yet.National Power obviously had a reason to raise rates while risking the ire of customers, and now it won’t be getting that extra income.

In the past, many marginal electric companies have been hurt by wild swings or increases in natural gas prices like the spikes we’ve seen recently, especially if they have tried to offer lower prices by gambling on fuel prices.Consumers may remember names like Texas Commercial Energy, Ampro Energy, Utility Choice Electric or Ideal Energy – all of which went out of business.

What happens to customers when their energy supplier goes out of business?They are switched to a company called the “Provider of Last Resort” (POLR).The problem is, the POLRs charge an extremely high price for this “backstop” service, because they never know when they might be required to serve new customers.POLR prices are based on high, volatile wholesale electricity prices plus a premium, and are severely penal to consumers.That’s why customers want to avoid being switched to a POLR at all costs.

What this means for National Power customers is that while they might feel good about keeping their 11¢ rate, they need to start thinking about National Power’s viability.If National Power was trying to raise prices because it couldn’t cover its costs to buy wholesale power, it might be facing a crunch in making regulated credit or other financial obligations required to trade power and function in the market.If National Power ultimately can’t meet those obligations, customers will still wind up losing their 11¢ rate, and be transferred to the highest price in the market: POLR rates.

No one can say if that’s likely to happen, but customers need to weigh their risks.If National Power can’t survive in the market, customers might be better off switching to another fixed-rate with a more reputable electric company now at 12¢ or 13¢, rather than waiting a few months only to see National Power go out of business, and leave customers scrambling to find a replacement deal during the height of summer, when fixed-prices might cost 15¢, 16¢ or even 17-18¢.

While electricity rates have jumped because of rapid rises in natural gas and oil costs, customers in some parts of Texas can still get a good deal.Residential customers in the Texas New Mexico Power utility area can still get a one-year, fixed price of 11.9¢ on SaveOnEnergy.com from Gexa Energy, while the same product costs 12.3¢ for customers living in the AEP Texas North area (Abilene). For Dallas area customers in the Oncor region, the cheapest one-year fixed offer on SaveOnEnergy.com is 13.5¢ from Direct Energy.Prices are higher for the Houston and Corpus Christi areas, but SaveOnEnergy.com still has several one-year, fixed-price offers from energy providers under 15¢ in each area.

Across America, consumers are preparing to be socked in the wallet from rising electricity bills , according to an article in The Wall Street Journal , with double-digit rate hikes up to 30% from New Jersey to Oregon. The culprit? Unabated rises in natural gas and oil prices . Natural gas climbed to near $11.50 last week, about 50% higher than it was in December. Oil has passed $125/barrel with Goldman Sachs predicting $200 oil within the next two years. That means it costs more to produce electricity , and in most states, those fuel costs are directly passed to consumers.

In Texas, things are different. Power prices are still rising, but energy companies can’t automatically pass higher costs through to customers unless customers are on a certain type of contract. Instead, business owners can choose how they want to deal with the risk of high electricity rates and can shop around for a deal that suits them. Competition among energy suppliers, like the eight providers going head-to-head on SaveOnEnergy.com , allows business owners to leverage their buying power to get a better electricity rate .

Each product has a trade-off. Locking-in a fixed-price for 12 or 24 months would give a business owner budget certainty and avoid any run-up in energy prices over the length of the contract. But a fixed-contract also prevents businesses from getting cheaper rates if energy prices subsequently decline. Not signing a fixed contract, though, exposes a business to wild swings in electricity rates , including wholesale prices in the thousands of dollars.

It’s always a tough question, but the current energy climate makes things even more difficult. Prices are at record highs, and no business owner wants to lock-in a rate at the height of prices. But prices also show no sign of letting up, and choosing a fixed-price now might be the safest option in the long-run.

Making the situation even more urgent is that summer is right around the corner, when prices are usually at their highest. This means businesses should start shopping around now before prices really spike from greater demand to run air conditioners, to avoid a nasty jolt when they open their first summer bill.

And based on where energy prices are going, it could be a bad summer for business owners.

The wholesale market price for most of Texas broke the bank in April, reaching unprecedented heights for a cooler month where prices typically moderate. The trend doesn’t look good for price relief either.

The wholesale prices, called the Market Clearing Price for Energy (MCPE), are divided into four zones with each having a different price that varies throughout the day. Customers can choose to buy on the MCPE to avoid missing out on price downturns, but they have to accept the risk of big spikes too.

April saw the MCPE depart wildly from historic norms, with the average MCPE for the month ranging $20 to $30 above typical levels depending on zone.

For example, in the South Zone, the average MCPE for April was $76 per megawatt-hour, compared with only $56 in April 2007. That’s a 36% jump.The situation was worse for the Houston Zone, which typically has higher prices because it’s tough to import cheaper electricity into the area. The average Houston Zone MCPE for April was an incredible $91 per megawatt-hour, a whopping $33 or 57% above the April 2007 price.

