Commercial Electricity Procurement: The RFP Process Guide (2026)

Commercial electricity procurement is fundamentally different from residential shopping. A business buying 250,000 kWh a year for an office building, or 4 million kWh a year for a manufacturing plant, isn’t picking a plan off a comparison site — they’re running a formal Request for Proposal (RFP) process to extract price competition from a half-dozen retail electricity providers (REPs). Done well, an RFP can save 10–25% versus default service or a one-off broker quote. Done badly, it locks you into bad terms for three years.

This guide walks the full RFP cycle: when to run one, what to include, how to evaluate bids on more than just price, and the contract terms that quietly destroy savings later.

When to Run an RFP

Run a formal RFP if any of these apply:

Your annual usage exceeds 100,000 kWh. Below that, broker quotes from 3–4 providers will give you most of the price discovery without the RFP overhead. Above that, the savings from competitive bidding scale enough to justify the work.

Your current contract is within 6 months of expiration. Pricing is most favorable 90–180 days before contract end — close enough that the market has visibility into your needs, far enough that you have leverage to walk.

You’re entering a new market or building a new facility. The first contract sets your reference price for years; competitive bidding ensures you don’t overpay from day one.

Your business uses electricity heavily during off-peak hours, or has flat load. Suppliers price these favorably and you want them competing to win you.

Run It Yourself or Hire a Broker?

Most mid-market commercial buyers use a broker or energy consultant. The brokers get paid by the winning supplier (typically $0.0005–$0.002 per kWh, baked into the contract price), so their “free” service isn’t actually free — you’re paying it through a slightly higher rate.

For sophisticated buyers with finance or operations bandwidth, self-running an RFP eliminates the broker margin entirely. For most buyers, a good broker is worth it: they have established supplier relationships, market intelligence on current pricing, contract language expertise, and they run dozens of RFPs a year so they know what’s standard versus what’s a giveaway.

The middle option is a fee-based consultant who charges a flat fee or hourly rate and doesn’t take supplier commissions. Their advice is more aligned with your interests because they don’t profit from a higher contract price.

What to Include in the RFP Document

A complete RFP gives suppliers everything they need to quote precisely. Vague RFPs get vague quotes.

Account information. Include all utility account numbers, service addresses, and rate classes. The supplier needs to pull historical usage data from the utility, which usually requires a Letter of Authorization (LOA) you sign and include.

Historical usage data. Provide 24 months of interval data if available, or at minimum 12 months of monthly kWh and demand. The more granular the data, the tighter the price suppliers can offer because they have less risk to price into the deal.

Pricing structure options. Ask for both fixed all-in rates and indexed (variable-plus-margin) pricing. Specify the term lengths you want quoted (commonly 12, 24, and 36 months). Some markets also offer block-and-index hybrids worth requesting.

Contract start date. Specify when you want service to begin. This affects pricing because suppliers hedge forward — a contract starting in 3 months has a different forward price than one starting in 9 months.

Green energy requirement. If you want renewable energy content, specify whether you want RECs only, bundled green energy, or a specific certification (Green-e). Include the percentage required.

Pass-through items. Specify whether ancillary charges, capacity tag adjustments, line losses, and ISO charges are pass-through or included in the all-in price. Pass-through is more common; included is less risky for you but more expensive.

Bandwidth allowances. Specify the usage tolerance you need. Standard contracts assume +/-10% to +/-20% bandwidth before “swing” charges apply. If your business is growing, expanding, or seasonal, ask for wider bandwidth or contractual flexibility for adding/removing accounts.

Special terms. Right to terminate (and what triggers it), early termination fees, renewal/extension provisions, force majeure language, change-of-law provisions.

The Bid Evaluation

Bids will come back with prices in $/kWh — sometimes called “energy charge” or “supply charge” — but the price alone isn’t the deal. Build a comparison spreadsheet that normalizes everything:

All-in vs. pass-through. A supplier quoting $0.072 all-in is different from a supplier quoting $0.068 with capacity, ISO charges, and ancillaries as pass-through. Calculate the expected total under both structures using your historical load shape.

Bandwidth fit. If a supplier quotes a tight +/-10% bandwidth and your business is growing 15% annually, you’ll be paying out-of-band charges. Either negotiate the bandwidth wider or use that supplier’s “low” price against the broader-band supplier in your comparison.

