In the middle of the “polar vortex” cold snap, one of @cubillinois’ followers Tweeted a great question: Was the frigid weather going to be a profit boon for energy companies?
The answer is yes and no, and requires delving into how your utility bill is broken down.
Your electric and natural gas bills are split into two main categories: delivery charges and supply charges. Supply reflects the amount of gas or power you use and is set by the free market. You might be surprised to learn that utility companies are not legally allowed to reap a profit from that supply. They’re supposed to pass on the costs, with no markup.
So who is profiting off supply, if the utilities aren’t? The answer is: The generators and producers that sell energy to the utilities.
Utilities like Nicor, ComEd, Peoples Gas and Ameren only profit off the delivery charges. Delivery covers the costs of getting the gas or electricity to your home, including system maintenance, administrative expenses and meter readings, plus a profit permitted by regulators. Gas delivery rates are determined by traditional 11-month rate cases before the Illinois Commerce Commission (ICC). For electric utilities, the General Assembly now allows the companies to annually determine rates by formula.
While some delivery charges, like the monthly customer charge, are fixed and don’t change no matter your usage, there is a distribution charge that is usage-based. And that’s how the polar vortex could slam his month’s utility bills and up the profits of utility companies in the first quarter.
When we get slammed with cold we use more gas or electricity, and that’s why energy efficiency is so key during times like this. In the middle of the cold emergency, CUB put out a consumer alert with quick tips on little things people could do to make their homes more efficient. Little actions can make a big difference in making your home more affordable and comfortable.