Understanding Your Electricity Bill.
Surprise birthday parties are great, but surprise energy bills? Not so great. Sometimes you might get two energy bills instead of one in a month, which gets confusing (and frustrating, especially if you weren’t expecting two!)
So, why the double trouble?
The Markets Make A Difference
Before getting into the details of your energy bills, it helps to understand whether you’re living in a regulated or deregulated energy market.
In a regulated market, a single utility owns the entire power supply chain. Essentially, this means customers have no choice but to purchase their energy from this single utility, which means they’ll end up with just one bill.
In a deregulated market, entities besides a utility are allowed to own power plants and transmission lines, which gives customers more options in deciding where they can purchase their energy. As far as electricity goes, generators, suppliers and utilities all play a role in the supplying and distributing of energy. Separating all these roles means customers can shop for a competitive electricity rate — but that they can also receive more than one energy bill. Customers have to pay the utility to deliver energy to their homes and businesses, but they also have to pay the generators and providers for the actual generation of that energy.
And just so we get all the energy vocabulary straight: electricity generators are the companies that produce electricity to sell on the wholesale market. Providers then purchase that wholesale electricity and sell it at a retail level to the public. Utilities are companies that own and maintain poles and power lines. They are responsible for the physical distribution of electricity to customers, as well as repairing downed lines during power outages or after storms and natural disasters.
Breaking Down The Bill
Now that we understand the different energy players involved in deregulated markets, we can dive into the details of your energy bills.
In addition to the energy that is actually consumed, energy customers are charged for several other components. The bill’s grand total reflects the cost of generating and distributing energy, the technology needed to sustain the grid (like poles and wires), environmental charges and miscellaneous fees, like government-imposed taxes. But ultimately, all these charges are broken into two categories: supply and delivery charges.
The supply charge is the cost of the actual energy used and is paid to the electricity provider. The delivery charge is for the transmission and distribution, which goes to the utility. Because supply and delivery charges are handled by separate entities, it’s highly likely they’ll also bill separately.
Be aware that your gas bills are structured similarly. You’ll be charged for the supply and delivery of natural gas to your home or business, and these charges go to either an investor-owned gas company that provides delivery services, or a gas supplier that sources natural gas for delivery to customers.
For more details on how your energy bill breaks down, you can download this free resource.
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