Utility (Standard Offer Service) Rates

Electric SOS Pricing

Electric Standard Offer Service (SOS) is the service provided by an electric utility to a customer who has not opted to receive electricity from a retail energy supplier. An electric utility company purchases SOS electricity directly from wholesale energy suppliers and distributes it to the customer. The SOS—or “electric supply”—rate on a customer’s electric bill refers to the actual price of the electricity that the utility is supplying to the customer. Ultimately, this rate is combined with the electric utility’s distribution rate—the price charged by the utility to cover its cost to distribute the electricity supply to the customer—to form the customer’s total bill.

SOS electricity is purchased during quarterly wholesale auctions. Several wholesale electricity suppliers place competitive bids to try to win contracts to supply electricity to an electric utility. The electric utility awards the contract to the wholesale supplier who made the lowest bid. An independent, neutral bid monitor oversees the auction process to ensure that the bids are consistent with market conditions and competitive, and that the process is open, fair, and transparent. Parties involved in the wholesale auctions, including the electric utilities, the staff of the Public Service Commission, OPC, and wholesale suppliers, also participate in an annual review of the auction process to make any necessary changes or improvements.

An electric utility meets its customer load requirement—the total electricity supply it will need to meet the consumption demand for all customers—through several electric supply contracts whose terms overlap by a number of months. Most of Maryland’s electric utilities execute 24-month contracts that cover about 25% of their total residential electricity load. The electric utilities stagger their procurement so that their demand obligations are being met by four separate contracts at any given time, each of which expires at a different time. Electric utilities procure SOS electricity in this way because it tends to reduce price instability and smooth the impact of wholesale price swings on a customer’s bill.

Each electric supply contract contains fixed prices, but those prices are typically fixed differently for winter and non-winter seasons. Because of this, and because of the way the electric utility’s supply contracts overlap to reduce the incidence of large price swings, the SOS electricity rate on your bill will change slightly each quarter. The prices electric utilities pay for SOS pursuant to supply contracts, and thus the amount that customers pay for SOS electricity, are impacted by many factors, including global energy consumption, supply of energy resources, and government policies.

To find more information about your electric utility’s SOS prices, please visit the links below.