Heat Rate Calculation
Learn how to calculate heat rate.
The heat rate component and the adder are stored in the rate detail, the gas index component is stored as a dynamic value in an index table by month.
The most common Heat Rate product is index price heat rate.
The Client sets up monthly heat rate price and the monthly rate amount. The heat rate is calculated using the following equations:
Heat rate = (Index price x rate amount) / 1,000 + Fixed adder Hence, Energy Amount on
Invoice = Heat Rate x Consumption
If Customer’s consumption crosses two months, the invoice amount is also split into
two months: Customer invoice amount = heat rate1 x consumption1 + heat rate2 x
consumption2
Where:
- Rate amount is the Customer's rate amount for a month.
- Index price typically refers to a monthly index price
- Retail Adder may include items such as ISO fees, ancillary services costs, retail margin, losses, and shaping costs. The Retail Adder may vary based on the Heat Rate chosen. For example, higher Heat Rates result in lower retail adders.
The market implied Heat Rate refers to the forward power price divided by the forward gas price.
Heat Rate and Retail Adder should be fixed at the time of contract. The Gas Index price typically varies month to month and is not known until you get closer to the delivery month.
The NYMEX contract settles three business days prior to the start of the delivery month and the Houston Ship Channel price is typically published on the first business day of the delivery month.
Heat Rate Invoice Calculation
In the following example shown in Index Details figure below, the heat index amount for
April is $9.5780, if Customer’s rate amount for April is 8.48, and adder is 0.01118, then
the heat rate for April is: April heat rate = (9.5780 x 8.48) /
1,000 + 0.01118 = 0.092401
Assuming, consumption for April is 200 KWh:
Hence, energy amount on Invoice for April = April Heat Rate x Consumption =
0.092401 x 200 = $18.4
Figure: Index Details
