One common question that utility companies receive from their customers is why there are two charges on their bill — a supply charge and a delivery charge. The first thought from customers is that they’re being double billed. If you’ve wondered about this before, you are not alone.
Utility bills can be extremely confusing between the tariffs, the fees, different charges and the way the bill is broken down. You’d almost think that these bills were designed to be confusing on purpose. Hopefully we can clear up some of the confusion in this informative article.
Your energy bill is always the sum of two components: supply and delivery charges. The first portion is delivery. These charges come from your utility company. Utility companies like Duke Energy, National Grid, Exelon, PG&E and Con Edison own and maintain the wires, poles and pipes. They are the ones who read your meters, they provide emergency service and they generate your bill.
The delivery portion of your bill is regulated. It’s still a monopoly so you can’t choose the utility company that services your address. It’s predetermined by where you live. Your utility company charges you to deliver your electricity or gas to your home using their wires or pipes.
The second portion of your bill is supply. This charge is strictly for the consumption of electricity or natural gas used during a certain period of time. It costs money to generate electricity and gas so you pay for what you use.
For electricity, you are charged per kilowatt hour. For a natural gas, you are charged per therm. The overall concept is simple: you use more, you pay more. These charges come from a supplier like Direct Energy, AEP Energy, Liberty Power, Oasis Energy and Constellation.
This portion of the bill is deregulated meaning you have the option to choose whichever company you want to receive supply services from. It’s a commodity so no one has better electricity or gas — it all comes from the exact same place regardless of the supplier you choose.
Now if your bill suddenly goes up the first thing you want to do is check your consumption. Did you use a lot of electricity last month? Was it hot or cold outside and it required a lot of energy to maintain a comfortable room temperature? These are important factors.
Next, check your rate. Is your rate competitive? Are you on a fixed rate or a variable rate? A variable rate at times may offer savings but due to market factors or during times of high demand, such as a hot summer or a cold winter, the rates might go up and you may be better suited with a fixed rate.
Hopefully this clears up some confusion you might have had between the supply portion and delivery portions of your bill. We also hope you now have a better understanding of why your bill may fluctuate on a monthly basis.