Balancing Energy
Energy bought or sold in the ERCOT real-time market to correct imbalances between a commercial customer's scheduled electricity load and their actual consumption. When a business uses more or less power than its REP scheduled, ERCOT procures balancing energy to maintain grid stability, and the cost is typically passed through to the customer. Understanding balancing energy exposure is critical for Texas businesses evaluating indexed or real-time pricing contracts.
Basis Differential
The price difference between a local natural gas delivery point — such as Katy Hub or Waha in Texas — and a major national benchmark like Henry Hub in Louisiana. Basis differentials reflect regional pipeline capacity, local supply and demand dynamics, and transportation costs. For Texas commercial natural gas buyers, basis can be a significant component of total supply cost, particularly during periods of pipeline congestion or extreme weather events.
Capacity Charge
A charge assessed by a Retail Electricity Provider or natural gas marketer to recover the cost of reserving generation capacity or pipeline capacity needed to serve a customer's peak load. Capacity charges are common in commercial electricity contracts and are often tied to a customer's peak demand recorded during system-wide peak periods. Businesses with high load factors and predictable usage profiles typically pay lower capacity charges.
Customer Charge
A fixed monthly charge on a commercial electricity or natural gas bill assessed regardless of how much energy the business consumes or what its peak demand is. The customer charge covers basic utility service costs including metering, account administration, and infrastructure maintenance. It appears as a separate line item on the TDU delivery charge section of a Texas commercial electricity bill and cannot be avoided by reducing consumption.
Demand
The rate at which a commercial facility draws electricity at any given moment, measured in kilowatts (kW) or megawatts (MW). In Texas, peak demand is typically defined as the highest average power draw recorded in any 15- or 30-minute interval during a billing period. Peak demand directly determines demand charges on commercial electricity bills and influences the pricing that REPs offer in competitive supply contracts, making demand management a key lever for reducing total energy costs.
Demand Response
A voluntary program that compensates commercial and industrial electricity customers for curtailing or shifting their electricity usage during periods of high demand or grid stress in the ERCOT market. Businesses enrolled in demand response programs receive financial incentives — either bill credits or direct payments — in exchange for reducing load when called upon. Demand response participation can be a meaningful source of cost savings for large Texas commercial electricity users.
Deregulation
The legislative process that opened Texas electricity and natural gas markets to competition, giving commercial customers the right to choose their own Retail Electricity Provider (REP) or natural gas marketer rather than buying energy from a regulated monopoly utility at government-set rates. Texas deregulated its electricity market in 2002 under Senate Bill 7, creating the competitive ERCOT market. Deregulation enables businesses to shop for better rates, negotiate contract terms, and work with energy brokers like Elite Energy Consultants to secure more favorable pricing.
Energy Charge
The per-kilowatt-hour (kWh) charge on a commercial electricity bill based on the total energy consumed during the billing period. The energy charge is the supply component of the bill — paid to the REP — and is distinct from TDU delivery charges, demand charges, and fixed customer charges. In a fixed-rate contract, the energy charge rate is locked in for the contract term; in an indexed contract, it floats with a market reference price.
ERCOT
The Electric Reliability Council of Texas, the independent system operator (ISO) that manages the flow of electric power across approximately 90 percent of the Texas electric grid, covering most of the state outside the panhandle and El Paso. ERCOT operates the competitive wholesale electricity market where generators, REPs, and large commercial buyers trade power, and oversees grid reliability for over 26 million Texas customers. ERCOT's market structure is unique in the continental U.S. because it operates largely independently of other regional grids, giving it distinct pricing dynamics that directly affect commercial electricity rates.
ESI ID (Electricity Service Identifier)
A unique 17- to 22-digit number assigned to every electric service point in the ERCOT deregulated market by the local Transmission and Distribution Utility (TDU). The ESI ID identifies the specific meter location — not the customer — and remains the same even when a business switches REPs. Commercial customers with multiple locations will have a separate ESI ID for each address. Energy brokers use ESI IDs to pull interval usage data and request competitive pricing from REPs on behalf of their clients.
Fixed Rate Plan
A commercial electricity or natural gas contract in which the supply rate per kWh or MMBtu is locked in for the full duration of the agreement — typically 12 to 36 months. Fixed rate plans protect Texas businesses from wholesale market price spikes and budget uncertainty, making them the most common contract type for commercial customers seeking cost stability. The tradeoff is that if market prices fall significantly during the contract term, customers on fixed rates do not benefit from the decrease.
Indexed Rate Plan
A commercial energy contract in which the supply rate floats with a published market index — such as the ERCOT real-time settlement point price for electricity or the Henry Hub price for natural gas — rather than being fixed for the contract term. Indexed plans expose commercial customers to wholesale market volatility but can deliver savings when prices are low. They are best suited for businesses with flexible operations, risk tolerance for price swings, or the ability to shift load in response to price signals.
Interval Data Recorder (IDR)
A commercial electricity meter that records energy consumption in 15- or 30-minute intervals rather than accumulating a single monthly total like a standard residential meter. IDR data provides a detailed load profile showing exactly when and how much electricity a business uses throughout the day and month. Energy brokers and REPs use interval data to accurately price competitive electricity contracts for large commercial accounts, assess demand charge exposure, and identify opportunities for load shifting or cost reduction.