Term value. A 36-month contract at $0.071 might look better than a 24-month at $0.068 on an annual basis but worse on a present value basis depending on your discount rate and market expectations. Plug it into a simple NPV.

Termination flexibility. What does it cost to leave 12 months in? Some suppliers charge a fixed liquidated damages fee; others charge the difference between contract price and market at termination. The latter can be punitive if rates fall.

Supplier creditworthiness. Less critical for short-term contracts, but for 3-year commitments check the supplier’s credit rating. Several large REPs have gone bankrupt in the past decade, and resolution involves involuntary transition back to default service at much higher rates.

The Contract Terms That Quietly Cost You

Pricing wins are easy to spot. The losses are buried in contract language. Things to watch for:

Material change provisions let the supplier reprice if your usage characteristics change materially. “Material” is often defined as 10–15% usage change. If you grow into a 25% larger facility, you can be hit with a market-rate repricing on the whole contract.

Regulatory change clauses let the supplier pass through new regulatory costs that didn’t exist at contract signing. Some of this is reasonable. Vaguely-worded clauses are not.

Automatic renewal language can roll you into a month-to-month evergreen at variable rates if you miss the notice window. Set calendar reminders for 120 days before any contract end.

Capacity tag stickiness — your peak load contribution (PLC) tag set annually drives a large portion of total cost in PJM, NYISO, and ISO-NE. Some suppliers price aggressively in year one and let your tag drift higher in subsequent years. Insist on tag visibility and management.

Timeline for a Mid-Market RFP

Typical schedule for a 100,000–5,000,000 kWh/year buyer:

T-180 days: Decide on broker vs. self-run. Pull historical usage data. Identify objectives (price, term, green content, flexibility).

T-150 days: Draft and finalize the RFP. Compile supplier short list (typically 5–8 REPs).

T-120 days: Issue RFP. Allow 10–14 business days for response.

T-100 days: Receive bids. Normalize and compare. Shortlist top 2–3 for follow-up questions.

T-90 days: Best-and-final round. Negotiate contract terms.

T-75 days: Award and sign. Supplier files enrollment with utility.

Day 0: Service begins.

Frequently Asked Questions

How many suppliers should I include in the RFP?

Five to eight is the sweet spot. Fewer and you’re not getting competitive pricing. More and suppliers know they have low win probability and bid conservatively (or skip entirely). Curate the list for relevance — focus on suppliers active in your state and load size.

Should I sign a longer-term contract for lower prices?

Sometimes. Longer terms generally lock in lower rates per kWh, but you give up flexibility and bet on a particular forward-rate view. In a falling rate environment, a 36-month contract leaves money on the table. In a rising environment, it’s a windfall. For most stable businesses, a 24-month term is the right balance.

What’s a typical broker commission?

$0.0005 to $0.002 per kWh, embedded in the contract rate. On 1,000,000 kWh per year over a 24-month term, that’s $1,000–$4,000 in broker compensation. For a sense of scale, compare to the fee-based consultant alternative of $3,000–$10,000 flat.

Can I leave my current default utility supplier without an RFP?

Yes — in most deregulated states you can move to any licensed retail electricity provider with no penalty, and the move is back-office only (no service interruption). The question isn’t whether you can leave; it’s whether the supplier you’re moving to is the best of those available, which is what the RFP determines.

What if my business has multiple accounts or locations?

Most suppliers prefer to quote the aggregate load — better pricing because you’re a bigger customer. Include all account numbers in the RFP and request both aggregated and per-site pricing if you want flexibility on which accounts to enroll.

Does this process apply to natural gas procurement too?

The structure is similar but the markets are different. If you buy both electricity and gas, consider running parallel RFPs since the supplier and broker landscape overlaps only partially.

Bottom Line

A formal commercial electricity RFP is one of the highest-ROI procurement activities a finance or operations team can run. The work is real (60–80 hours of effort spread across 3 months) but the savings — 10–25% versus default service or a casually-negotiated contract — are recurring over the contract term and roll forward through subsequent renewals. For organizations spending more than $30,000 a year on electricity, the math always favors running the process.