Do All Electric Distribution Companies Charge A Monthly Distribution Fee? + What to Know About Energy Contracts

Electricity Supplier vs. Electric Distribution (Utility) Companies 

An electricity supplier (also called a retail energy provider) is the company that supplies electricity for homes and businesses. Suppliers source electricity from generation facilities and sell it to consumers at competitive rates. 

In deregulated energy markets, suppliers compete to offer the best pricing, contract terms, and service options. Suppliers purchase electricity wholesale from power plants, wind farms, solar farms, and other generation sources. They then sell this electricity to customers, allowing consumers to choose a supplier that best meets their budget and energy needs.

Keep in mind that not all states and service areas allow consumers to choose their electricity supplier. Electricity suppliers generally exist  inexist in states with deregulated markets. For example, in deregulated states like Ohio, Pennsylvania, and Illinois, customers can select from multiple suppliers, ensuring more competitive pricing and service options. 

In regulated markets, an electric utility  manages all aspects related to the provision of electricity to end use customers. It is generally responsible for generation (or purchasing generation), transmission, distribution, sales, customer care, and billing .billing. In contrast, in deregulated markets, some of these functions are separated, so that companies can compete with each other.   

Utilities generally own and maintain the infrastructure needed to transport electricity safely and reliably. They handle how electricity is carried over long distances from power plants to substations and handle the delivery of electricity from substations to homes and businesses. Utilites also track electricity consumption for billing purposes and are responsible for delivering power, maintaining infrastructure, and ensuring grid reliability.

What is a Distribution Fee? Who Charges it and Why? 

An electricity distribution fee is a charge imposed by your local utility company to cover the costs associated with delivering electricity from power plants to your home. This fee encompasses the maintenance and operation of the electrical grid infrastructure, including power lines, substations, and transformers. It ensures that electricity is reliably transmitted to end-users. 

Purpose of the Distribution Fee 

• Infrastructure Maintenance: the distribution fee funds upkeep and repair of the electrical grid to ensure consistent and safe power delivery. 

• System Upgrades: Energy distribution fees support improvements and modernization of the grid to enhance efficiency and accommodate new technologies. 

• Operational Costs: Distribution fees cover expenses related to managing the distribution network, such as monitoring and responding to outages. 

Electric utilities impose distribution fees to cover the costs associated with delivering electricity from power plants to consumers. These fees fund the maintenance and operation of the electrical grid infrastructure, ensuring reliable power delivery. 

Do All Electric Distribution Companies Charge A Monthly Distribution Fee? 

Not all electric distribution companies charge the same fee or even have a distribution charge. Electric distribution companies, also known as utilities, are responsible for delivering electricity from power plants to consumers through a network of transmission and distribution lines. To cover the costs associated with maintaining and operating this infrastructure, many utilities do still implement a monthly distribution fee.  

What Components Contribute to Distribution Fees? 

Electricity delivery fees encompass several components that collectively ensure the reliable transmission of power from generation facilities to home residents. Here’s what contributes to these fees: 

1. Transmission Charges: Transmission charges cover the costs associated with transporting high-voltage electricity from power plants to local substations. These charges fund the maintenance and operation of the transmission network, including high-voltage power lines and related infrastructure. They are typically calculated based on the amount of electricity consumed. 
2. Distribution Charges: Distribution charges fund the local delivery of electricity from substations to homes and businesses. This fee covers the maintenance of local infrastructure such as poles, wires, and transformers. It also includes costs related to metering, billing, and customer service. 
3. Metering Charges: Metering charges account for the installation, maintenance, and reading of electricity meters. These charges ensure accurate measurement of electricity consumption, which is essential for precise billing. They may appear as a flat fee or be included within distribution charges. 
4. System Reliability Fees: System reliability fees aid to invest in grid resilience and fund repairs and storm recovery efforts. These fees support initiatives to enhance the electrical grid’s robustness, ensuring consistent power supply even during adverse conditions. They may also cover costs associated with emergency response and infrastructure upgrades. 
5. Government-Mandated Fees: Government mandated fees comply with state and federal regulations through taxes and surcharges. These charges fund various public policy programs, including energy efficiency initiatives, renewable energy development, and assistance for low-income households. They are mandated by governmental authorities and are a standard part of electricity billing. These fees and their charges can vary from state to state.

Factors That Impact Distribution Fees 

When understanding electric distribution companies and if they charge distribution fees, you’ll want to know the several factors that impact these fees. For one, there are utility commissions at the state level that oversee rate structures. This means that these fees can vary in price depending on the state and regional regulations. 

Whether you live in a deregulated or regulated energy market impacts distribution fees on your electricity. In a deregulated energy market, you can choose your electricity supplier, but the local utility company still manages distribution and infrastructure. Distribution fees are set by the utility and regulated by the state, so while your supply rate may be competitive, distribution charges remain fixed and non-negotiable. 

In a regulated energy market, both the supply and distribution are controlled by the utility company. Since there’s no competition for supply, the utility sets the electricity rates—including distribution fees—subject to state regulatory approval. 

