Energy Pass-Through Charges
Pass-through energy charges are either expected or unexpected. In some cases, supplier contract language allows them to pass on incremental costs in energy to the consumer. Most importantly, suppliers can pass-through incremental costs during pre-negotiated fixed-priced electric contracts. Many times, these incremental costs are associated with Transmission and Capacity and not with the actual energy commodity cost. In other cases, customers can elect to have certain portions of their energy rate passed through by the energy supplier. In these instances, the supplier will simply bill the customer its cost for a certain rate component. See article on Hybrid Block + Index Products.
When a fixed-rate contract ends, suppliers may also begin to bill the customer on a market-based rate. This is called the contract rollover rate or a default rate and is many times much higher than a fixed rate. Post-term rates are considered to fall in the pass-through category as energy suppliers will take their wholesale market prices each period, add their margin, and pass along the total amount to the customer. A good energy broker will protect you from a post-term rate by renewing your contract in a timely fashion.
Energy customers can avoid Energy pass-through charges by choosing an energy supplier that does not have pass-through language in the retail energy supply contract.