UNDERSTANDING ENERGY DEREGULATION – PART TWO – SELECTING A SUPPLIER

By Roy Goodwin

Energy Consultant

In part one I explained how deregulation works, now we’ll get to selecting which of the dozens of suppliers to pick, and then how to manage your decision to save the money you hope to save. This involves changing the way you think about buying electricity. We need to stop being “unconscious” about this important purchase and start thinking about it more like buying gas for our cars. If you were driving down the road, and noticed your gas gauge dropping below ¼ full, you’d start looking at gas prices as you drive along your way. If you see two stations and one is selling gas 10 cents cheaper per gallon there is a good chance that is the one you’ll stop at. Why pay 5-10% more for gas than you have to, right? Because we now all have choices on where we buy our electricity, we need to check prices the same way to make sure we are not over paying. Unfortunately there are no road side signs to help us, and we don’t want to be switching suppliers every two weeks!

It does take a little more effort, but it can be well worth the effort when you see what you can save! For instance all last winter I paid 8.5 cents per kWh for electricity right here in Upton, while National Grid was charging all their customers as much as 15.6 cents (January and February). I saved 48% on the supply side of my electric bill over the last six months by being an informed consumer. Those that didn’t switch to a lower supply rate spent hundreds of dollars more than they needed to just to keep those lights on and watch their TV sets! Those of you that don’t want to keep throwing additional money away should keep reading!

Unfortunately there is more to watch out for than just the supply rate you are going to be charged. There are many companies out there that will take advantage of un-informed consumers that panic when their electric bills skyrocket in mid-winter. I can’t tell you how many people I’ve spoken to that switched to long term contracts at rates of 11.5-12.5 cents/kHw when National Grid exceeded 16.5 cents in January of 2015. YES, those rates sounded terrific when compared to what they were being charged, and most people that switched went right back into “unconscious” mode as soon as they saw their first lower bill. However when they found out they were still “stuck” at 12.5 cents last summer when National Grid had dropped their rates back down under 10 cents, they weren’t as happy! They then had to choose between staying with the higher rates or negotiating a penalty charge to switch out of the plan they had agreed to. Basically, these people were “screwed”!!!

The way to avoid getting “raked over the coals” with a fixed rate plan is to either commit to a low cost rate during the summer time period (when all rates are historically lower), or go with a supplier that will agree to a “not to exceed” rate with a provision for you to switch to a lower rate if/when rates drop. It is also important to find out what happens to your rate when the contract term expires. Some companies will offer a decent rate for 12 months, but then they automatically bump that rate up to a rate 15-20% higher than the market rate of the incumbent provider (National Grid) at the end of the term (I know, it happened to me a few years ago!). It wouldn’t be too bad if you saw it coming, but again we are usually in “unconscious” mode and won’t notice the much higher rate until 1-2 months after we’ve started being charged. It will take another 1-2 months to switch out of that higher rate, so you end up getting “overcharged” for 2-5 months. Often times that overcharging will cancel out the mid-winter savings you thought you had gotten!

Some towns, like Upton, to help their residents get better prices are even enrolling in “Aggregation” plans where the entire town gets enrolled automatically (unless they “opt out”) in a lower rate plan. The thinking here is that everyone can save money by buying in bulk. It works to a point, but a lot depends on the available rates when the plan is implemented and what the terms are. For example the Town of Marlboro is in a plan with a rate of 9.58 cents. That was a good rate for the residents last winter when National Grid was 13-16 cents, but not as good as other plans that were only 8.5 cents! All those people in Marlboro will still be at 9.58 cents this summer and yet National Grid just announced they are dropping their rates in May to 8 cents. Imagine how the tens of thousands of people in Marlboro are going to feel knowing they are paying more for their electricity this summer than if they hadn’t switched! And that is even if they don’t find out how much of what they are paying is going to the “consultant” that sold the town on this great deal! (Note: As part of these “Aggregation Plans” the consulting service gets paid a monthly fee based on the total usage of the customer base, so thousands of dollars is being paid monthly to the firm that sets up the Aggregation Plan for the Town. While those checks are written by the electric supply company, the cost is incorporated into the bid and everyone pays a share monthly. Because of this we can usually find lower rates with individual plans.)

One last thing: Energy de-regulation is fairly new but we already have dozens of companies actively looking for our business. Competition can be a good thing! It has already driven rates down considerably. Like in the telecom industry this competition will also change the industry. For instance at least one supply company now provides very low rates AND awards Vacation Rewards Points to their customers each month for just paying their bill! Good rates and free vacations, hard to beat! You also can get involved in programs that will give you credit for referring other customers, and those credits can be enough in some cases to cover your entire electric supply bill…. FREE ENERGY for life!

With all the companies involved, and all the various rates, plans, and programs, it can be very confusing to decide what plan is best. That situation has opened the door to a need for energy consultants that specialize in helping people understand the best way to get good rates, protection against overcharging, and potentially many other benefits. With the energy market in North America being a $470BILLION/year industry, there are some that believe Energy Deregulation will provide the greatest shift of wealth ever seen in America. The real exciting thing is that we can all take advantage of this if we want to.

(Note: My next segment will deal with residential solar. Stay tuned.)