TeachMeFinance.com - explain Coordination service pricing
Coordination service pricing The term 'Coordination service pricing' as it applies to the area of energy can be defined as 'Coordination service pricing: The typical price components of a bulk power coordination sale are an energy charge, a capacity, or reservation charge, and an adder. The price for a particular sale may embody some or all of these components. The energy charge is made on a per-kilowatt basis and is intended to recover the seller's system incremental variable costs of making a sale. Because the nonfuel expenses are usually hard to quantify, and small relative to fuel expense, energy charges quoted are usually based on fuel cost. A capacity charge is set at a certain level per kilowatt and is normally paid whether or not energy is taken by the buyer. An adder is added to that energy charge to recover the hard quantify nonfuel variable costs. There are three types of adders percentage, fixed, and split savings. A percentage adder increases the energy charge by a certain percentage. A fixed adder adds a fixed amount per kilowatt hour to the energy charge. Split savings adders are used only in economy energy transactions. They split production costs savings between the seller and the buyer by adding one half of the savings to the energy cost'.
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