The Adder in an Index Electricity Price, Explained

When a competitive supplier quotes an index or pass-through price for electricity, the number is built from two parts: a wholesale market index that moves with the market, and an adder the supplier layers on top. The index is outside anyone's control. The adder is the part the supplier sets, and it is where the supplier's costs and margin live. For a buyer comparing index offers, understanding the adder is the difference between comparing prices and comparing marketing.

This guide explains what the adder is, what it typically does and does not cover, and how to evaluate one without fixating on a single decimal.

What an Index Price Is Made Of

An index price passes the wholesale cost of energy through to you and adds a supplier charge on top. The wholesale portion is tied to a published market index — for example, a day-ahead or real-time energy price for your zone — and it changes hour to hour or settlement to settlement. Because it floats, neither you nor the supplier is locking it. You take the market as it comes.

The adder is the supplier's piece. It is usually expressed in dollars per megawatt-hour or cents per kilowatt-hour and, in most index contracts, it stays fixed for the term while the index underneath it moves. So your all-in supply price in any period is roughly the index for that period plus the fixed adder. That structure is the defining feature of index and pass-through products, and it is what separates them from a fixed price, where the supplier folds everything into one locked number and carries the market risk itself. Our guide on fixed versus index commercial electricity covers that broader choice.

What the Adder Covers

The adder is not pure profit. It is the supplier's charge for turning a wholesale market price into a retail product delivered to your account. Depending on the contract, it can include:

• Service and administration. Billing, account management, contract handling, and the cost of running a retail operation.
• Credit and risk. The supplier extends you credit between the time it buys energy and the time you pay. The adder can reflect the cost and risk of that exposure, which is why credit terms sometimes move the number.
• Certain wholesale cost components. Some adders fold in items such as line losses, ancillary services, or scheduling and settlement costs. Others leave these out and bill them separately as pass-throughs. This is the single biggest reason two adders are hard to compare at face value.
• Margin. The supplier's profit for providing the product.

The exact composition varies by supplier and by contract. Two quotes with the same-looking adder can be built very differently underneath, which is why the number alone tells you less than it appears to.

What the Adder Does Not Cover

Just as important is what the adder leaves out. In an index or pass-through structure, several costs typically sit outside the adder and reach your bill on their own:

• The wholesale energy index itself. This is the floating market price, passed straight through. The adder rides on top of it, not inside it.
• Delivery charges. These belong to your delivery utility, not your supplier. Whether you buy from the utility's default service or from a competitive supplier, the utility that owns the wires, meter, and service continues to bill delivery. See /utilities/comed/ for how that split appears on a northern Illinois bill.
• Capacity and transmission, in many structures. These are frequently handled as separate pass-throughs rather than being bundled into the adder. When they are, a low adder can be paired with a longer list of line items that add up.
• Taxes and regulatory charges. These are generally passed through regardless of supplier.

Because a low adder can coexist with a long pass-through list, the adder is only meaningful next to the list of what remains separate. A number without that context is not comparable.

How to Evaluate an Adder

The goal is to compare offers on the same basis rather than being drawn to the smallest headline. A short, concrete checklist:

1. Confirm the units. Dollars per megawatt-hour and cents per kilowatt-hour are different scales. Line up every quote in the same unit before you compare.
2. Ask what the adder includes. Get a written list of which wholesale components are baked into the adder — losses, ancillaries, scheduling, capacity, transmission — and which are billed separately.
3. Ask what stays as a pass-through. Pair the adder with the pass-through list. A higher adder that bundles more can total less than a lower adder that unbundles everything.
4. Confirm it is fixed for the term. Verify in writing that the adder does not reset and that only the index floats. If any adder component can change, understand the trigger.
5. Tie it to your load. The adder applies to your actual volume. A supplier's assumptions about your usage shape feed the quote, so make sure they are working from your real interval data.

Our guide on how to compare commercial energy proposals walks through lining these elements up across competing quotes, and how to evaluate an Illinois ARES provider covers the supplier-level questions that sit behind any adder.

Where the Adder Fits the Bigger Picture

The adder is one term inside a larger structure. In an index product it governs how much you pay above the market, but it does not change the fact that you are taking market prices as they come. That trade-off — accepting a floating index in exchange for not paying a supplier to carry price risk — is the real decision. The adder is how you measure the cost of the service wrapped around that decision.

For a buyer, the practical takeaway is simple: treat the adder as a component to be understood, not a score to be minimized. Read it beside the pass-through list, confirm what it bundles, and compare quotes on identical terms. Because a competitive supplier is an ARES licensed by the Illinois Commerce Commission, it affects only the supply portion of your bill; the delivery utility continues to handle everything on the wires side no matter which adder you accept. For structured buying support, see /commercial-energy-procurement/ and the product overview at /commercial-electricity/.

Sources

• Illinois Commerce Commission
• PJM Interconnection
• Plug In Illinois
• ComEd

This guide is educational and does not promise any specific savings or outcome. Your adder, pass-throughs, and total cost depend on your load, your contract, and market conditions; confirm the exact terms with your supplier and the primary sources above.