Why should I know about pricing components?

Why should I know about pricing components?

By understanding the pricing components that go into calculating your price for electricity, you will be better prepared to ask questions about what is and is not included in the quoted price, and therefore be better positioned to make decisions about which product, offer and supplier will work best for your business.

In some cases, components may be included as part of your quote. In other cases, they may be passed through as individual charges. Suppliers may offer different product configurations that are more or less inclusive.

A "fixed all-inclusive product" should contain all of the above components wrapped into one rate – your price. For this maximum price protection scenario, the price will contain a premium to cover the cost components that may vary over the duration of your service. This premium protects a supplier, who must estimate all of these changing cost components in order to provide you with an all-inclusive price for your desired term.

A "fixed product with varying pass-through charges" could include one or more of the above components wrapped into your fixed rate, and several others passed through separately. It could also mean that your energy component is fixed and all of the other charges are passed through at cost.

It's important to clarify whether components are included or passed through because a rate that does not include every cost component will be lower. Sometimes this can be good if your business can benefit from certain cost components being passed through at cost each month. Usually businesses with less risk tolerance choose product configurations that wrap most common cost components into one fixed rate – even if it means paying a slightly higher price premium to do so.