For most commercial business owners and facility managers, fixed-price electricity contracts are a familiar option. Within these fixed agreements, there are significant variations in how contracts address non-energy costs, such as capacity, transmission, and regulatory fees. Two common structures are “all-in” and “pass-through” rates. Knowing how these work can help your business select a contract that aligns with your budget and risk preferences.
What Are “All-in” Rates?
An “all-in” rate bundles most of your supply-related costs into a single, fixed price per kilowatt-hour. This typically includes the energy commodity, capacity obligations, transmission capacity, and other supplier-related regulatory charges.
Instead of showing separate line items that can fluctuate with market conditions, an all-in fixed rate gives you one predictable price that makes budgeting straightforward. For example, if your all-in rate is $0.10 per kWh, that price covers your energy and supply-related charges without monthly swings tied to capacity or other pass-through fees.
The tradeoff is that suppliers typically build in a risk premium when offering all-in rates, since they assume the risk of price swings in capacity or other costs. As a result, all-in rates may be slightly higher on average compared to a pass-through rates, but they deliver greater budget certainty.
What Are “Pass-through” Rates?
Pass-through rates lock in the energy commodity price while other costs – such as capacity and transmission - related charges are billed at their actual market values.
This approach means those non-energy fees can change monthly, depending on:
- Market-driven capacity costs
- Regulatory or tariff adjustments
- Seasonal or demand-based grid conditions
Pass-through pricing reduces supplier premiums since you’re not paying extra for their market risk. However, it also means that your bills may be less predictable and require active monitoring to avoid unexpected expenses.
We’ve put together a comprehensive blog post on how to identify your utility’s pass-through costs.
Which Structure Makes Sense for Your Business?
In many markets, capacity and other non-energy charges can make up a significant share of total energy spend. That’s why many companies choose all-in rates, which provide budget certainty and stable pricing that’s easier to forecast. They’re often preferred by businesses with steady energy demand and limited appetite for market risk.
Pass-through rates offer potential energy savings when network or capacity costs trend downward, or if your facility can shift demand during peak periods. While these rates require more active management, they can be rewarding if you closely monitor market activity and adjust your energy usage accordingly.
Making an Informed Choice
Choosing between all-in and pass-through fixed rates means balancing risk tolerance, operational flexibility, and budget priorities. Over the course of your contract, market conditions may favor one model over the other. However, selecting the right structure to fit your business needs from the onset reduces surprises and enables a more effective energy strategy.
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