Connecticut Electricity
Learning How Connecticut Electricity Prices Are Calculated
Below we give a concise explanation of how Connecticut electricity prices are calculated. When choosing a Connecticut electricity company you want to be sure you understand what exactly is included in their quoted price. Not all electricity providers will go out of their way to give you a clear picture. You must also find an energy supplier that has a reasonable electricity deposit requirement or in a best case situation, no electricity deposit at all.
Energy & Delivery: Two Components of Energy Costs
Energy and delivery are two components that comprise the cost of getting electricity to your business. The following is a breakdown of how this works:
1. Energy
The actual energy component itself accounts for approximately 60% – 85% of the total cost for energy to your business. This makes setting a budget very difficult if not impossible. Since energy is highly unpredictable, determining a close budget figure is challenging. Now, a liquid energy market is available. Companies are able to provide customers with as much or as little energy price certainty as is required by their business.
- Majority of total energy cost
- Generator output, plus losses and congestion
- High instability, and highly liquid
- Price determined by market forces
2. Delivering Energy to Your Meter
The delivery of energy to your business is comprised of several different line items, but generally these line items fall within a few sub-categories. Regulatory Compliance, Reliability and Transmission Costs clearly cover various things but also have common threads. In essence, all of these line items represent costs related to getting the energy from the out-put side of the generator delivered to your meter. These costs are generally not driven by market forces, but by Independent System Operators and regulatory bodies. This portion of the cost is much smaller than the actual energy component, and represent costs that are substantially lower and less unstable. This portion of your energy costs cannot be controlled by suppliers, who cannot really hedge them. Generally, suppliers will attempt to provide for some of the uncertainty by assessing risk premiums against these costs, but if a material change is made to the cost, it will most likely be passed along to the consumer. Many companies now allow the consumer to float delivery charges so that costs to your business are allocated in a way that better allows you to control budget.
So, delivery of energy to your meter encompasses:
- Costs associated with getting energy from generator to your meter
- Smaller percentage of total energy cost
- Decreased instability, yet not very liquid
- Mostly determined by ISO’s and regulatory bodies
Other Deregulated Electricity Markets
Texas was one of the first succesful deregulated electricity markets. Pennsylvania improved how they have allowed deregulation to continue and Connecticut continues to be moving in the right direction.