What is an Energy Charge or Generation Charge?
If you’re shopping for energy providers, then you’re probably wondering what the energy charge is. Energy contracts can be lengthy and filled with terms that are unfamiliar to most people. The energy charge is also known as the generation charge and represents the cost of the electricity the customer consumes each month. The cost can be determined by taking the energy rate and multiplying it by the number of kilowatt-hours consumed by the customer in a billing period.
For example, if the customer consumes 25,000 kWh and has an energy rate of six cents per kWh, then the energy charge will come out to $1,500.
The energy charge is just one component that makes up the total supply charge. The total supply charge is often referred to as the price to compare. The price to compare rate is what the customer should be asking for from the energy supplier when comparing supply rates. This will assure the customer is receiving an apples-to-apples rate while comparing energy providers. A few of the components that make up the price to compare rate include:
- Energy Charge
- Congestion Charge
- Losses
- Ancillary Services
- Capacity Charge
- Transmission Charge
- GRT/SUT Taxes
Factors that Affect the Energy Charge
The main factor that affects the amount a customer pays for the energy charge is the source of power generation. The more conventional methods are also the most cost-effective. These methods of power generation include coal, natural gas, and nuclear power. If you’re shopping for the lowest electric rate, then you should choose a plan that generates power from one of these sources. The Electricity Facts Label provided by Retail Energy Providers (REPs) in Texas will include the percentages from each source of power generation.
Green Energy Plans come with a High Premium
Green energy plans offered by energy providers often will be more expensive than conventional plans. This is due to the high costs associated with generating power from renewable energy sources such as solar, wind, hydropower, and biofuels. States are attempting to make these plans more affordable by creating regulations to artificially increase the supply of renewable energy sources. These regulations are known as the Renewables Portfolio Standard (RPS) and vary by state.
Components of the Supply Charge
