For large businesses and industrial consumers, risk mitigation is a key part of day to day operations. Given the immense amounts of electricity and natural gas that such businesses can consume, it’s imperative to find an energy plan that protects against price spikes while accommodating changes in consumption,
A load following energy plan is one way to fulfill both of these needs.
Load following energy plans look at past energy consumption to estimate how much electricity to buy ahead of time at a negotiated rate.
Many companies choose to fulfill their energy needs by taking advantage of block pricing plans, which offer a moderate amount of risk. However, for some industries, it is desirable to keep risk to an absolute minimum for the sake of long-term budgeting.
Many energy companies meet this need by offering a load following plan, which is essentially an extremely conservative block pricing plan. Energy companies offering load following plans will look at a customer’s historic energy usage, and then prescribe how much electricity the customer should purchase each month in order to match future consumption.
These plans will often give credits to customers when they don’t use their entire monthly allotment, which can be credited to future payments. And in months when customers consume more than their pre-paid allotment, the remainder is typically purchased at the current spot market price.
This allows customers to meet the entirety of their electricity and natural gas needs, while keeping exposure to price volatility to an absolute minimum.
It should be noted that the terms “load following” and “block pricing” are sometimes used interchangeably, depending upon the company in question and the services they offer. In either case, the intent is largely the same: to negotiate ahead of time for the purchase of a certain percentage of a company’s anticipated energy needs for the purpose of stable budgeting.