And all those prices are monthly averages , meaning that throughout the day, the MCPE can spike to staggering levels in the thousands of dollars. Just last week, the Houston Zone saw prices during the day hit $1,500 with prices in the South Zone clearing $2,300.

What this means for business owners depends on how they buy electricity . Business owners can escape directly paying those high and volatile MCPEs by contracting for a fixed-price from one of eight vetted energy providers competing on SaveOnEnergy.com .

However, business owners that have chosen to buy on the MCPE must pay based on the floating wholesale prices, which can be risky. Businesses have to accept the potential for large spikes on their electric bill if the wholesale price reaches thousands of dollars just for very short intervals.

If current trends continue, average summer MCPEs could exceed $100 per megawatt-hour.

With that possibility, business owners with all but the largest risk appetite should shop for a fixed-price deal they can live with to guard against being caught in a volatile summer market. Business owners may want to seek a term shorter than one year just to get them through the higher-priced summer period and test the market again in the fall. Such custom pricing is available from energy providers at SaveOnEnergy.com hungry for customers’ business and willing to come up with unique contract lengths to fit individual needs.

That strategy would avoid the volatility and risk of month-to-months deals while still preserving a shopping opportunity should energy prices recede from current levels.

Texas businesses buying electricity in today’s climate of high energy prices face a tough question: is now the right time to lock-in a price, or are high prices temporary, and is a better deal just a few months away?

For customers willing to accept a bit of risk in the short-term, Texas energy suppliers offer a product that lets customers ride the market, and avoid the prospect of locking-in a high price, only to see electricity rates fall a month later.

It’s called buying on the Market Clearing Price for Energy, or MCPE for short, and essentially means the customer accepts the floating wholesale price for electricity in Texas , rather than locking-in a fixed price for a set term.

While the mechanics of MCPE can be a bit complicated, finding an MCPE plan isn’t. Eight energy providers are waiting to compete and offer their best MCPE product to customers through SaveOnEnergy.com , whose unique commercial portal lets customers receive competing bids for their power needs through just one click of the mouse.

The basic principle behind MCPE is that the customer is never out of the market, and is never paying more for power than what they could get that day. This allows a customer to test the market, and watch prices before choosing a long-term deal. If the customer thinks prices are currently too high, and expects them to fall in a month or two, then buying on MCPE lets the customer wait before locking-in a better term deal for electricity .

However, the MCPE product is not without risks. First, there is no guarantee that prices will go down, and waiting to buy a term product may increase the eventual price paid under the term deal. Second, the MCPE can be volatile given the nature of the wholesale market, and does expose customers to the potential of very high price spikes.

The Texas wholesale electricity market is run by an organization called ERCOT, and a new price for power, the MCPE, is set every 15 minutes, based on the interaction of buyers and sellers. The MCPE varies greatly throughout the day, and is typically lower when people are using less power (such as nighttime), and higher when people are using more electricity (such as during the late afternoon). The MCPE can also spike for short periods of time when there is a shortage of power, just like how gasoline or food prices can sharply rise when there is not enough supply. Customers buying electricity at a fixed price avoid these risks, but buying on MCPE means the customer could pay much higher prices at certain times.

Energy suppliers offering an MCPE product typically price it at the wholesale MCPE plus a “retail adder.” The adder covers the provider’s overhead costs, and also some “ancillary” electricity costs at the wholesale level which aren’t counted in MCPE. The adder is essentially what differentiates each provider’s MCPE product, and is what electric companies compete on.

Depending on the energy supplier and the product the customer wants, the customer could receive a bill based on true MCPE calculated every 15 minutes, or a daily, weekly or monthly average of the MCPE.

Texas electricity providers offer a suite of customized MCPE products as well. For example, if a customer wants to ride the market for a bit, but wants to be protected from a price spike that’s too high, energy suppliers can build a “trigger” into the MCPE product. The trigger allows the customer to move to fixed-pricing at certain times or under certain conditions, such as a price point. Such a product protects customers against abnormal spikes in the MCPE, which may be caused by a power plant or transmission line outage, while still letting them ride the market.

Buying on MCPE comes down to a customer’s risk appetite, and the best way to judge MCPE products is by comparing different options from competing suppliers. The quickest way to get eight quotes from vetted, reputable energy suppliers is to use SaveOnEnergy.com’s online commercial portal, which allows business owners to shop for power on their schedules and at their convenience.

Business owners can simply enter their monthly bill payment on SaveOnEnergy.com and tell the suppliers that they’re interested in an MCPE product, and the eight energy suppliers will compete head to head for the customer’s business. Electricity providers will contact the customer directly with their best offers, putting the customer in charge.