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What does the fine print under your energy price mean?

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Be honest: do you read the fine print? 

Electricity pricing can be complicated and difficult to understand – especially if your contract is filled with legalese and industry lingo.

It’s tempting to only pay attention to the kilowatt hour energy price. After all, if you’re buying on a fixed price, the rest of the contract should be standard, right?

That’s what some electricity companies want you to think. And it’s a common mistake, even for businesses that buy large amounts of energy.

When it comes to fixed electricity prices, it’s difficult to make a true apples-to-apples comparison between rates precisely because the fine print of non-supply costs varies from one supplier to another. But it’s essential to understand the components that go into your kilowatt hour price – and to know when you’ll benefit from passing components through at cost instead of fixing them.

Electricity Pricing Components 101

To make sense of that pesky fine print, you’ll need to have some basic knowledge about the regular line items on your energy bill.  

You already know about your electricity supply. It’s the main part of your bill and the cost the electricity itself. With a fixed price, your cost will be the amount of energy you use multiplied by your kilowatt hour price.

There are three other major components that comprise monthly electricity costs for large businesses:

  • Capacity
    Capacity charges help guarantee that there will be enough energy on the grid to service all energy consumers at all times. It’s calculated based on the amount of energy you use during peak load times.

  • Transmission
    Transmission charges account for moving power from the electricity generator to your local distribution company (usually your electricity utility). Budgets for new energy infrastructure are often baked into your transmission charge.

  • Distribution
    Distribution charges account for moving power from your local distribution company (usually your electricity utility) to your business.

How Electricity is Delivered 

These components are mandatory fees charged by the utility. You pay them regardless of which retail company or utility supplies your electricity. Together they comprise the non-supply “fine print” charges that many businesses don’t pay attention to. 

Why do so many businesses overlook this part of their rate?

It’s because many electricity pricing structures make them hard to see.

What’s included in your fixed price?

On the surface, a fixed price means that you’ll pay the same rate for electricity each month. 

But it's harder to discern what that fixed rate includes. 

In some cases, non-supply components may be included as part of your supply price. Essentially, the supplier estimates the cost of these changing components and provides you with an all-inclusive fixed price premium for your term.

The problem with this solution for many large businesses, is that they forfeit the opportunity to actively manage these costs. And depending on how the contract is written, if mandatory fees go up, the supplier may be allowed to charge the business for the higher-than-estimated surprise fees.

That’s right. Your supplier may be able to charge you for non-supply fees, even if you’re paying a premium fixed supply price that already accounts for them.

You have to read the fine print

It’s critical to understand the non-supply components of your electricity price and contract – now more than ever. 

Why?

Because while wholesale electricity prices have dropped, non-supply costs have spiraled out of control. And fine print often leaves room for suppliers to pass these exorbitant fees along to customers without warning. 

We’re exposing the hidden truth of these market changes to business leaders like you; and offering a new era pricing structure that puts the power in your hands to manage it. 

It’s time to get to know your fine print, and make sure you have a smart energy strategy for the long term.

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Posted: July 26, 2018

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