The Price-to-Compare: Why It’s Not Always the Best Benchmark for Energy Buyers

In deregulated energy markets, the Price-to-Compare (PTC) serves as a reference point for comparing utility default supply rates to third-party supplier offers. At times, a utility’s PTC may appear lower than competitive supplier rates, but this snapshot comparison can be misleading. A more strategic approach to energy procurement—one that considers market timing, risk management, and long-term cost control—can provide greater value over time.

It’s like comparing bulk purchasing to buying single items on demand. While an individual purchase may sometimes be cheaper, bulk purchasing offers more consistency and cost savings in the long run. The same principle applies to energy procurement.

Understanding How Utility PTCs Are Set

One reason utility PTCs can sometimes be lower than market rates is that utilities procure power in advance, often through staggered purchases made months or even years before rates appear on customer bills. This procurement method is designed to smooth out price volatility, but it also means that utility PTCs tend to lag behind actual market conditions—both when prices are rising and when they are falling.

This time lag can create misleading comparisons. For example:

• First Energy Ohio: In early 2023, FirstEnergy Ohio's PTC rate was lower than the 12-month rolling forward strip monthly average, as indicated in the chart below. However, by mid-2023, the PTC rate spiked sharply and remained elevated compared to the 12-month rolling strip, despite some recent tightening. This tightening is largely due to the utility still leveraging lower-cost electricity from late 2024, whereas the 12-month rolling strip now reflects increased price risk driven by bullish fundamentals.
• Eversource Connecticut: As shown in the chart below, regional differences significantly impact pricing on both utility PTC rates and forward markets. Utility PTCs in ISO-New England, particularly at Eversource CT, were exceptionally high in the first half of 2023 but later declined due to lower natural gas prices. More recently, PTC rates have begun rising again, while the 12-month rolling strip has remained relatively stable, averaging between 5.5 and 7 cents.

Note – PTC prices derived from utility data with estimates subtracted to represent the commodity only portion of the supply rate.

The Advantages of Competitive Supply Agreements

Unlike utilities, competitive energy suppliers have more flexibility in how and when they purchase power. This flexibility provides several advantages:

✔ Market Timing – Suppliers can purchase energy strategically rather than being locked into a predetermined utility procurement schedule.
✔ Risk Management Options – Fixed-price, hybrid, and index-based contracts allow customers to mitigate price volatility in ways that utility default service does not.
✔ Long-Term Cost Planning – Businesses can align their energy strategies with budget goals instead of being subject to unpredictable utility rate adjustments.

While utilities follow regulated procurement practices designed to ensure stability, they do not offer the same level of choice and control that competitive supply agreements provide.

Key Takeaway: PTCs Do Not Tell the Whole Story

While a utility’s PTC may occasionally seem attractive, it does not always reflect the best long-term value. More importantly, customers on utility default service have no control over future rate changes—they must accept whatever adjustments the utility implements at the next review cycle.

For energy buyers, partnering with a competitive supplier can provide:

✔ More transparency in pricing
✔ Greater flexibility in procurement
✔ Better long-term cost management

The next time you see a low PTC, ask yourself: Is this really a fair comparison? A well-planned procurement strategy often provides greater benefits than simply chasing the lowest rate at a single point in time.

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