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Factors Affecting Price in Utilities

Energy firms have an arduous task of negotiating deals(for supply of Gas, Electricity, Water) with customers of varied requirements. In this context they maintain highly customised tools and applications which becomes difficult to manage at times. SAP ISU definitely meets the Energy firms requirements to a large scale. And Implementation firms again very carefully elicit the requisite information from these complex tools and applications these Energy firms manage.

Energy firms while arriving at a correct price to negotiate with a potential customer takes into account of numeruous factors. These factors are carefully evaluated and their cost impact is analysed in the total price being offered to a potential customer.Find below some critical factors that i believe are points to consider while trying to analyse the price:

1.Transport Cost

2.Storage Cost


4.Oil Price Fluctuations

5.Weather Impact


7.Administration Charges

8.Import/Export Cost


Similarly, there could be other factors as well affecting price.And Implementation Partners must carefully analyse these and how they affect the overall price to Customer.

I would encourage views,suggestions on what else impacts the overall pricing and how? 

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  • Amitav,
        While not directly effecting pricing - one critical aspect of energy price impact is with financial reporting on a month to month basis of the unbilled revenue.  In order to accomplish this, other predictive items come into play which actually cross into the list that you have made.  Some of the same items would be weather, and fixed costs such as fuel costs and surcharges for govt taxes, facilities charges and other infrastructure. However, other factors would include:
    Pricing for the customer for both peak and non-peak usage,
    flat energy usage charges,
    Historical usage patterns (year over year),
    weekend vs weekday utilization (cheaper on weekend),
    Line loss factors

    All of these things can be used to help predict the current months revenue - even if revenue has not been collected...  and may be considered when thinking about pricing.


    • Michael,

      Thanks for your inputs. I have also found that the following affects pricing as well:
      1.Credit History of a Customer
      2.Miscellaneous Charges (e.g. Port Handling Cost, Commission Charges, Overhead Charges, etc)
      3.Penalties for contracts.For example, a customer could get some discount if he consumes gas for a certain quantity(volume) on a daily basis.There could be some upper and lower limits and if his daily usage deviates beyond this range, he could be penalised as well.This is similar to the point mentioned by you on historical usage,though, it has some differences.