In this post, we are going to show you how to calculate commission for both electricity and natural gas. In both cases, the total dollar commission is based on customer usage of the commodity, term length and commission adder.

Calculating Electricity Commission

To calculate commission on a closed electricity contract, the following formula applies:

(Annual volume (kWh) x commission adder (mills)) x term length

Note: mills is a term used in currency to express 1/10 of a cent. 1 mill is equal to $0.001.

Here are three examples where commission is calculated:

Example 1

A customer that uses 1,000,000 kWh per year signs a 12-month contract and you added 3 mills commission to the contract price.

(1,000,000 x .003) x 1 = $3,000 received over the 12-month term

Example 2

A customer that uses 1,000,000 kWh per year signs a 24-month contract and you added 5 mills commission to the contract price.

(1,000,000 x .005) x 2 = $10,000 received over the 24-month term (or $5,000 per year).

Example 3

A customer that uses 1,000,000 kWh per year signs a 6 month contract and you added 3 mills commission to the contract price.

(1,000,000 x .003) x .5 = $1,500 received over the 6 month term.

Calculating Natural Gas Commission

To calculate commission on a closed natural gas contract, the following formula applies:

(Annual volume (therms) x commission adder (cents)) x term length

Here are three examples where commission is calculated:

Example 1

A customer that uses 100,000 therms per year signs a 12-month contract and you added 3 cents commission to the contract price.

(100,000 x .03) x 1 = $3,000 received over the 12-month term

Example 2

A customer that uses 100,000 therms per year signs a 24-month contract and you added 5 cents commission to the contract price.

(100,000 x .05) x 2 = $10,000 received over the 24 month term (or $5,000 per year).

Example 3

A customer that uses 100,000 therms per year signs a 6-month contract and you added 3 cents commission to the contract price.

(100,000 x .03) x .5 = $1,500 received over the 6 month term.

Note that suppliers all pay differently with some common forms of payment being:

  1. Yearly and up front
  2. Quarterly and up front
  3. Monthly and after metered usage

If the payments are made up front, commission will be based on estimated usage, while after usage payments will be based on actual metered usage.

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