What Is an Energy Supplier Markup and How Much Are Illinois Businesses Overpaying

An energy supplier markup is the margin that a retail energy supplier adds above the wholesale cost of electricity or natural gas. In Illinois's deregulated market, retail suppliers purchase energy on the wholesale PJM market and then resell it to commercial customers at a marked-up price that covers their operating costs, hedging costs, and profit margin.

There's nothing inherently wrong with this system. Retail suppliers provide a valuable service—they absorb price risk, handle billing, and offer contract flexibility that the wholesale market doesn't. But the size of the markup matters enormously, and it varies widely between suppliers and contracts.

How Supplier Markups Work in Practice

Imagine the PJM wholesale price for electricity in Illinois averages $0.045 per kWh during a given contract period. A competitive retail supplier might charge $0.052 per kWh—a markup of $0.007 or roughly 15.6%. A less competitive supplier might charge $0.065 per kWh—a markup of $0.020 or 44.4%. For a business using 500,000 kWh per year, that difference amounts to $6,500 annually.

This is why comparing Illinois electricity suppliers matters so much. A business that last shopped the market three years ago and simply renewed with its existing supplier is almost certainly paying a markup that no longer reflects competitive market conditions.

Why Are So Many Illinois Businesses Overpaying?

The Illinois Commerce Commission licenses and oversees retail energy suppliers, but it doesn't regulate the prices they charge commercial customers in the deregulated market. That means the market sets prices—and businesses that don't actively shop get left behind. Several factors contribute to persistent overpayment: infrequent contract reviews, automatic renewals that roll into higher rates, lack of awareness about the competitive market, and the complexity of energy bills that makes markup analysis difficult.

Your Illinois commercial energy bill contains all the information you need to identify potential markups—if you know where to look. Here's a systematic approach to analyzing your bill and uncovering what you're actually paying.

Step 1: Separate Supply from Delivery Charges

Your bill has two main components: supply charges (paid to your retail supplier) and delivery charges (paid to your utility—ComEd or Ameren—and regulated by the ICC). Only the supply portion is negotiable in the deregulated market. Identify the supply charge and express it as cents per kWh by dividing the total supply charge by your total kWh usage.

Step 2: Compare to PJM Wholesale Prices

PJM publishes historical load-weighted average energy prices (LMP data) that approximate the cost of wholesale electricity in Illinois. These are publicly available at pjm.com. Compare your supply rate per kWh to the PJM average for the same period. The difference is a rough estimate of your markup. Note that suppliers legitimately add costs for capacity, ancillary services, and hedging—so a markup of 10–20% is typical and reasonable. A markup above 30–40% warrants serious scrutiny.

Step 3: Look for Variable Rate Provisions

Some contracts are structured as 'index plus margin' or 'market-based' rates, where your supply cost fluctuates with wholesale prices. In these contracts, the markup is the fixed margin component. Check your contract for language like 'cost plus,' 'index rate,' or 'market-based pricing' to determine how your rate is structured.

Step 4: Request a Rate Transparency Report

A reputable Illinois energy broker can provide a rate transparency report that shows your current effective rate compared to current market rates available from competing suppliers. This analysis often reveals markup gaps that are immediately actionable. Illinois Energy Advisors offers this analysis at no cost—contact us through our Bill Analyzer tool to get started.

Quantifying overpayment across Illinois's commercial market is difficult to measure precisely, but industry data and the experience of energy advisors paints a clear picture. A significant proportion of Illinois businesses are paying above-market rates—often without knowing it.

According to the U.S. Energy Information Administration (EIA), Illinois commercial electricity prices have historically tracked PJM wholesale prices with a retail markup. When businesses haven't shopped the market in 2–3 years, they're often paying rates that reflect the market conditions when they last contracted—not today's market. In periods where wholesale prices have declined, those businesses are effectively subsidizing supplier margins.

Real-World Overpayment Scenarios

Consider a mid-size manufacturing facility in the Chicago suburbs consuming 2 million kWh annually. If their current supply rate is $0.070/kWh but competing suppliers are offering $0.055/kWh, the business is overpaying by $30,000 per year. Over a 3-year contract at the competitive rate, the cumulative savings would be $90,000—money that could fund equipment upgrades, additional staff, or simply improve profitability.

For smaller businesses—say, a restaurant group or retail chain using 300,000 kWh annually—a $0.010/kWh markup means $3,000 in unnecessary annual costs. Across a 10-location chain, that's $30,000 per year flowing to a supplier rather than your business.

The Illinois Deregulated Market Advantage

Illinois's deregulated energy market exists precisely to create the competitive pressure that eliminates excessive markups. But that pressure only works when businesses actively participate. When you solicit competing quotes through a transparent procurement process, suppliers know they're competing—and they sharpen their pencils accordingly. The Illinois Commerce Commission provides a list of licensed retail suppliers you can verify before engaging.

The good news: stopping the overpayment cycle is entirely within your control, and you can begin the process today regardless of where you are in your contract cycle.

Action 1: Get a Free Market Rate Analysis

The first step is understanding what the market actually looks like right now. An energy broker can provide a no-cost, no-obligation analysis of your current rate versus available market rates. This analysis typically takes 24–48 hours and gives you a clear picture of your markup gap.

Action 2: Understand Your Contract Exit Options

If you're in the middle of a contract, review your early termination provisions. Sometimes the savings from switching immediately outweigh the termination fee, especially for businesses significantly overpaying. In other cases, it makes more sense to plan ahead for contract expiration.

Action 3: Engage in a Competitive RFP Process

When you're eligible to switch (at or near contract expiration), engage in a formal competitive solicitation. Illinois Energy Advisors can run this process on your behalf, gathering quotes from multiple licensed suppliers and presenting a transparent comparison. This process consistently yields rates 10–25% below what businesses were previously paying.

Action 4: Build a Proactive Energy Management Calendar

Don't let this happen again. Once you've secured a competitive rate, create a calendar reminder 9 months before your new contract expires to begin the process again. Energy procurement should be treated like any other significant vendor contract—reviewed regularly and benchmarked against the market.

For multi-location Illinois businesses, consider whether aggregating your sites into a single procurement package could yield additional volume discounts. Learn more about multi-location energy procurement strategies on our insights page.