Capacity, Energy, and Transmission: The Three Supply Cost Buckets

Every commercial electricity supply price is built from separate cost components, even when the supplier quotes you a single number per kilowatt-hour. Understanding the three main buckets that make up the supply side of your bill, energy, capacity, and transmission, is the difference between comparing offers on equal footing and being surprised by a charge you did not know was floating. This guide separates the buckets, explains how each is determined, and shows why a buyer should always ask which components an offer includes or passes through.

Before going further, it helps to remember the boundary between supply and delivery. Delivery charges follow your utility's tariff and stay with the utility no matter which supplier you choose. Your supplier only affects the supply portion of the bill. The three buckets below all live on that supply side. For how the delivery side works, see our guide to reading a ComEd commercial electric bill and the overview of commercial electricity in Illinois.

Bucket One: Energy

Energy is the commodity itself, the actual electrons delivered to your facility, measured in kilowatt-hours. It is usually the largest single component of a supply price and the one most people picture when they think about their electricity cost.

Energy is priced through wholesale power markets. In northern Illinois, ComEd sits in the PJM Interconnection footprint, so wholesale energy prices are set in PJM's day-ahead and real-time markets. In central and southern Illinois, Ameren sits in MISO, the Midcontinent Independent System Operator, which runs its own energy markets. Wholesale energy prices move with fuel costs, weather, demand, and grid conditions.

When a supplier gives you a fixed all-in price, they are taking a view on where energy prices will go over your contract term and building that view into the number. When you buy on an index or hourly product, you are exposed to those market movements directly. The energy bucket is where most of the price competition between suppliers happens.

Bucket Two: Capacity

Capacity is not energy you use, it is a charge for having generation available to serve you when the grid is most stressed. Grid operators require that enough generating resources are committed in advance to reliably meet peak demand, and the cost of securing that commitment flows down to customers as a capacity charge.

In the ComEd and PJM zone, your account's share of capacity cost is driven by its Peak Load Contribution, often called the capacity tag or PLC. Your PLC is set by how much electricity your account draws during the specific hours when the regional system hits its peak. This is the important nuance: capacity is not driven by your total annual kWh, but by your usage during a handful of peak hours. Two facilities that use the same total energy can carry very different capacity costs if one runs hard during system peaks and the other does not. That tag then carries your peak behavior into the capacity component of your supply cost for the delivery year.

This is why load shape matters, not just load size. A facility that can reduce demand during likely peak hours can lower its capacity tag and, through it, the capacity bucket of its supply cost. We cover the mechanics in detail in capacity tag forecasting methods and in how PJM capacity prices affect Illinois business bills.

One point that causes confusion: a PJM or MISO capacity auction clearing price is a wholesale input, not a customer bill rate. The auction sets a price for capacity across the region for a delivery period. What you actually pay depends on that wholesale price combined with your account's capacity tag and how your contract handles capacity. Do not read an auction headline number as your rate.

Bucket Three: Transmission

Transmission is the cost of moving power across the high-voltage grid from where it is generated to your utility's local system. It is distinct from distribution, which is the local wires and poles that deliver power the last stretch to your facility and which sits in the delivery portion of your bill.

Transmission costs are governed by federal tariffs and by the regional transmission organization, PJM or MISO depending on your location. Like capacity, your share of transmission cost is often tied to your demand during certain peak measurement periods. The exact method for allocating transmission cost differs between PJM and MISO and can change over time, which is one reason a buyer should confirm how an offer treats it rather than assuming it is a fixed, trivial line.

Why the Buckets Matter When You Compare Offers

Here is the practical payoff. When a supplier hands you a price, that number may:

• Bundle all three buckets into one fixed rate, so the supplier absorbs the risk that capacity or transmission costs rise during your term.
• Fix energy but pass through capacity and transmission, so those components float based on the market and your usage, and your effective cost can move even though your energy rate is fixed.
• Pass through everything on an index basis, giving you full exposure to market movements in all three buckets.

None of these is inherently the right or wrong choice. A bundled price buys certainty at the cost of a risk premium. A pass-through structure can cost less on average but exposes you to volatility. The mistake is comparing a bundled quote against a pass-through quote as if they were the same product. They are not, and the cheaper-looking number may carry more risk.

This is also where your capacity tag becomes a lever rather than a fixed fact. If capacity and transmission are passed through and tied to your peak behavior, reducing usage during peak windows can lower those buckets directly. If they are fully bundled, you have already paid the supplier to carry that risk, so operational changes affect your cost differently. Knowing which structure you are in tells you whether peak management pays off on your supply cost or only on your delivery demand charges. For the delivery-side version of that question, see commercial demand charges.

Questions to Ask Any Supplier

• Does this price include capacity, or is capacity passed through separately?
• Is transmission fixed in this rate, or does it float?
• If capacity or transmission is passed through, what drives my share, and how is my capacity tag determined?
• If my usage during peak hours changes, which buckets does that affect under this contract?

A supplier who can answer these clearly is quoting you a product you can actually evaluate. If the buckets are opaque, you cannot compare offers on equal footing, and you cannot tell whether operational effort on your side will move your bill.

When your utility's default supply is the comparison point rather than a competitive offer, the same bucket questions apply. See when the price to compare and utility supply win for how to run that comparison honestly.

Sources

• PJM Interconnection
• Midcontinent Independent System Operator (MISO)
• Illinois Commerce Commission

This guide explains how supply cost components are structured so you can compare offers accurately. It does not quote rates and does not promise any level of savings; your actual cost depends on your usage, your contract terms, and current market conditions.