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What's in my Power Rate?

Learn about how Retail Power Rates are calculated on PJM and other capacity-centric RTO's.

Confused about your rate for electricity? Don't worry, we're here to help. Understanding your power bill is simple once you discover the right resources.


Your total power bill has two major components: generation (supply) and distribution (delivery). The generation portion of your bill is for the electricity commodity and is billed in $ / kWh. This is typically referred to as the "supply" portion of your bill, and is the cost you can shop with a 3rd party energy supplier in a deregulated market. We will breakdown the price components that make up a supply rate for electricity below.


Next, you have distribution charges. These are the costs your local utility company bills you to deliver the power over their local lines, maintain those lines, and offer customer service. These charges are typically billed in $ / kW and will be discussed in a future blog post.


The supply portion of your bill typically accounts for 60 - 80% of your total power bill, depending on your market. The rate you pay for electricity has six major components in most states. See below...


Energy (50%)

This is the cost to generate the electricity commodity at a power plant, wind farm, etc. Energy makes up approximately 60% of your total supply rate.


Capacity (25%)

This is the cost that helps guarantee there will always be enough electricity generation to meet your energy demand.


Transmission (10%)

This is the cost to transmit the electricity from the power plant, wind farm, solar farm, etc. to your local utility company so they can distribute it to you.


Renewable Portfolio Standards (7%)

As mandated by many states, this is the charge for your supplier to procure a portion of your power from green sources.


Ancillary Services (4%)

This is the cost to help maintain the reliability of the electric grid.


Line Losses (4%)

These are the charges that cover losses of power when transmitting the power from the power plant to your business.

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