Commercial energy / Buyer guidance
Electricity index pricing: define the location, interval and load weighting
Reconstruct an indexed electricity bill with an interval-weighted example and checks for missing pricing inputs.
An index name is only the beginning of a formula
To reproduce an indexed electricity invoice, identify the precise price series, location, market, settlement interval and customer quantity used with each price. Ask which adders, losses, fixed fees and other components sit outside that multiplication. If the supplier sets a variable price without a reproducible index formula, do not describe the product as mechanically tracking a published benchmark.
PJM's energy-market description distinguishes day-ahead and real-time markets. It does not determine which market, node, zone or adjustment applies to a retail account. The signed product schedule must supply that connection; this guide is not an assertion that all electricity customers settle through PJM.
Specify the data alignment
Record the time zone and treatment of daylight-saving changes, estimated meter intervals, missing prices and corrected settlements. Verify whether the contract uses actual interval consumption, an assigned profile, a period average or another stated method. An annual or monthly kWh total alone cannot reconstruct a settlement that requires hourly quantities.
Retain a small calculation file containing timestamp, kWh, converted MWh, price, adder and extended amount. Identify the version of meter and pricing data used. If the supplier applies a weighted monthly figure, ask for the weights and reconciliation. A simple arithmetic average of displayed market prices may answer a different question from the cost of this customer's consumption.
Worked example: identical monthly consumption, different indexed costs
Invented two-interval illustration: interval one uses 10 MWh at an index of $30/MWh. Interval two uses 30 MWh at $150/MWh. The fictional agreement adds $8/MWh and a $100 monthly fee. Modeled supply cost is (10 × $38) + (30 × $158) + $100 = $5,220.
The volume-weighted index is [(10 × $30) + (30 × $150)] ÷ 40 = $120/MWh. Adding $8/MWh and allocating the $100 fee across 40 MWh produces $130.50/MWh, or $0.1305/kWh. The simple unweighted index average would be $90/MWh, understating this customer's weighted exposure.
If the quantities are reversed while the two prices stay unchanged, cost becomes (30 × $38) + (10 × $158) + $100 = $2,820. Total usage remains 40 MWh. The $2,400 difference comes entirely from timing in this constructed example. It is not a forecast, a demand-response result or a claim that this business can shift that load safely.
Use a stress test instead of extrapolating one month
Test a higher-price interval against the equipment that actually operates then. Document which processes can change schedule and which cannot. Model any operational cost of moving production separately. A lower energy result does not establish a lower total operating cost, and reducing an energy interval does not automatically change a separate demand or capacity obligation.
Use the load-profile guide to organize meter evidence. Keep any supply budget consistent with the settlement formula instead of substituting a national average rate.
Sources and limits
The PJM source supports the market distinction only. The two-interval model, prices and retail terms are independently invented. Delivery, taxes, other supply components and contractual data-correction rules are outside the numerical illustration.