There are several sections and numerous line items within a electric bill from your local utility. Here is a brief explanation of the sections and what to look for when looking at competitive supplier options and alternative generation.
Charges
Generation
Cost of energy produced by a facility and delivered to the "grid." This cost is dependent upon the type of power, time of year and the length of the contract and how these variables are impacted by commodity markets. Competitive energy suppliers each have their own pricing models to compete. Rates usually include transmission in the rate quoted as a "full requirements" contract.
Transmission
Cost of energy transmitted on the grid to your locale. This cost is dependent upon where the energy is coming from, the timing and other ancillary charges. Generally, this price is combined with generation when receiving a quote from a supplier. If not included, it is important to understand that the price of transmission will not be the same as the utility's standard offer service.
Distribution
Costs associated with actually getting the power off the grid and to your home are collected and paid directly to the local utility. The utility is responsible for line maintenance, power outage repairs, customer service and billing. Utilities generally bill for generation and transmission and then pay the chosen supplier. Distribution costs are priced on usage and fixed by the local utility and are not negotiable with competitive supplier quotes.
Service Options
Fixed Rate
Rates that lock in generation and transmission for a set period of time. Due to this guaranteed price, rates may be slightly higher than the daily rate, but offer protection against price spikes during the period of the contract.
Index
Rates that are tied to market pricing, which go up and down, are index rates. A supplier adds a cost to the wholesale price of energy and provides a summary at the end of the billing cycle.
Generation only vs Full requirements
If a contract only includes generation pricing, leaving all ancillary and transmission costs to be "passed through" to the customer, this contract is not a full requirements offer. There are various pricing options, so be sure to understand what is covered. A full requirements and fixed rate deal covers all costs except distrubution charges by the utility or any new regulatory or governmentally driven charges.
Standard Offer
Under the rules of competitive energy markets, local utilities offer a standard offer service. If customers do not switch to a competitive supplier or their contract with a supplier ends, they will still receive power and be charged the standard offer rate. These rates are set by "rate class" and are priced based upon the timing set by the utility.
Power options
Renewable Power vs Standard grid power-
Energy supplied from the grid network that comes to your house or work is the flow of energy coming from various generators in the region. The standard power produced in the our region is primarily from fossil fuel sources, especially coal. Regardless of what power is purchased, the actual energy flowing into your home is driven by the power available locally at any given time. The grid network has a complex accounting mechanism to insure that all energy produced and used is accounted for, but its actual stopping point is not determined. For more information on the mid-atlantic grid, PJM, click here.
If one wishes to purchase renewable energy in greater quantities than the standard grid power, which is less than 2% of the total regional power supply, renewable energy certificates (RECs) are required. An energy supplier can provide a renewable power contract by "bundling" the power contract with RECs in the appropriate percentage. To learn more about RECs, click here.
Local vs. National RECs
RECs are produced by various renewable energy generators, including residential solar power systems. Based upon where the generator is located, the grid it is connected to and authorities it has, the REC can categorized differently. A local REC is one that is recognized by the regional grid and/or local state as being tied to energy transmitted on its wires. National RECs may be within a regional grid or from outside of it, but are not tracked to energy flowing on the local/state grid. For example, wind RECs produced in Texas are not tracked on the PJM grid or produced in Maryland and are categorized as a national REC source. Pennsylvania produced RECs are tracked by PJM and are considered local. However, Pennsylvania RECs would not count towards state mandated REC programs such as the Solar REC carve out.
Generally speaking, West Virginia and Pennsylvania are where most local PJM RECs sold in the Washington DC and Baltimore market areas are generated. National RECs can come from numerous sources, however the most cost effective options are from generation facilities in the center of the country, Texas up to the Dakotas.
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