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Usage pricing in the context of energy and utilities refers to a pricing structure where customers are billed according to the quantity of energy or utilities they use. This is in contrast to other pricing models where customers are charged a fixed amount regardless of their usage, like flat rate pricing or fixed fee pricing.

Energy & Utility companies make extensive use of usage pricing, which handles four subtypes of pricing.

Unit Rate : For the consumption of gas, electricity, and other commodities, unit rates are used. For the same commodity, large commercial customers may pay different unit prices. For instance, electricity rates may vary depending on the time of day, the season, and the level of consumption. Usage is forecasted for quoting, giving both the customer and the provider an estimate of cost and revenue.

Standing Charge : Most bills include a charge that covers the cost of providing and supporting infrastructure to deliver a commodity to the customer. This fee is frequently calculated as a daily rate multiplied by the number of days in the billing period.

Interval Pricing : Consumption pricing at regular intervals. Consumption can be measured multiple times per hour or day in a Smart metered world, as well as with large industrial customers. (The size of the interval varies by region). Each day’s intervals could be priced separately, or multiple intervals could be aggregated and the total consumption priced.

Flex Pricing : Pricing is determined by naming a “block” of energy to be purchased in advance, which is then amended or “Flexed” based on anticipated usage. The blocks are frequently fixed at the time of contract negotiation, i.e. they are long-term positions, whereas the flex increases (or decreases) are nominated and traded on short notice – weeks or days ahead of the required energy. Flex contracts allow large customers to adjust their predicted usage closer to the time to account for short-term localized factors such as weather forecasts or seasonal demands on their businesses.

Hope this information helps you guys.

Cheers!!!

Mukul Sharma