Kilowatt (kW)
A unit of electrical power equal to 1,000 watts, used to measure the rate of electricity consumption or generation at a specific moment in time. In commercial electricity contracts and utility bills, kilowatts measure demand — the instantaneous draw on the grid. Demand charges on Texas commercial electricity bills are assessed on a per-kW basis, typically tied to the highest demand interval recorded during the billing period, making peak demand management an important cost control strategy.
Kilowatt Hour (kWh)
The standard unit of electricity consumption equal to one kilowatt of power used continuously for one hour. A commercial facility that draws 100 kW of power for 10 hours consumes 1,000 kWh. Texas commercial electricity bills and supply contracts are priced on a per-kWh basis for the energy charge component, making it the primary metric for comparing REP offers. Annual kWh consumption is also the key input energy brokers use to estimate potential savings when shopping the commercial electricity market.
Load Factor
A percentage that expresses how consistently a commercial facility uses electricity relative to its recorded peak demand, calculated by dividing total kWh consumed by the product of peak kW demand and total hours in the billing period. A load factor of 100% means the business draws electricity at its peak rate continuously, while a low load factor indicates high demand spikes relative to average usage. Texas commercial customers with high load factors are generally offered more favorable electricity contract pricing because they represent a more predictable and efficient load for REPs to serve.
Natural Gas Marketer
A licensed company that purchases natural gas in the wholesale market and resells it to commercial and industrial customers in deregulated states including Texas. Natural gas marketers negotiate supply contracts, manage commodity price risk, and arrange transportation and delivery to the customer's local distribution company (LDC) interconnection point. For Texas businesses with significant natural gas consumption — such as manufacturers, restaurants, hotels, and multi-family properties — working with an energy broker to source competitive marketer pricing can reduce supply costs substantially.
Price to Beat
A regulated maximum electricity rate that incumbent utilities in Texas — primarily Reliant Energy and TXU Energy — were required to charge residential and small commercial customers during the early years of market deregulation, from 2002 to 2007. The Price to Beat was established to ensure competitive REPs could offer lower rates and gain market share. It has since been phased out as the Texas retail electricity market matured, but understanding its history provides context for how ERCOT deregulation evolved to create today's competitive commercial energy market.
REP (Retail Electricity Provider)
A company licensed by the Public Utility Commission of Texas (PUCT) to sell electricity directly to residential and commercial customers in the ERCOT deregulated market. REPs purchase power from generators in the wholesale market, manage supply contracts, handle customer billing, and provide account services. They do not own or operate the power lines — that function belongs to the TDU. Texas commercial customers work with energy brokers like Elite Energy Consultants to compare offers from multiple REPs and secure the most competitive rates and contract terms.
Supply Rate
The per-unit price charged by a Retail Electricity Provider or natural gas marketer for the energy commodity itself — expressed in cents per kWh for electricity or dollars per MMBtu for natural gas. The supply rate is only one component of a commercial energy bill; the full cost also includes TDU delivery charges, capacity charges, taxes, and other pass-through fees. When comparing commercial electricity or natural gas offers, understanding the difference between the supply rate and the all-in cost per unit is essential for making an accurate cost comparison.
Swing Contract
A natural gas supply contract that allows a commercial customer to vary their daily or monthly consumption volume within a defined band — typically a percentage above or below a nominated base quantity — without incurring penalty charges. Swing contracts provide operational flexibility for businesses whose natural gas usage fluctuates with weather, production schedules, or occupancy. They are common in commercial and industrial natural gas procurement and are an important contract feature for energy-intensive Texas businesses to negotiate.
TDU (Transmission and Distribution Utility)
A regulated utility company in Texas responsible for owning, operating, and maintaining the physical power lines, poles, transformers, and meters that deliver electricity from generators to homes and businesses. TDU charges appear on every Texas commercial electricity bill and are set by the PUCT — they are the same regardless of which REP a business chooses. The six TDUs serving the ERCOT market are CenterPoint Energy (Houston area), Oncor (Dallas-Fort Worth and West Texas), Texas-New Mexico Power (TNMP), AEP Texas Central, AEP Texas North, and Sharyland Utilities.
Variable Rate
A commercial electricity or natural gas supply rate that changes from month to month based on current market conditions, typically set by the REP or marketer with reference to prevailing wholesale prices. Variable rates offer no price certainty and expose commercial customers to the full range of market volatility — including the extreme price spikes that can occur in the ERCOT market during summer heat events or winter storms. They are generally not recommended for businesses seeking budget predictability, but may benefit customers who monitor the market closely and can time contract decisions around favorable price environments.
Wholesale Market
The competitive market in which electricity generators, REPs, and large industrial buyers buy and sell bulk power, primarily through ERCOT's day-ahead and real-time settlement markets in Texas. Wholesale electricity prices in ERCOT are set by supply and demand at each 15-minute interval and vary by location via Locational Marginal Prices (LMPs). The wholesale market directly influences the rates that REPs offer to commercial customers in supply contracts, and understanding wholesale price trends is central to the commercial energy procurement strategy that Elite Energy Consultants provides.