How Distribution Fees Vary Between Utilities  

Electricity and distribution fee structures vary significantly across regions, influenced by local regulations and the types of utility providers operating within each area. Here’s how distribution fees vary between utilities: 

In the United States, each state has a public utility commission (PUC) that regulates utility rates and services. These commissions approve rate structures (including the distribution fees) and ensure that utilities provide reliable services at reasonable rates. This means that distribution fee pricing varies from state to state. 

In deregulated markets, while consumers can choose their electricity supplier, the distribution of electricity is still managed by a regulated utility company. This means, no matter which energy market you live in, electricity supply charges vary based on competition among suppliers. Energy distribution fees (or delivery charges) remain regulated and are set by the local utility, covering infrastructure maintenance, grid reliability, and transmission costs. Even if a customer switches suppliers, they still pay distribution fees to the utility responsible for delivering the electricity. 

What is a Delivery Charge? 

Delivery charges include all fees associated with delivering power from the generation source to your home. Delivery charges are charged by your local utility, even if you switch electricity suppliers. These delivery charges may include:

• Transmission Fees – Cost of transporting electricity long distances from power plants. 

• Distribution Fees – Cost of local grid maintenance, including poles, lines, and transformers. 

• Metering Fees – Cost of reading and maintaining your electricity meter. 

• System Reliability Fees – Investments in grid resilience, emergency response, and storm recovery. 

• Regulatory & Government Surcharges – Mandated taxes and environmental fees. 

Why Do Some Delivery Charges Fluctuate? 

Electricity delivery charges can fluctuate due to several factors that impact the cost of maintaining and operating the power grid. Here’s an overview of key contributors: 

• Seasonal Demand: During extreme temperatures in summer and winter, electricity demand increases as consumers use heating and cooling systems more intensively. This heightened demand can strain the grid, leading to higher maintenance and operational costs, which may be reflected in delivery charges.  

• Grid Enhancements: Utilities invest in upgrading transmission lines, substations, and other infrastructure to improve reliability and accommodate growing demand. The costs associated with these capital improvements are often passed on to consumers through increased delivery charges.  

• Natural Disasters: Severe weather events such as hurricanes, ice storms, and wildfires can damage electrical infrastructure, necessitating emergency repairs and replacements. The expenses incurred from these unforeseen events can lead to temporary spikes in delivery charges as utilities work to restore service.  

• Policy Adjustments: State laws and decisions by utility commissions can alter the structure of delivery pricing. For instance, mandates to integrate renewable energy sources or enhance grid resilience may require utilities to invest in new technologies or infrastructure, influencing delivery costs.  

• Operational Expenses: Rising costs for labor, materials, and fuel can increase the expenses associated with grid maintenance and operation. Utilities may adjust delivery charges to reflect these higher operational costs, ensuring they can continue to provide reliable service. 

What’s the Difference Between Delivery and Supply Charges?  

Supply charges refer to the cost of the electricity you use, and this is set by your chosen electricity supplier. Delivery charges are fees collected by the utility to maintain infrastructure and transport electricity to your home or business. 

The key difference between supply and delivery charges is that the supplier sets supply rates, while the utility determines delivery fees. Some states allow customers to shop for lower supply rates, but delivery charges are fixed based on location. 

Breakdown of Charges on Your Electric Bill  

One of the first charges on your electricity bill is the “Supply Charges” (Cost of Electricity). 

This is the cost of the actual electricity you consume, measured in kilowatt-hours (kWh). 

Depending on your plan type, this rate may be fixed (consistent throughout your contract) or variable (fluctuates based on market conditions), or you can choose a flat-fee or unlimited plan for a supply charge that doesn’t change.* 

Distribution and other fees are also known as “Delivery Charges”. These fees cover the cost of transporting electricity from the power plant to your home. The delivery charges are charged by your local electric utility, regardless of which supplier you choose. This often Includes maintenance costs for power lines, transformers, and meters, as well as regulatory fees. 

Aside from supply and delivery charges, your bill includes multiple line items, each representing different costs associated with different fees. Here’s a breakdown of the most common charges you’ll see on a typical electricity bill: 

Transmission charges cover the cost of transporting high-voltage electricity from power plants to local substations. Utilities pay transmission fees to regional transmission organizations (RTOs) or independent system operators (ISOs), passing costs to customers. 

Metering & administrative fees are attributed to the cost of maintaining, reading, and servicing your electricity meter. This includes billing, customer support, and administrative expenses and this fee may be a flat monthly fee or vary based on usage which depends on your energy provider. 

Some electricity provider charge system reliability & capacity charges which are fees to maintain grid reliability, prevent blackouts, and handle emergency power reserves. These fees also helps fund utility investments in infrastructure upgrades and modernization. 

Government taxes & regulatory fees are charged by local, state, and federal taxes applied to all energy customers. Regulatory fees mandated by state public utility commissions (PUCs) to support energy programs and compliance. 

