Commercial energy / Buyer guidance
Fixed versus variable electricity: test the budget against load timing
Compare fixed, formula-indexed and discretionary variable electricity prices with a load-weighted two-period example.
Price structure and total-bill certainty are different decisions
Before comparing fixed and variable offers, identify which components are fixed and which remain adjustable. Then identify how the customer consumes electricity. A supply rate can stay unchanged while consumption or separately billed charges change. A budget that treats a fixed supply rate as a fixed invoice misses both exposures.
The Pennsylvania regulator's fixed and variable rate explanation distinguishes price structures. That shopping guidance is not a substitute for a negotiated commercial schedule or another jurisdiction's rules. Read the account's actual product and exclusions.
Distinguish a formula from a supplier's price-setting discretion
For a variable product, ask whether an explicit published index and formula determine the price or whether the supplier may set it under described terms. Obtain the location, market period, usage weighting, markup and treatment of missing or corrected data. A monthly displayed average is not necessarily the price applicable to the business's operating hours.
For a fixed product, ask about volume limits, pass-throughs and material changes. Document how a new refrigeration system, second shift or site closure would be treated. Avoid labeling a product safe or aggressive solely by its name. The relevant question is which price and quantity exposures the business can fund and manage.
Worked example: an unweighted average misses the expensive hours
Invented two-period month: usage is 20,000 kWh in period one and 80,000 kWh in period two. The index is $40/MWh in the first period and $100/MWh in the second. The fictional indexed offer adds $10/MWh to both. A fixed offer covers the same modeled scope at $85/MWh.
Converting usage gives 20 MWh and 80 MWh. Indexed cost is (20 × $50) + (80 × $110) = $9,800, equivalent to $98/MWh or $0.098/kWh. Fixed cost is 100 MWh × $85 = $8,500. The indexed scenario is $1,300 higher. Taking the simple average of $50 and $110 would yield $80/MWh and incorrectly imply the indexed cost was $8,000.
If period two's index were instead $60/MWh with the same quantities, indexed cost would be (20 × $50) + (80 × $70) = $6,600, below the fixed case. Neither scenario is assigned a probability. These invented prices establish neither the cheapest product nor future market behavior. Delivery, demand, taxes and other supply differences are excluded.
Put limits around the decision
Write a tolerable adverse invoice amount and identify who reviews price changes. Test the proposed product against actual interval data where available; if only monthly usage exists, label the timing assumption. Decide how a major operating change would trigger a reforecast. Review a replacement offer using the same delivery term and cost scope rather than a different headline rate.
The load-profile guide helps organize usage evidence. The offer comparator handles entered flat prices; it does not simulate interval-index settlement.
Sources and limits
PJM's energy-market description provides wholesale-market context, not this account's retail formula. The load-weighted arithmetic is independently constructed. No product is promised to deliver savings or a fixed total bill.