How much does electricity cost?

I don’t know about you but when I need to buy gas for my car it’s a relatively simple process. All gas stations have a similar sign out front clearly stating the price per gallon. Not all of them charge the same and you soon learn which gas station is the cheapest and also most convenient for you to use. Even when you’re on road trips to other states the format of the sign is the same and it’s obvious how much you’re paying.

Most people don’t worry too much if their gas is Shell, Exon, Sunoco etc. It’s basically the same stuff.

Why is electricity different? It turns out depending where in the country you live it can be extremely difficult to know what you’re actually paying to your utility for electricity. As a consequence, it’s very hard to tell if the third party retail plan you’re considering is a good deal.

Fair Warning! We do get into quite a bit of detail here. The short version is some states (like CT and MA) make it clear what your utility standard rate is. Others (like NY) do not. Figuring out the “price to compare” is critical to saving money. Utiliz customers don’t need to do this. They have the peace of mind of knowing we do this for them and guarantee they will save money.

Supply and Distribution

One thing that is consistent across all utilities / states is that your bill is made up of two parts:

1) Supply. This is the cost of the electricity you use. Think of it as the cost of the raw material. Your supplier buys this on your behalf from the power generation plants. When you ‘switch suppliers’ or sign up with Utiliz, this is the part of the bill we can reduce.

2) Delivery. This is also expressed in kWh but is the fee charged by the utility to deliver the electricity to your home or business, maintain and improve the grid including responding to outages, cover the costs of billing, and so on. Regardless who your supplier is, this cost is fixed by your utility and they have a natural monopoly on this (imagine if every supplier had to run a separate set of wires to you!)

Lets talk about New York

In New York it can be really hard to understand the true cost of electricity. For starters there are 6 separate utilities and 10 different load zones. A load zone is an area where pricing can be different (for example ConEd operates in 3 load zones: North Westchester, South Westchester and NYC). Secondly every utility has variable pricing, meaning the supply charges change every month.

So how does a customer know whether they’ll save money if they switch suppliers? To answer this you need to figure out the price to compare. Two utilities (Orange and Rockland and Central Hudson) do provide this information if you dig for it on their websites, but it’s not clear on the bill. Others go to great lengths to mask this true cost and make calculating it as difficult as possible.

There are four separate charges that make up the supply cost:
- Market Supply Charge (MSC): This is the basic cost of the electricity for the month.

• Merchant Function Charge (MFC): This is the cost of acquiring the electricity (i.e. the buyers and their staff)

• Market Supply Charge Adjustment (MSC Adj): This one is great. If they over or under price the MSC on a previous month they can retrospectively adjust it on future bills. Imagine if you bought a car and the salesman called the next month saying he under charged you and needs another $500, what would you tell him to do?

• Gross Receipts Tax (GRT): This is a tax that is applied to customers on standard service only and is not applied to people on a third party retail plan.

• Others. Depending on your utility there can be up to 5 additional charges added to the above to cover various taxes and fees.

I told you this was complicated!

What about Connecticut?

Night and Day. The CT regulator has mandated that Eversource and United Illuminating fix their prices for 6 months at a time in Jan and Jul, and also print the total all-inclusive price for supply on the front page of the bill. This makes it easy to understand what you’re paying and estimate your savings from switching to another supplier.

What now?

One of the great features of Utiliz is we do this work for you, figuring our your price to compare and the potential savings we can realize for you by switching you to another plan. When we find a great plan that will save you money, we switch you automatically!

Tom
tom@myutiliz.com