When you stop at a service station to buy gas, you have the advantage of knowing how much each unit of fuel costs. The value of gasoline — its “price per gallon” — is always prominently and clearly displayed. You can control your total expenditure by choosing the price you are willing to pay or by limiting the volume of gas you purchase.
Gas prices and utility-sourced electricity prices are driven by similar market forces.
Gasoline industry factors
Each gas station has the opportunity to set the price per gallon charged, but it must first pay the wholesale price for the fuel. It is the wholesale price that establishes most of the end price-per-unit for the consumer, and that wholesale price can vary widely on a daily basis.
The price of wholesale gasoline is set by the prevailing price per barrel of crude oil, plus the costs of extracting the oil, refining it into gasoline and transporting it to the dealers who sell it. In the past 50 years, the price-per-barrel has been driven by supply (the Middle East oil barons charged exceedingly high prices in the 1970s), the challenges within the transportation and routing systems, and the integrity of the gasoline production infrastructure. Impediment in any of these supply chain factors will cause the price of a gallon of gas to increase, so when the wholesale price of gasoline goes up, consumers are faced with a choice to pay more or drive less.
Electricity industry factors
Determining the value offered by traditional electricity generation systems is more difficult. Unlike gasoline, electricity consumers don’t “shop” for their monthly electricity rate or supply amount. Instead, they sign up with an electricity supplier (frequently the public utility company) and agree to pay whatever rate per unit (kilowatt per hour or kWh) that supplier is charging. Suppliers don’t ask consumers for permission to raise prices, so when their wholesale costs increase, they pass those costs onto their customers.
From the consumer side, high demand will also cause electricity prices to rise. Electricity plays an integral part in America’s heating and cooling systems, so demand is often highest during the coldest and hottest months of the year. Often, consumers aren’t aware of the increase in their usage of electricity during these seasons until the electric bill arrives, showing a substantially higher amount than previous months.
Consumers can agree to pay less for electricity
For consumers of traditional grid-supplied electricity, there is no way to avoid these “boom and bust” electricity rates. Residents of New York, New Jersey, Massachusetts, Connecticut and California, however, do have the opportunity to not only reduce their electricity costs in general, but to also set the price per kWh they are willing to pay. The ability to set the price per kWh is called a “Power Purchase Agreement” (PPA), and it is available through RGS Energy. The PPA participant pays only for the electricity generated by the RGS-owned system, not for the equipment itself.
A PPA provides to the electricity consumer a key piece of information currently given to every gasoline consumer — the exact price for each unit they are purchasing. Electricity is sold by the number of kWhs used by the home or business. The PPA sets the kWh price at a low fixed rate so the consumer always knows what that rate is, regardless of the time of year. Reducing the overall cost of electricity is then managed by adjusting the number of kWhs used throughout the day or month. Conversely, when more electricity is consumed due to seasonal changes, the rate per kWh doesn’t change. There is no demand-side influence on the rate per kWh. Accordingly, PPA participants have much more control over their electricity bill than do utility customers and can accurately budget for that amount month after month.
No processing costs mean no processing fees
Because solar photovoltaic (PV) power is generated by the sun, there are no extracting, refining or transportation costs to obtain access to its energy. The costs associated with a PV system are for the manufacture and purchase of equipment, installation and connection charges. PPA participants are spared these costs because they are purchasing the power, not the system (ownership of which remains with RGS). The PPA also covers maintenance of the system, if or when that is needed, so the PPA participant has no out of pocket costs for the lifetime of the agreement.
A PPA might even make you money
Depending on your jurisdiction, you might also generate income through your PPA. Each PV system comes with the panels that collect the DC electricity, an inverter to change that pwer from DC to AC (for use in today’s homes and businesses), and a meter to read the amount of PV or grid-generated electricity being consumed. In a “net metered” system, the meter runs forward when tracking grid-sourced electricity and backward when tracking PV sourced electricity. The “net” cost to the PPA participant — the number of grid-supplied kilowatts per hour minus the number of PV supplied kilowatts per hour — is owed to the utility.
When the monthly PV kWhs exceed utility kWhs, however, the meter will share that excess electricity power with other utility customers by sending it back into the grid. In some jurisdictions, the utility will pay the PPA participant for that excess electricity supply and the PPA participant will become a part of the utility’s “distributed generation” system. The PPA participant is both saving money through reduced electricity pricing and potentially making money by selling excess electricity to the utility.
As costs are rising in so many integral aspects of today’s society, electricity consumers can gain control of some of their monthly expenses by signing a PPA with RGS.
To learn how a PPA can work for your home, visit www.rgsenergy.com for information and a free quote.