Default rate vs locked rate: the math, the risk, the trap

How the default supply rate is set, and why it is expensive

When a household or business does nothing, electricity supply defaults to the local utility's standard offer. This rate is recalibrated periodically — quarterly, semi-annually, or annually depending on the state — based on a wholesale auction plus the utility's procurement costs and a regulator-approved margin.

The default has three structural properties that make it expensive. It floats with the market, so cold-snap and heat-wave spikes pass through quickly. It is priced conservatively, because the utility has to procure for every customer at any point in the cycle, including peak demand. And it carries no contract terms in your favour — no fixed price, no fixed term, no protection from a winter spike or summer peak.

Competitive suppliers can almost always price under the default because they only contract with customers who actively choose them, they hedge specific volumes, and they compete on price for accounts they want to keep.

Why the "introductory" rate trap is also a default in disguise

A teaser-introductory rate (e.g. 5.9¢/kWh for the first six months, then 11.4¢/kWh for the rest of the term) is structurally not comparable to a flat fixed-rate offer. The intro period covers about half the term; the post-reset rate covers the other half. The blended cost over twelve months is rarely as cheap as the intro rate suggests.

Suppliers offer teaser rates because they win attention in the apples-to-apples portal listings, where the rate column shows only the headline number. Customers who do not read the contract often discover the reset only when the next bill is materially higher than the previous month.

Seenra strips teaser rates from the shortlist by default and surfaces only fully-disclosed locked offers. The chart below shows a typical 5.9¢-then-11.4¢ teaser against a 8.6¢ fixed alternative — the fixed wins on month-six total cost.

What the cumulative savings look like over a 24-month lock

On a $4,800/mo commercial bill — roughly 32,000 kWh/mo — a 24-month lock at 12.6¢/kWh saves an estimated $7,720 in year one and $7,720 in year two against the typical default rate trajectory. For a household consuming 950 kWh/mo, the same lock structure saves an estimated $260 to $380 per year.

These numbers are estimates and never guaranteed. Actual savings depend on the load profile, the wholesale market trajectory, and the specific contract clauses signed. The chart shows the cumulative dollar value year by year on the commercial example.