There are several components that make up the amount you are charged on your energy bill. One you’ve probably heard about is the “Price to Compare” rate or PTC, but what is it, exactly?
The Price to Compare rate is the price that local utility is charging (per kWh) for the generation portion of your electricity bill. It is a benchmark that customers can use to compare utility rates to offers from competitive suppliers. To save money on your electricity bill, you may choose a supplier, like AEP Energy, whose prices may be lower than the PTC charged by the local utility.
How does utility pricing work?
Price to Compare (PTC) – is the generation charge portion of the electricity bill and is the charge replaced by the supplier when a customer switches. To determine potential savings from a supplier, a customer can compare the rate offered by the supplier to the PTC charged by the local utility.
Wholesale auctions – in many deregulated states, local utilities are required to have competitive wholesale auctions where they secure energy capacity requirements for their customers. The winning bids from the auctions are blended together to determine the generation rates or PTC the customer will be charged by the local utility.
Stability versus volatility – because the PTC is based on multiple winning bids of a variety of prices and terms blended together, and the rate of a supplier is based on energy purchased singularly, there is often more volatility and potential for rate changing with utility pricing and more stability with supplier pricing.
The major components of most energy bills are the price of electricity, also known as generation supply, and the price for the transmission and distribution of that electricity. Other components may include Public Utility Council (PUC) approved by-passable riders and administration fees.
The cadence when a PTC changes depends on the local utility. It may be updated monthly, quarterly or annually. Visit your local utility online to learn more about the PTC or you can find their contact numbers here.
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