There are different types of supply pricing options for electric customers, and many times each of the various suppliers have their own unique pricing systems. However, there are common factors in every electric price. In order to fully comprehend electric pricing, whether it be from a utility or an alternate supplier, you need to understand the basic components that make up a price.
Your electric utility bill is separated into two main categories – delivery charges and supply charges. Delivery charges always come from the utility and are their charge for maintaining the local distribution network and the cost for transmitting the electricity over the public network of power lines. Each customer within the same rate class will pay the same distribution charge determined by the utility.
Supply charges are a little more complex and vary with each account and supplier, even for accounts within the same rate class. These charges can come from your utility, or if you choose an alternate supplier, the supply charges will come from that supplier. Some of the multiple components that make up the supply charge are energy, ancillaries, capacity, and any relevant taxes or surcharges imposed by the state. Every supplier factors the various components into their pricing structure or pricing model differently and that is why it is important to understand what the basic components mean:
- Energy is the cost to produce the energy and this price is determined by market conditions and an account’s usage profile.
- Ancillaries include the additional services required to deliver the electricity to the end-users and maintain power reliability.
- Capacity refers to the amount of electricity, measured in kW, required to meet a customers’ expected load during peak demand periods.
In order to accurately compare quotes from various suppliers you need to know what components are, or are not, included in each price. Some suppliers will include all the additional charges, like the ancillaries and capacity charges, in their price offer. Other suppliers will add these additional charges to the customer’s invoice as a separate line item, which in turn can make their offer appear lower by not including the additional fees into their offer price. Electric supply offers are not always transparent or easy to understand, but here at Power Management we evaluate and understand all the components in the various offers we present to our clients in order to deliver straightforward, reliable pricing options.