UNDERSTANDING ENERGY DE-REGULATION – Part One by Roy Goodwin

 

energyBy Roy Goodwin – Energy Consultant

If you’re like me, you’ve been getting phone calls, postcards, and letters for the last few years offering to help you save money on your electric bills. You’ve probably also been deluged with calls about solar energy, but that is a topic for another day!

So what is this all about, and how can we all take advantage of lower costs without fear of getting “scammed”? The best place to start is always at the beginning, so that is what I’ll do.

For most of our lives (assuming most people reading this are at least in their mid-twenties) the only thing we thought about electricity is when was the bill is due so we could get it paid before our lights were shut off! There were no choices and no options. When you were almost ready to move into a place you called the local service provider and arranged to have the power turned on in your name. When the bills came you paid them. When you walk into a dark room at night you hit the switch and expect the lights to come on….. when they don’t you panic! In the industry they use this phase: “Electricity is something we habitually use every day and unconsciously pay for every month.”

For a lot of people that hasn’t changed, but it should! Just like the telecom industry twenty years ago, the government has mandated that the energy industry (electricity and natural gas) must be de-regulated. That means that, while companies like National Grid will still be the exclusive provider of services in a given area, they no longer can monopolize the supply of the power we use. It wouldn’t make sense to have more than one company running poles and wires in any area, or more than one company responsible for maintaining that equipment or sending customer bills for that matter. All those service items stay with the “incumbent” provider for the area. In the case of Upton that is National Grid.

What independent electric supply companies can do however is supply the actual electricity a customer uses. Don’t worry, all the electricity still comes in on the same lines, and off the same “electrical grid”, it’s only a matter of how National Grid has to pay for the electricity you use, and what the rate is that you are charged. This is determined by an agreement between the individual customer (YOU) and the electric supply company chosen. The transition from one supplier to another is all handled between the companies seamlessly. No need to worry, you will not experience a power outage during the switch, and you’ll still get the same service from National Grid if there are any problems with the lines. Your bill will still come from National Grid each month, and you’ll still send your monthly payment to them. The only difference will be one line item on that bill indicating the name of the supply company you have chosen and the lower rate you agreed to.

As simple as this is supposed to be for the customer, it isn’t a simple process for the electric supply companies. To start selling power in an area the first thing that has to happen is the State has to adopt the de-regulation mandate. The second step involves each individual electric supply company getting State approval as a supplier. This portion of the process can sometimes take years! Once a supply company is approved in the State they have to contract with the individual incumbent provider to co-ordinate billing, customer transfer procedures, and payment details to assure a seamless transition. Only when all that is taken care of can a new supply company start going to potential customers asking for their business! As a result of how this all comes together no customer has to worry about some new company leaving town with their money (you always only pay National Grid), or that they’ll wake up some morning and find their service has been terminated because the supply company went out of business.

Hopefully that helps everyone better understand the basics. The reason why this is all important is that, due to all the competition, the opportunity exists for each of us to save considerable money on our monthly electric bills with a little careful shopping. In the next installment I’ll go into selecting a supplier, and the things to watch out for in the process.

 

 

 

About Jennifer Doyle

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