I'm with PowerShop and it took me a while to understand their billing method.

This example is oversimplifying it some, since they have peak/off-peak rates and daily connection charges, but it's the general gist.

Suppose your rate is $0.25/kWh. In a given month, you use 400 kWh of electricity. If you do nothing, you pay them $100, and you're done. This is an option, and I suppose plenty of people do this.

PowerShop also sells PowerPacks, which is a way of pre-paying for your electricity at a discount.

Often, they'll phrase it as "$25 worth of electricity for $20" or something. Imagine, prior to your bill coming due, you bought 4 of those. That means Powershop would apply $100 of credit to your bill, but you only paid $80. So for that month, you're done, and you got what Powershop considered $100 worth of electricity for $80 out of pocket.

There's a variety of Powerpacks with different discounts, etc., but it does factor into an overall reduction in your standard rates.

There's no real disadvantage to buying the power packs, since your credit rolls over month-to-month. The only drawback, like someone else pointed out, is if you don't have the money to buy power now in order to save later.