Block Price Rate

Here the rate is a comparison of actual usage against projected usage.

A Block Price rate calculation compares the consumption (actual usage) against the contract volumes (expected usage).

“Swing” percentage can be specified to create an expected usage range.

Assuming, expected usage = 500, swing percentage = 10%, therefore,

swing range = 450 – 550

expected usage range upper = 550, expected usage range lower = 450.

If the actual usage falls within the expected usage range, no additional charges are applied. If the actual usage is outside the expected usage range, an additional charge is applied to the Customer’s invoice. Overtake charges are applied when the actual usage is greater than the expected usage range upper amount. Undertake charges are applied when the actual usage is less than the expected usage range lower amount. All overtake and undertake charges are based on a Custom Index plus an adder.

Overtake and Undertake Charges explained with graphical representation

The image below illustrates Customer’s monthly expected energy usage or contracted volume of year 2007 and partial year 2008. For the contracted volume, negotiated fixed Rate A is applied to that volume contracted (kWh or Therms). If the actual usage is outside the expected usage range, an additional charge or credit is applied to the Customer’s invoice at optionally a different fixed rate or index-base rate (most common usage would be for overages to be billed at a market value index based rate).

Figure: Customer Annual Expected Usage

Overtake charges are applied when the actual usage is greater than the expected usage range upper amount. As shown in the image below, the blue part illustrates the overtake energy. Here Index Rate B plus an adder is applied to Customer on the overtake energy charge calculation.

Figure: Energy Consumption Overtake

Undertake credits are optionally applied when the actual usage is less than the expected usage range lower amount. In the image below, the green part illustrates the undertake energy. Here index rate C plus an adder is applied to Customer on the undertake energy charge calculation.

Figure: Energy Consumption Undertake

An optional “swing” percentage can be specified to create an expected usage range. If the actual usage falls within the expected usage range, the fixed price is used for the entire volume.

Figure: Change on Expected Energy Usage

A Customer may negotiate and change his expected usage during the contract term. Locking in another fixed block of volume when he feels prices are at a low point or he feels he has too much future volume exposed or risked at market prices.

For example, starting from May 2007, the Customer increases its expected usage (the yellow section in the image above). For the increase expected usage he is locking in price at fixed Rate D. In this case, the Customer creates a tier rate structure: for tier one, fixed rate A is applied and for tier two, fixed rate D is applied.

In CIS, there is no limit on tiers.