Two retail electricity contracts quoting the same cents-per-kWh may have very different total costs depending on whether the price is 'all-in' or 'pass-through.' This distinction is one of the most important — and most overlooked — factors in evaluating commercial energy offers.
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Side-by-Side Comparison
| Factor | Option A | Option B |
|---|---|---|
| Price certainty | Complete — all costs locked | Partial — commodity locked, passthrough varies |
| What's included | Supply + capacity + ancillaries + losses | Supply only; extras billed as incurred |
| Headline rate | Higher (includes more) | Lower (excludes passthrough costs) |
| Total cost predictability | High | Moderate — varies with capacity charges |
| Market transparency | Lower — costs bundled | Higher — you see each component |
| Best for | Budget-focused accounts | Accounts who actively monitor costs |
What "All-In" Actually Means
An all-in electricity contract bundles all supplier-controllable costs into a single per-kWh rate: the commodity supply, capacity charges, ancillary services, transmission line losses, and any other cost the supplier bears. Your rate is a single number for the contract period. No surprises.
What "Pass-Through" Means
A pass-through contract prices the commodity supply at a fixed rate but allows the supplier to pass through actual costs for capacity charges, ancillary services, or other components at actual cost. The headline rate is lower, but total cost depends on how the passthrough components behave over the contract period.
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Where Passthrough Risk Hides
PJM capacity charges are the most significant passthrough risk. Capacity prices are set at annual auctions — they can be low in low-price years and very high in scarcity conditions. An all-in contract absorbs this risk into the quoted rate. A pass-through contract passes the actual auction result through to the buyer regardless of where it settles.
How to Compare All-In vs. Pass-Through
To compare apples-to-apples, ask for an all-in equivalent on any pass-through contract. What would the total rate be if capacity and ancillaries were fixed at current levels? This translates both contract types into a comparable total-cost basis. We do this translation for every competing offer.
Which to Choose
For budget certainty, choose all-in pricing. You pay a slight premium for the certainty, but you know your energy cost precisely. For accounts with the sophistication to model passthrough components and tolerance for some variability, pass-through contracts can occasionally deliver lower total cost when capacity markets are benign.
Frequently Asked Questions
How do I know if a quote is all-in or pass-through?
Ask the supplier explicitly: 'Does this rate include capacity, ancillary services, and line losses, or are any of those components passed through at actual cost?' A good broker extracts this information from every quote.
Is pass-through pricing common?
Pass-through pricing is common in PJM markets where capacity charges are set by auction and can vary year to year. In ERCOT, capacity market structures are different and most commercial contracts are effectively all-in. In ISO-NE, capacity charges are significant and pass-through treatment is an important contract consideration.
Can I negotiate a pass-through contract to all-in?
Often yes. Suppliers who offer pass-through pricing can usually offer an all-in equivalent at a modestly higher rate — they're pricing in the capacity risk they're absorbing. We compare both structures for accounts where the choice is meaningful.
What other charges might be passed through beyond capacity?
Ancillary services (regulation, spinning reserve), transmission congestion charges, and line loss adjustments are sometimes treated as passthroughs. Each adds variability beyond the quoted commodity supply rate.
Does broker compensation differ between all-in and pass-through contracts?
No. Broker compensation is a per-kWh fee consistent across contract structures. The all-in vs. pass-through choice doesn't affect broker economics.