Intro
If you’ve been following the last few posts, you now know:
energy is deregulated (yes, you actually have choices),
market forces (not your thermostat) drive most of your bill, and
forward energy markets quietly dictate the price you pay.
But even if you understand all of that, you can still overpay. How? By signing an electricity or natural gas contract that looks simple on paper but hides dozens of cost components, most of which you never see until the bill arrives.
This post breaks down the biggest blind spot in commercial energy buying:
the difference between all-inclusive contracts vs. pass-through contracts.
Understanding this is one of the easiest ways to avoid unnecessary cost surprises.
1. The Two Types of Supply Contracts
Every energy contract (whether electricity or gas) falls into one of two buckets:
a) All-Inclusive (Fixed) Contracts
This is the “clean” version. You pay one fixed rate ($/kWh) and the supplier includes nearly every line item inside that number. This means: energy (the commodity); capacity; ancillary charges; line losses; ISO/market fees; renewable compliance; fuel security charges… are all wrapped into one price.
This is why these rates tend to look higher on paper. They're bundling every risk into the number so you never get a surprise fee.
b) Pass-Through (Indexed or Hybrid) Contracts
These look cheaper upfront… because they exclude things. A pass-through contract might only fix the commodity but pass through: capacity; ancillary services; line losses; fuel security charges; ISO uplift; transmission changes; regulatory adjustments; balancing & congestion costs.
This means your “rate” isn’t your actual cost. Two suppliers can quote 10.0¢/kWh. One could be all-inclusive. The other could exclude $0.01–$0.03/kWh in market charges.
Same number. Completely different cost.
2. Why the Confusion Exists
Most suppliers deliberately keep offers vague. Why?
Because “$0.099/kWh” looks more attractive than “$0.107/kWh,” even if the second option actually includes everything and will save you money. This is exactly what you see in real market data.
For example, in supplier bid tables like those shown in typical procurement analyses, all-inclusive suppliers show higher fixed rates because they're absorbing capacity and fuel security charges, while lower-priced suppliers exclude those items and pass them through later. If you’re not actively comparing the structure behind each rate, you’re not comparing apples to apples.
3. The Fees That Surprise People the Most
Here are the line items that most people overlook, but that hit budgets hardest:
Capacity: Often the second largest cost component after the energy commodity. ISO-NE capacity charges have fluctuated massively over the last decade, with auctions setting different price levels each year.
Fuel Security Charges: These can add $0.004–$0.012/kWh in some years, depending on ISO programs. Often excluded from “cheap” quotes.
Ancillaries & Uplift: Market services the grid requires to stay reliable. Passed through 80%+ of the time unless explicitly bundled.
Line Losses: The energy that evaporates moving through wires. Small percentage, meaningful cost.
Once these pass-through items hit your bill, you learn quickly: Fixed rate ≠ fixed cost.
4. How to Compare Contracts the Right Way
If you take only one thing from this post, take this: Never compare rates. Compare what the rate includes.
Ask suppliers directly: Is capacity included or passed through? Are fuel security charges included? Are ancillaries included? Are line losses included? Is transmission or balancing passed through? Are regulatory changes fixed or variable?
Request a cost breakdown: Good suppliers will show you the components of the fixed rate.
Use a total-cost model: A contract at 10.7¢ that includes everything is often cheaper than a “low” quote at 10.1¢ that hides unpredictable pass-throughs.
5. Why It Matters Now
Forward electricity and gas markets have dropped sharply from the 2022 peaks. In New England, CY 2024–2027 wholesale strips fell significantly after warm winters eased supply concerns, according to the forward market charts. This has led to a flood of new supplier offers, many of which look cheap but rely heavily on pass-through structures.
That’s why contract structure matters more now than ever. A good-looking rate can still hurt you. A slightly higher rate can protect you. The market environment makes it easy to get fooled by the headline number.
Final Thoughts
Energy procurement isn’t about finding the lowest-looking rate. It's about making sure you understand exactly what you’re buying.
All-inclusive contracts give budget certainty. Pass-through contracts give exposure to the market. Neither is “right” or “wrong,” but one is often a better fit depending on your risk tolerance.
At RePulse Energy Partners, we spend most of our time helping clients compare these structures side-by-side so they don’t get blindsided by unexpected charges or misunderstood quotes. The more informed you are, the less random your energy bill becomes.
Learn more at: repulseenergy.com