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.
To start saving, look for the "Price to Compare" or "Supply Rate" on your bill. This is the number you need to beat.
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.