Electricity is generated using a variety of resources. In the United States, the majority of electricity is produced using traditional sources such as natural gas, oil, coal and nuclear. More recently however, the percentage of renewable resources such as solar and wind have begun to grow as a source of electricity. In order to effectively compare electricity kWh prices from electricity providers, it’s important to understand some of the fundamentals of the market such as how electricity is priced and what portions of your bill you have control over.
In addition being aware of other factors such as your energy consulting company or electricity providers ability to provide you with electricity saving tips such as energy efficiency or conservation initiatives that can not only lower your electric bill, but also provide your company with other benefits such as meeting corporate sustainability goals.
The electric and natural gas markets can seem complex. Power Management strives to work as your partner, keeping you up to date and informed about changes in the market that could affect your energy management strategy. Detailed account analyses, constant communication, and weekly energy market updates are a few of the ways we work to accomplish this.
The price of electricity can fluctuate based on changes in natural gas and oil prices, weather, political events and other economic factors. In order to make an accurate comparison between the offers you receive Power Management works on your behalf to ensure you understand the choices and get fair and competitive rates.
These are charges from your utility to transport electricity to you. These costs help to maintain the electric grid and deliver electricity from its point of generation to your business. Other surcharges and administrative fees may also appear in this area of the bill. Your utility will deliver electricity to your business regardless of your choice of supplier and will continue to read your meter, care for the poles and wires, and restore power when there is a service interruption.
This portion of your bill covers the cost to generate the electricity you use and is charged to you by an electricity provider/supplier, or your local distribution company if you are on default service. The supply portion of your energy bill is the part of your electricity service that you are able to shop for. Your agreed upon rate will appear on this section of the bill along with the amount of energy that you used during your billing period.
ISOs and RTOs are organizations that control and monitor the use of the electric transmission system by utilities, generators and marketers. ISOs and RTOs function under the guidelines that they will operate a competitive market and manage reliability of the transmission grid. They are tasked with providing efficient, fair and open transmission access and promote infrastructure development.
An ISO is a non-profit organization that provides fair and open access to power, independent of the transmission owners and the customers who use its system. They manage the flow of electricity throughout their regions to ensure it’s produced in sufficient quantities, has constant availability and transmitted where it needs to go when it’s needed. They also provide system planning, studies, and analyses information to policymakers, stakeholders, and the general public in order to ensure there will be long term reliability and electricity needs will be met for future generations.
RTOs typically perform many of the same functions as ISOs, but cover a larger geographic area. The terms ISO and RTO often used interchangeably. While RTOs also provide access to the transmission network they must meet specific FERC regulations regarding transmission planning, system congestion and expansion.
List of U.S ISOs and RTOs
The cost to supply electricity varies minute by minute. To minimize the risks of purchasing during extreme conditions, most consumers consider future products so they do not experience these daily price fluctuations of the spot market. Future products are less volatile and provide more price certainty for electricity over the specific time period, at a price negotiated on the contract date.
When evaluating supply contracts, it’s important to understand what is or is not included to accurately compare electricity kWh prices. Depending on the supplier, certain charges may be included as part of the price quote, or they may be passed through as separate charges on your bill. A rate that does not include all cost components could appear lower, however in the long run could be more expensive. It’s important to work with a company like Power Management who is well versed in the contract language and evaluating these various supplier agreements regularly in order to better educate you regarding which product, offer and electricity providers will work best for your business. In addition to the pricing components, considering your company’s risk tolerance, business goals and need for budget certainty can help determine if you are more comfortable with a fixed or variable pricing structure.
As with natural gas, evaluating electricity supply options for your business is a complex process. There are many variables and fundamentals that change the marketplace. Power Management strives to keep you abreast of pertinent information about the electricity markets, supplier options, ways to save electricity and other important factors. In addition to personalized communication about your accounts, PMC provides tools like our weekly energy market update to keep your business up to date and informed.