Examples of different types of electricity rates.
- Blended rates: A blended rate combines the cost of energy from different sources, such as coal, natural gas, and renewable energy. For example, a utility company may charge customers a blended rate that includes 30% coal-generated electricity, 50% natural gas-generated electricity, and 20% renewable energy. This allows the utility company to manage the costs of different energy sources and pass on a stable rate to customers.
- Time-of-use (TOU) rates: A TOU rate varies depending on the time of day or day of the week. For example, a utility company may charge a higher rate for electricity used during peak usage times, such as weekday evenings, and a lower rate for electricity used during off-peak times, such as weekends or overnight. This rate structure encourages customers to shift their energy usage to times when demand is lower, helping to reduce overall energy costs.
- Real-time pricing (RTP) rates: Real-time pricing rates change in real-time based on the current market price of electricity. For example, if electricity prices are high due to high demand or limited supply, the RTP rate will be higher. Similarly, if electricity prices are low, the RTP rate will be lower. This rate structure allows customers to take advantage of market conditions to save money on their electricity bills.
- Net metering: A net metering rate credits solar energy system owners for the electricity they add to the grid. For example, if a customer with a solar panel system generates more electricity than they use, they will receive a credit on their bill for the excess electricity they sent to the grid. This rate structure incentivizes customers to invest in renewable energy systems and promotes the growth of renewable energy.
- Demand rates: A demand rate charges customers based on the highest amount of electricity used in a given time period, such as a month. For example, a customer’s bill may include a charge for their highest 15-minute usage during the month, rather than their overall usage for the month. This rate structure encourages customers to reduce their peak usage, which can help to reduce overall energy costs.
- Flat rates: A flat rate charges a fixed amount for electricity regardless of usage. For example, a customer may be charged a fixed rate of $0.15 per kilowatt-hour (kWh) for all the electricity they use. This rate structure is simple and predictable for customers, but may not provide an incentive for energy conservation.
- Marginal rate: A marginal rate charges customers based on their usage above a certain threshold. For example, a customer may be charged a lower rate for the first 1,000 kWh of electricity they use and a higher rate for any additional usage. This rate structure provides an incentive for customers to reduce their overall usage.
- Tiered rate: A tiered rate charges different prices for different levels of usage. For example, a customer may be charged a lower rate for the first 500 kWh of electricity they use, a higher rate for the next 500 kWh, and an even higher rate for any usage above 1,000 kWh. This rate structure provides an incentive for customers to reduce their overall usage and can be a way for utility company to recover fixed costs
It’s important to note that different utility companies in different states and even different regions may use different types of rates and rate structures, and there may be variations or different names used for similar types of rates. Additionally, there may be laws or regulations in place that dictate which types of rates a utility company can offer to customers.