understanding esco contract language
TRANSCRIPT
![Page 1: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/1.jpg)
A PASS-THROUGH PRIMER
“FIXING” FIXED RATES
![Page 2: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/2.jpg)
AN OBJECTIVE LOOK AT ENERGY SUPPLIER CONTRACT LANGUAGE
THIS PRESENTATION WILL COVER
▸ Avoiding costly mistakes before entering into a contract
▸ Factors affecting the decision making process
▸ Comparing contract language
▸ Common provisions that allow for “pass-through” charges
▸ Addressing concerns with a supplier or broker
![Page 3: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/3.jpg)
73% OF SMB EXECUTIVES POLLED WERE MOST INTERESTED IN A FIXED PRICE ENERGY CONTRACT
-Energy Research Council Study
FIXED PRICE CONTRACTS CARRY LITTLE MARKET RISK AND ENHANCE BUDGET CERTAINTY
![Page 4: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/4.jpg)
DON’T MAKE THE MISTAKE OF BUYING ON PRICE
ENERGY PRICING CAN CHANGE DURING THE TERM OF YOUR AGREEMENT
▸ Not all fixed rates are created equal
▸ Many factors can affect energy supply pricing once a contract has started
▸ Reviewing and understanding contract language is increasingly important
![Page 5: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/5.jpg)
COMPARING CONTRACT LANGUAGE
BE SURE TO REVIEW THE FOLLOWING CONTRACT PROVISIONS
▸ Are all pricing components defined clearly?
▸ Does the contract reference assignability?
▸ What are the bandwidth provisions?
▸ What is the suppliers stance regarding a “change in law”?
▸ End date of contract and any early termination or post contract fees?
![Page 6: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/6.jpg)
CONTRACT LANGUAGE THAT CAN AFFECT ENERGY PRICING
▸ Change in Law - Changes to energy pricing during the term of an agreement that occur as a result in a change in law
▸ Bandwidth - Penalties that can be incurred based on the amount of energy used during the agreement
![Page 7: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/7.jpg)
TEXT
UNDERSTANDING CHANGE IN LAW PROVISION
▸ Justified as this protects supplier from additional costs incurred as a result in laws or regulations
▸ Rare for a supplier NOT to have this clause in their default contract language
▸ These provisions should not be written to help the supplier recoup costs as a result of adverse market conditions
▸ Rarely suppliers will remove this clause even if a premium is added to pricing
![Page 8: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/8.jpg)
UNDERSTANDING BANDWIDTH PROVISIONS
▸ Many suppliers reserve the right to charge additional fees should your energy usage vary by a pre-defined percentage during the course of your agreement
▸ Can be referred to a either ‘bandwidth” or “swing”
▸ Historical energy consumption provides a baseline for the supplier
▸ Most suppliers will remove this clause if asked some may charge a premium
![Page 9: Understanding ESCO Contract Language](https://reader035.vdocument.in/reader035/viewer/2022081818/58ef522f1a28ab77108b45f1/html5/thumbnails/9.jpg)
UNDERSTANDING AND NEGOTIATING THESE TERMS IS AN IMPORTANT FACET OF ENERGY MANAGEMENT. BE SURE TO REVIEW THESE TERMS CAREFULLY BEFORE EXECUTING YOUR NEXT CONTRACT