Gas and electric deregulation efforts that were initiated in the late 90’s created competitive markets in the deregulated states. This offered customers in these states the ability to select their preferred gas or electricity supplier that was separate from the standard utility.
As the deregulation laws began being passed from state to state, gas and electric utilities were required to unbundle the products that they had been providing to consumers in addition to selling off their generation assets and start purchasing gas and power from the wholesale market like other retail suppliers. These utilities came to be known as utility distribution companies whose focus was to distribute or deliver energy as well as other maintenance needs and billing services to their customers.
At the beginning of the deregulation, consumers could not jump ship right away as there was little to no competition to these utility companies. However, in recent times, there has been significant growth in the retail energy market with numerous suppliers entering the market. The result has been a staggering amount of options for customers to choose from. Moreover, in order to stay competitive, these companies have to create enticing rate plans and services that promise to help the consumer save a significant amount on their energy bills. You can compare their rates here.
Today, switching is a straightforward task as you do not even have to pay any switching fees, in addition to non-existent cancellation fees. So, in spite of this, there are some things that you must be aware of before you make the switch. This article is a guide.
What You Should Know Before You Switch Providers
Switching providers does not necessarily mean that you will get improved services if your main concern was unreliable infrastructure. This is because retail energy providers do not have the physical means to get electricity to your house since all the poles and wires are owned by your public utility company. As such, the utility company will still continue to handle your service issues as well as any infrastructure upgrades.
The Most Common Rate Structures to Choose From
These are pricing options that will affect your kWh costs. They include:
- Fixed: Here, the price for kWh remains constant throughout the contract. As such, if energy prices increase, you will not be affected. However, if they drop, you’ll still pay what was agreed upon.
- Floating: This features variable rates where the cost per unit fluctuates according to the wholesale value of electricity. The drawback to this option is that you might find it difficult to manage your energy costs when the market becomes unpredictable.
- Hybrid: This is a cross between the fixed and floating rates where a certain percentage of your cost is fixed while the other is billed at the floating rate.
Pitfalls to Look Out For
- Unbelievably low introductory offers. These are the kind of rates that sky-rocket once their promotion is over. This is why you must ask whether it is renewable.
- Auto-renewal. You should retain the right to decide whether the contract should be renewed or not.
- Misleading tactics. Due to the competitive aspect of the market, some unscrupulous providers might employ misleading tactics such as showing up to your doorstep and claiming that they have been sent by your public utility company and that you need to switch suppliers within a certain timeframe. Your local utility company would never send anyone to you on their behalf. Therefore, be on the lookout for such scams.
Questions and Answers
Q: Is cost per kWh fixed?
A: You ideally want a supplier that offers you the hybrid pricing option so that you can adjust with varying rates effectively.
Q: Do they have monthly service charges as well as other fees?
A: Some suppliers might show up with attractive introductory offers but purposely hide their monthly charges and other extra fees deep into their contracts. Ask about these so you can compare with what other companies have.
Q: Is this a renewable contract or it is just a one-time deal?
A: Same as above, some suppliers might give you a good deal during the initial contract, but change rates during your next contract. Be sure to ask if the deal you are getting is renewable.
Q: Are there promotions or discounts that I should be aware of?
A: Be sure to ask about these so you can take advantage of them.
Q: Will I be charged when I choose to break the contract?
A: Even though most contractors do not charge you when you choose to stop dealing with them, some will and thus, you must know this beforehand.
Q: For my billing issues, can I contact you directly?
A: You do not want to jump through rings to reach your supplier. Ask them if they will always be available to answer your queries. Your supplier should provide you with 24-hour services.
Q: Is the supplier you are considering licensed?
A: All suppliers must have a state license that allows them to sell energy via a public utility.
Switching energy providers is often the only option left when you are not happy with the services or prices of your current supplier. However, do not jump on to the next sweet-talking supplier without considering the factors we have covered on this guide.