Energy, transmission and distribution, taxes and levies, operations and margin: where each layer of a hosting rate comes from and which can move.
What is inside a hosting rate quoted at a given price per kilowatt hour? The number on the page looks like a single figure, and treating it as one is how two offers that look close on paper turn out to behave very differently once the contract is running.
An industrial power price is a stack, not a single input, and each layer comes from a different place, moves on a different schedule, and is negotiated with a different counterparty. Knowing the layers is what lets you ask a useful question instead of comparing two headline numbers and hoping they mean the same thing.
The components under the headline rate
A hosting rate is generally built from four kinds of cost, stacked on top of each other:
- The energy itself, bought on the wholesale or industrial market the operator has access to.
- Transmission and distribution charges for using the grid the site sits on.
- Taxes and levies set by government or the grid operator, which vary by jurisdiction and by site.
- Operations and margin: the operator's cost of running the site (maintenance, staff and everything that keeps the power reaching your machines) and its margin on top.
A quoted rate is the sum of those four. Two operators quoting the same number can be carrying very different weight in each layer, and the layer that matters most to you is the one most likely to change during your term.
Some of these layers are within an operator's control and some are not. The operator sets its own margin and can, within limits, choose how it structures its energy purchasing. It does not set network charges or levies, and it does not set the wholesale energy price either, only where and how it buys against that price. A rate breakdown that separates what the operator controls from what it passes through is a more useful document than one that presents the whole stack as a single negotiated figure.
Energy: the energy charge and the demand charge
Industrial energy pricing is usually split into two separate charges rather than one. An energy charge applies to the energy consumed, metered per kilowatt hour. A demand charge (sometimes called a capacity charge) applies to the peak draw the site is entitled to or has reserved, independent of how much energy is used in a given period.
For a hosting customer this split matters because it changes what curtailment costs, and who it costs. A site billed against a demand charge has an incentive to keep draw steady and predictable, including yours, because a single peak can set the charge for a longer period than the peak itself lasted. Ask whether your quoted rate is a blended figure that already accounts for both charges, or whether either is passed through separately, and what happens to the demand charge during any period your machines are curtailed or offline.
Network charges and levies
Network charges are what the grid operator bills for delivering electricity over its wires, set independently of the energy price itself. They can include separate figures for peak and off-peak use, and they tend to move on a slower, more predictable schedule than energy prices, since they follow regulatory decisions rather than a market.
Levies sit on top of that: government charges, support schemes for the wider grid, and similar line items that vary by jurisdiction and sometimes by the class of customer the site is registered under. Neither network charges nor levies are something an operator sets, and a rate breakdown that is open about its own structure will show them as pass-through items rather than folding them into an unlabelled total.
The operator's margin and what indexation does
Operations and margin are the layer the operator controls, and they vary between hosts. Within a single agreement, what tends to move more is how the other three layers are allowed to change during the term, and that is a question of indexation rather than margin.
An agreement should say plainly which components are fixed for the term, which are indexed to a named reference, and on what notice a change takes effect. A rate presented as a single fixed number with no indexation language anywhere in the document is either genuinely fixed, which you should confirm directly, or it simply has not told you yet which layer is going to move. The absence of an indexation clause is not the same thing as a fixed price.
Indexation is not, by itself, a reason to walk away from an offer. Network charges and levies move regardless of what any single contract says, and an operator who fixes those on their own book is carrying a risk on your behalf rather than passing it through. The question to ask is not whether indexation exists, but which reference it tracks, how often it can apply, and whether that reference is one you can check independently rather than one the operator reports to you after the fact.
Before you compare two rates
A rate you cannot break into its layers is not something you can meaningfully compare against a second rate you also cannot break down. Before treating two quotes as comparable, ask each operator the same set of questions and write the answers down side by side, rather than trusting memory once the conversation has moved on: which components are fixed, which are indexed and against what reference, how the demand charge behaves during curtailment, and which line items are pass-through rather than margin.
Our hosting rate page names these layers and what sits inside our base rate; the rate itself comes with a written quote.
