Common Electricity Terms

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Cancellation Fee

A Cancellation fee, also known as an Early Termination Fee or Exit Fee, is a charge added to your bill when you end an energy contract before it expires. These fees usually do not apply to variable rate plans. Energy suppliers differ in terms of when these types of penalties apply.

Carbon Footprint

Your carbon footprint is a measure of the impact your energy choices have on the environment. A higher carbon footprint means the energy you use is associated with more pollution. Choosing an energy plan with a high percentage of renewable energy can reduce your carbon footprint. Other ways reduce your carbon footprint include signing up for community solar, installing rooftop solar, and enrolling your smart thermostat in load control programs.



Energy deregulation refers to a series of policy reforms that removed or reduced of the role of the government in regulating certain parts of energy service to customers. Traditionally, electric utilities were granted a monopoly over all aspects of energy service – electricity distribution, transmission, and generation – subject to government oversight. In the 1970s it became apparent that government regulation created inefficiencies that lead to higher costs. In response, the federal government granted states the ability to chose how to supply energy to consumers. Today, 13 states and Washington, D.C. give customers the ability to choose their electric supplier. Suppliers are responsible for electricity generation, while local utilities or grid planners still oversee distribution and transmission. Retail suppliers compete to provide customers with the best plan to suit their needs, but their offers can be complex. WattBuy exists to help you make find the personalized power that best fits you.


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Electricity Generation

The first step in the electricity delivery process is the generation of electricity. Electricity is typically created through spinning a magnet inside coils of wire to create a current. All electric generation sources use a prime mover. Sources like natural gas and coal power plants use the heat from burning fossil fuels to create steam that turns a turbine. Renewable sources like wind and hydroelectricity directly turn a turbine via wind power or water flow. Solar generation absorbs energy from the sun into conducting cells. Currently, the most common energy sources are fossil fuels, coal, and non-renewables. This is rapidly changing as renewable resource costs decline.

Electricity Transmission

Transmission is the unseen workhorse of the electric delivery process. Once electricity is generated, the current is delivered at low voltage to substations, where the low voltage product is increased to higher voltages through a transformer. Transmission lines then carry the high voltage energy in bulk over long distances. When energy reaches its final destination, the current is delivered to another substation where the high voltage product is decreased to lower voltages through another transformer. The lower voltage power is then delivered into the electricity distribution network.

Electricity Distribution

Distribution is the final step in the process of electric delivery. Electricity distribution generally occurs at a low voltage through networks that connect smaller electricity substations directly to the consumer’s home or business. This stage is the most visible and includes the power lines that lead to homes. The utility that oversees electricity distribution, also known as a local distribution company, historically oversaw all portions of energy service and often appears on energy bills.



kWh is an acronym for a kilo‌Watt hour. A kWh represents 1,000 watts (kilowatt) of power being used for an entire hour. This is a common measurement used by electricity providers to track how much energy you use over a specific time period. Many electricity costs are applied based on the amount of kWh you use in a billing period, generally a month.


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Renewable energy is energy collected from naturally replenished resources, meaning the energy source will not run out when used. Examples include solar energy (from the sun), wind energy, hydropower energy (from the flow of moving water), and geothermal energy (from heat within the earth).


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Types of Electricity Plans

Fixed Rate Plans

A fixed rate plan maintains the same (fixed) rate month by month, regardless of whether electricity costs rise or fall. Every month, for as long as your plan lasts, each kWh of power used will cost the same amount.

Variable Rate Plans

A variable rate plan changes month by month. The rate for each kWh used will change in response to many different factors usually tied to market conditions and the underlying cost of energy.

Time of Use Plans

A Time-of-Use rate plan changes the amount you pay for power based on when you use it. Many time-of-use plans set a higher price for energy used during the day time, on weekdays, and/or in the early-evening (i.e., on-peak hours), which are times when it costs the most to generate electricity. These plans also set a lower price for energy used during weekends and at night (i.e., off-peak hours), which are times when it costs the least to generate electricity. This plan rewards you for shifting the time of day you use electricity.

Pre-Paid Plans

Prepaid plans allow households to budget for the price of their electricity bill in advance. A prepaid plan means that you won’t be surprised by high electricity bills. In this type of payment plan, you can pay in advance based on your expected energy use at a given price. If the prepaid balance gets low, you can reload your account by depositing extra funds.

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