Reading my client's REP contract in Austin carefully. The headline rate is $0.058/kWh which is competitive. But buried in the terms is a "capacity obligation charge" of $4.50/kW applied to the client's peak demand. On a 400 kW account, that's an extra $1,800/month that isn't reflected in the per-kWh rate. The client had no idea this charge existed when they signed. Is this standard practice?
REP contract has a hidden capacity charge — is this normal?
Not standard but not uncommon with certain REPs. The capacity charge covers the REP's cost of securing generation capacity from ERCOT. Some REPs bake this into the per-kWh rate, others break it out as a separate charge. The problem is when the REP quotes a low per-kWh rate to win the deal and then adds the capacity charge in the fine print. Your client isn't being overcharged per the contract — they're being charged exactly what the contract says. The issue is whether the REP disclosed this during the sales process.
Marcus is right — if the contract includes the capacity charge, it's technically valid. But this is worth flagging to the client as a lesson for their next contract renewal. When comparing REP offers, you have to look at the total cost including all charges, not just the headline per-kWh rate. For the audit, calculate the client's actual all-in cost per kWh (energy rate plus capacity charge divided by kWh) and compare that to what's available on the market. If the all-in cost is above market, the client should shop at their next contract renewal window.
All-in cost is $0.0725/kWh when I include the capacity charge. Market rates for this size account are around $0.062. So the client is overpaying by about $0.01/kWh. On 600,000 kWh/month that's $6,000/month they could save by switching at renewal. Flagging for the client. Thanks.