The following is a guest post from Hilary at Call Me Power.
Do you feel like your utility bills keep going up every month? What if you were paying more for your energy than you had to? With energy markets for residential customers deregulated in many areas across the United States, you may be able pay lower rate for your energy supply. Let’s look at how to shop around for a lower energy rate and save on your utility bills.
What is energy deregulation?
Traditionally, utilities provided all aspects of electricity and gas service, from supply to delivery. However, many states have restructured their energy markets, separating energy production from delivery. Deregulation means that you have a choice of company that provides your electricity and natural gas. It allows you to shop for a provider, just like you would for phone or internet service. If you live in a state where energy is deregulated, you can choose your energy supplier.
What’s the difference between my utility and a supplier, and why switch?
Your utility owns and operates the power lines or pipelines that bring energy to your home. They are responsible for responding to power outages or other energy-related emergencies, and in all states except Texas, they are also the default supplier for customers who choose not to buy energy from an independent supplier. All utilities have a monopoly over the areas they serve, meaning that you do not have a choice of utility.
An energy supplier is an independent company that sells directly to energy customers. The energy they sell is delivered by the local utility. If you live in an area where electricity or gas is deregulated, you have a choice of supplier.
We shop around for gasoline, so why not shop for electricity or gas supply as well? Shopping for energy takes only a few minutes of research, but can deliver savings over the long run. Along with offering competitive energy rates, suppliers often offer a wide variety of energy plan options, including fixed prices, renewable energy, or plans with rewards such as air miles or cash back. Depending on where you live, the amount of choice of plans and suppliers can almost be dizzying, but it’s easy to find a good deal if you just keep a few basic principles in mind.
How to get a good deal when shopping for energy
First, understand your options. There are essentially two price types when shopping for energy: fixed rates and variable rates. Fixed rates stay the same throughout the duration of the plan. They offer predictable bills (through price stability, though keep in mind that how much you use may change from month to month), and you may save money if energy prices rise above your rate. However, many – but not all – suppliers charge early cancellation fees if you leave the plan early, and if market prices fall you will have to wait until the end of your plan before you can take advantage of lower prices.
Variable rates change from month to month, and plans usually don’t come with early cancellation fees. Plans that change according to a formula are called indexed prices, and are directly related to market prices (meaning that your rate will increase if market prices rise, and will decrease if market prices drop). Other variable plans change according to the supplier’s discretion, which means they may or may not follow market trends.
Next, it’s a good idea to know how much energy you use in a month. Using last month’s bill as reference, find the kilowatt-hour total (or ccf/therm, for natural gas) of energy that you used that month. Your monthly energy use does change depending on the season, so if you want to be more precise and have had an account with your utility for about a year, check on your online utility account to add up all of your previous monthly bills to get a yearly total.
Then, find the supply rate that you currently pay. Each utility presents information slightly differently, but somewhere on your bill will be a breakdown of your rate that separates delivery charges and supply charges. Find the supply rate – you will be using this rate to compare prices when you shop for energy. Alternatively, you could also call your utility to ask them what the current “price to compare” is for customers shopping for energy.
Now you’re ready to shop! Your utility will have some information about energy choice on their website, or you can look for state-run comparison websites (such as powertochoose.org for Texas or papowerswitch.com for Pennsylvania). Simply enter your zipcode to find what’s available. As there are often hundreds of choices of plans, it’s a good idea to filter them based on your preferences (e.g. fixed prices only, renewable energy, etc), or consider using an energy price comparison websites that offer a curated selection of suppliers.
To get an idea of how much you’ll be saving each month, multiply the rates by your monthly energy consumption. Once you’ve found a few plans that are cheaper than the rate you currently pay with your utility, quickly skim through their terms and conditions. Make a note of:
- Cancellation fees: does the supplier charge an early cancellation fee and if so, how much? How much time do you have to change your mind without having to pay a fee? In most states you have at least three days after signing in which you can change your mind with no penalty.
- Additional charges: is what you see what you get? Some suppliers may charge a monthly fee, and some online-based plans may charge you for offline customer service
- Rate changes: can the rate change, and if so, by how much? Some suppliers will limit how much the rate can change from month to month.
- Customer advantages: many suppliers offer rewards (e.g. free electricity, travel miles, a free smart thermostat, etc) to attract customers. While customer rewards shouldn’t necessarily be the first thing you look for in an energy plan, they can certainly help in making a final decision, and may help you save in other areas of your budget.
Once you’ve found the answers to these questions, you’ll have all the information you need to make a final decision to save on your energy bills!
Hilary writes for callmepower.com, an energy price comparison website that provides useful information to help people save money on their electricity and gas supply.