I am often asked by owners and tenants about the cost of electricity. All the questions are typically about how to better predict and reduce costs.
First, it is important to understand the two cost categories of your electricity bills: generation and transmission. The generation component is dictated by the cost of producing the electricity that you will be consuming, while the transmission rate is based on the cost of delivering electricity to you.
In Greater Boston the two utility transmission companies are NStar and National Grid. The rate you pay for this portion of your bill is based on market demand. It varies according to how much and when you use electricity. The price is determined by the provider and is fixed. While changing use patterns may save some money, use is typically dictated by business needs and not by savings potential.
Unless a customer decides differently, utility companies will bill consumers a variable rate based on their cost of purchasing generated electricity. Because electricity is mostly produced using natural resources, the cost of generating it fluctuates with the current costs of those resources. Typical contracts are negotiated for one to two years and can be entered into independently or with the help of an energy broker.
By watching energy markets and negotiating for a lower generation cost, you will be able to better predict and lower your costs.