Trim the Fat Tuesday: The Electricity Supply Rate

You know those annoying mailings you get telling you to check out some new electricity supplier to get a better price? And how you can lock in a low rate while your current electric company keeps operating the power lines to your house and zzzzz...

Yeah, I know. They're boring and stupid and why would anyone bother?

Because it turns out that it really is cheaper — especially for the expensive winter months — if you take the time to

Shop around for the cheapest fixed electricity supply rate offered through the electric company.

This one takes maybe an hour or so of research, but it's pretty easily done with the magic of Google. We have National Grid as our provider, so I started there to check out the available suppliers. National Grid will still send us our bill and charge us for the "delivery" via their magic wires, but we get to choose the company that supplies our energy. You can also choose a company that deals in renewable energy, too, if you want.

I was going for cheap.

I hit all the links, jotted down all the prices (they ranged from 8.99 cents to 11.49 cents per kilowatt hour, and you could lock in a rate for 6, 12, or occasionally 24 months).

Then I went back to National Grid to look up their historic rates. This part is important! Right now they are at 10.025 cents until the end of April, because they jack up their prices in the winter. But in the six months of summer billing, they've been consistently just a little over 7 cents for the past couple of years. The average for a year, then, came in at about 8.5 cents, which was still cheaper than the low of 8.99 cents that I found from a handful of companies.

So locking in at the 8.99 cent rate only makes sense during the winter months — if you lock in for the whole year, you're stuck with that rate in the summer, and it's not your best bet. That's why I decided to lock in for just 6 months, which gets me a good deal for the winter and frees me up to comparison shop again in the spring when rates go down. After the six month period, I'm free to choose a new provider by comparison shopping again to make sure I'm always getting the best deal.

Is that a pain? Now that I've done it once, it should be quicker in the future to revisit those websites and crunch the numbers. Might I forget to do it and get stuck in the not-as-good variable rate after the six months is up? Nope — I put a reminder in my phone to make me do this again exactly six months from today.

Math time:

To figure out how much you're saving, you need to figure out your usage per kilowatt hour (kWh). Check you electric bill — ours has a handy chart detailing the previous year's consumption, so I just used the six winter months and added them up, figuring our usage is roughly the same from year to year:

I actually did this at the beginning of December, so I added up December-May, which totaled 8,726 kWh. Next, use that total to figure out six months worth of delivery charges, which will stay the same with National Grid. That's this part of the bill:

So each of those decimals is multiplied by your total kWh (8,726 in my case), and then you add those totals together to get your total delivery charge. The only slightly tricky part is the first two distribution charges: the first 600 kWh each month are cheaper, and then the remaining ones are charged at the second, higher rate. No problem--just take 3,600 kWh (6 months x 600 kWh) and multiply by the cheap rate, then multiply the difference (8,726 - 3,600 = 5,126 kWh, in my case) by the higher charge. Then add them all up.

Now, figure out the savings on the supply charges by multiplying your usage by your old rate, and then do it again with your new, cheaper rate. For us, the old service charge is .10025 x 8,726 kWh = $874.78, while our new service charge is .0899 x 8,726 kWh = $784.47. The difference is $90.31 over the next six months, or $15 per month.

I feel like you'll never speak to me again if I drag you through any more equations, so you can just trust me that a few more number crunches later revealed that the overall savings on the electric bill is 6%. 

Sign-up is totally painless online, and we had the added bonus of a $75 rebate from the supplier I chose. (I already printed out the rebate paperwork and put it with our bills so I wouldn't forget to send it in after the switch.) Free money — sweet! 

If you need more math or are interested in the company we chose you can give this a try, message me or hit the comments, and I'll send you the information.

Savings per month: $15

One-time bonus: $75


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