How Comparing Energy Rates Works
A step-by-step guide to understanding your bill and finding better deals.
1. Reading Your Bill
Your energy bill might look complicated, but it boils down to two main components:
- Supply Charge: The cost of the actual electricity or natural gas you use. This is measured in kilowatt-hours (kWh) for electricity or therms/CCF for gas. This is the part you can shop for.
- Delivery (Distribution) Charge: The cost to transport the energy to your home or business. This is set by your local utility company and typically cannot be changed.
Short answer. Beat the supply price on your bill, at your usage, after fees. The arithmetic is (your supply rate minus the offer’s supply rate) times kWh, minus monthly fees, minus any early termination fee you would pay to leave. A lower headline rate that fails that sum is not a savings.
Example only, not a live offer: a supply price of 10 cents versus an offer of 8 cents on 900 kWh is 18 dollars before fees. A 10 dollar monthly fee cuts that to 8 dollars. Delivery charges are not in the subtraction, because you pay them either way.
| Line | What it is | Can you shop it? |
|---|---|---|
| Supply | Generation, priced per kWh or therm | Yes, where your state allows choice |
| Delivery | Wires, metering, outages | No. The utility tariff sets it |
2. Comparing Rates & Plans
When you shop for a new energy supplier, you'll see different types of plans. Here is what they mean:
Fixed-Rate Plans
What it is: The price per kWh or therm stays the same for the entire contract length (e.g., 12, 24, or 36 months).
Pros: Stability and protection from price spikes.
Cons: You might pay more if market rates drop significantly. Often has early termination fees.
Variable-Rate Plans
What it is: The rate can change month-to-month based on market conditions.
Pros: Flexibility; usually no long-term commitment or cancellation fees.
Cons: Rates can skyrocket during extreme weather or high demand periods.
Indexed Plans
What it is: The rate is tied to a public market index (like natural gas futures).
Pros: Transparent pricing formula.
Cons: Complex to understand and carries market risk.
3. Understanding Contract Terms
Before you sign up, pay close attention to the fine print:
Contract Length
Plans range from month-to-month to 3+ years. Align the term with your living situation (e.g., do not sign a 2-year contract if you plan to move in 6 months).
Early Termination Fees (ETF)
Most fixed-rate plans charge a fee if you cancel before the contract ends. This fee can be a flat rate ($150) or based on remaining months.
Monthly Fees
Some suppliers add a monthly service charge (e.g., $5.95/month) on top of the usage rate. Factor this into your total cost calculation.