Get the Same Supply Charge Every Month with an Unlimited Energy Plan 

If a fluctuating supply charge scares you, consider an Unlimited Energy plan! With this plan, your supply cost stays the same each month no matter how much you use.*  

Some of the benefits of a Santanna Unlimited Energy plan include protection against high energy costs during peak demand seasons. When energy demand gets rough, when you’re locked into a Santanna Unlimited Energy Plan, your supply charge never changes. 

This plan is also ideal for those who prefer predictable expenses and financial planning. No more worrying about a changing supply charge! With this plan you’ll have a stable supply charge, but keep in mind that on the delivery and distribution side of your bill, your rates can still fluctuate. 

Questions to Ask Your Energy Supplier if You’re Looking for a New Plan 

Still deciding? Before signing up for an electricity plan, it’s important to ask your energy supplier the right questions to ensure transparency and avoid unexpected charges. Here’s a list of key questions to ask: 

• What is my electricity supply rate (per kWh), and is it fixed or variable? 

• Do you offer flat-fee or unlimited plans? 

• What is the contract length, and are there penalties for early termination? 

• Is there a grace period where I can switch plans without incurring a fee? 

• Are there any incentives or promotions, and do they expire after a certain period? 

• How often can my rate change, and what factors influence price adjustments? 

• How will regulatory changes impact my bill over time? 

• Do you offer renewable energy plans, and what percentage of my electricity will come from renewable sources? 

• How does your company support sustainability initiatives in the community? 

• How can I contact customer support, and what are your service hours? 

• Do you offer live chat or 24/7 emergency support for billing or service issues? 

• What happens if I experience a power outage—who do I call, my supplier or the utility? 

Asking these questions will help you compare energy suppliers, avoid unexpected charges, and choose the best electricity plan for your needs. 

Tips for Comparing Energy Contracts 

Choosing the right electricity contract requires careful evaluation of the total cost, contract terms, and potential hidden fees. Here are strategies to help you make the most informed decision: 

1. Look Beyond the Advertised Rate

Suppliers often market low introductory rates, butrates but read the fine print to see how long the rate lasts. Some contracts offer teaser rates that increase after a few months. Compare total estimated monthly costs, including supply rates, delivery fees, and base charges.

2. Understand Fixed vs. Variable Rates vs. Flat-Fee

Two of the most common energy plan types are fixed-rate, variable-rate energy plans, and flat-fee plans. Knowing the differences and the risks involved can help you make an informed decision about your plan choice. With a fixed-rate plan, the price per kWh stays the same for the contract duration, offering consistency. 

With a variable-rate plan, the price fluctuates based on market conditions, which can lead to bill volatility. This can be an extremely risky plan since rates can rise during high demand leading to higher than usual bills.   

Often called “Unlimited Energy,” flat-fee plans offer a predictable and fixed supply charge to your monthly bill, making monthly budgeting easier. Fixed rates and Unlimited plans are ideal for budgeting and long-term stability, while variable rates can be beneficial when electricity prices are low.

3. Factor in Additional Fees & Hidden Costs

 Some suppliers charge a flat monthly fee regardless of usage while some plans may include penalties for using too little electricity. If you leave a contract early, you might face penalties (early termination fees) ranging from $50 to $200+. Some suppliers charge extra for paper billing or credit card payments if they manage billing.

4. Compare Plans Using Reliable Tools & Resources

When comparing electricity plans, it’s essential to use unbiased and transparent resources that break down the true cost of each option. Many suppliers advertise low rates upfront, but the key is to look at the complete picture, including contract terms, additional fees, and rate variability.

5. Check the Supplier’s Reputation & Customer Service

Read customer reviews on sites like Better Business Bureau (BBB) and Google and look at customer service ratings, including responsiveness and complaint handling. Some suppliers offer multiple ways of contacting them, like via live chat, which can be valuable when you need a question answered quickly. Watch for suppliers with frequent billing disputes or unexpected rate hikes in reviews.

6. Consider Renewable Energy Options

If sustainability matters, look for eco-friendly energy plans like Santanna’s Earth-Friendly plan. Check if the plan comes with Renewable Energy Certificates (RECs) to verify green energy sourcing. Compare the cost of green energy plans vs. traditional electricity contracts.

7. Read the Terms & Ask Questions Before Signing

Get clarification on contract length, termination fees, and rate structure before enrolling. Ask: “What happens if I move before my contract ends?” and “Are there any rate hikes after the first few months?” 

Understanding your electricity bill empowers you to make smarter energy choices and avoid hidden fees. While delivery charges are unavoidable, you can minimize their impact through energy efficiency practices. Comparing suppliers and plans ensures you find the best deal tailored to your specific energy usage and plan for your lifestyle and budget. With Santanna Energy Services, you get a reliable energy supplier offering competitive rates and innovative plans, giving you the transparency and stability you need. 

* Restrictions apply. Enrollment based upon program eligibility. Customers using more than 125% of normal monthly usage as determined by Santanna may be required to switch plans.