A hotel group owns 138 locations. Before the winter storm in Texas in February 2021 one hotel was using approximately 22,000 KWH / month / hotel .
Their normal monthly electricity invoice is $1,500. Because of the winter storm for just one hotel their electricity cost jumped to $12,000.
The hotel group can encounter the same cost impact during the summer if a sudden heat wave induced load on the grid causes brownouts or curtailments.
The reason behind the dramatic cost increase in the winter and the potential increase during the summer is because the hotel group elected to only lock in the energy rate and not the ancillary and congestion costs. An even more dramatic increase in cost could have occurred if the hotel group had decided to not lock in the energy rate and to float instead on daily index pricing.
There is a risk / reward decision to be made when selecting which rate plan to execute. The risk side is not locking in rates and sudden weather events cause a dramatic demand on the grid, causing prices to spike and congestion on the distribution side to spike. The reward side of not locking in rates is that lower daily rates are possible and may average lower over time. Most businesses and organizations are not in the speculative energy business and are running hotels, restaurants, medical facilities, etc. and their primary focus is on profitably running their business. An organization needs to decide how much risk they want to take or decide to fix all costs and be able to budget for those expected costs.