“Forget electricity rates. What can you do about these PASS THROUGH CHARGES?!”

The one question I hear every week looks like this: “What can you do about my pass through charges?! They are so HIGH!” Or “My delivery charges are more than my electricity supply!” A quick look at your usage file (ordered from your local utility) can tell you if the pass through charges on your bill match the amounts charged by your utility for the delivery portion of the bill. The chatter about suppliers ‘pulling a fast one’ regarding delivery charges is a result of all the fear in the electricity marketplace and here at Shop My Power, we get it. We try to ease that fear whenever we can by educating our customers, so let’s talk about what it all means.

There are a number of items that can be called “pass through charges” so let’s get clear on that first by understanding a function of your retail electricity supplier. In Texas, your supplier is like a collector for three separate parties. Think of it like your water/trash bill at home. You might pay one bill and the city will divvy it up, right? It’s similar with your commercial power bill. Most folks get one bill for their business electricity from one entity (usually the retail supplier) and on it are three separate sections: Taxes, Delivery and Supply. You pay the bill, then the supplier pays the government their taxes and the utility for the delivery of your power. This is why business owners cannot “shop” their taxes or delivery charges. And YES – quite often businesses pay more for the delivery of their power than they do for the power (or supply,) especially now while electricity prices are so dang low! Unfortunately these two sections (taxes and delivery) are what most folks are talking about when they say “pass through charges”. You cannot shop for better tax or delivery rates as there is no competition for your government or your “poles and wires” company (your local utility). What you can shop is your supply (the amount you pay per kWh – i.e. your RATE.) But rates are not presented to you apples to apples. Oh no, there are pass through charges in rates from suppliers too, and those are the pass-throughs we can manage together.

Think of it like mailing letters. You cannot do anything about the cost of the stamps (delivery) but you can sure go buy cheaper stationary (supply). At Shop My Power we help you weed through the supply rates (which can be about as clear as mud) to find a bill you can fully understand and feel good about.

What’s the difference between the suppliers who supply power and the utilities who deliver it?    In order to wrap your head around what is arguably the first important “get” when shopping for electricity in a competitive market, you need a small history lesson (sorry) here goes. I will make it quick.

 Deregulation; a history lesson: The electricity market before deregulation and retail electricity suppliers existed: (This is General as all states are a little different.)

For many years, electricity was produced and delivered by the same company. This company can be called a Utility. Here are some examples of those utility companies:  ConEd in New York, ComEd in Illinois, ONCOR and Centerpoint in Texas, JCP&L in New Jersey. These utilities historically provided both these services: Supply and Delivery:

  • Supply – Think of power plants generating power. This power itself, the electrons, is the electricity supply.

  • Delivery- Look outside at the poles and wires delivering your power and the people reading your meters. This is a delivery system. The utility still oversees delivery exclusively.

What is electricity deregulation? Before deregulation, there was no choice as to whom we could buy our power from, hence power supply and delivery were both regulated. About 14 years ago, the laws began to change in certain states. These changes in law allowed business owners to choose who they bought power from. Today, almost half of our United States is deregulated for the supply portion of either natural gas or electricity. In two words, deregulation means: ELECTRIC CHOICE. Delivery is still regulated. When deregulation laws were passed, that did allow for customers in deregulated territories to purchase their power (supply) from anyone they liked (Retail electric Service Providers or REPS), however the delivery of that power is often still managed, maintained, and billed to you by your utility company, depending on your state.

The Birth of Retail Electricity Providers (REPs) and ELECTRIC CHOICE:

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Retail Electricity Providers (REPs):  When deregulation laws passed, utilities were forced to sell their generation (power plants). These plants were bought by retail companies that planned to sell the supply (electrons) from those power plants to customers in that territory. It is their prices for power that Shop My Power will present to you. Why pay more for the same electricity?

These new supply companies have many names; in the south they are called REPs (Retail Electricity Providers), in the north they are called ESCOs, and in the Midwest they are simply called suppliers. Some examples of suppliers: Direct Energy, Constellation New Energy, Just Energy, and Liberty Power. There are hundreds of these REPs in every deregulated state. How will customers know which one to choose?

Energy Consulting: With so many REPs to choose from (none of them presenting pricing, contract language or fees the same way,) it became very confusing for business owners to shop rates for their supply, compare apples to apples offers, and read contract language. A professional community emerged to simplify the process for business owners. We call this community the ABC community: Aggregators, Brokers, and Consultants. The ABC community helps business owners by finding them the best deal for their electric and natural gas supply. In the more mature markets like Texas, over 60% of commercial businesses recognize the value of utilizing an electricity professional to shop for their power. Shop My Power is ready to simplify your procurement today.

 

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