Compare Plans

Given a choice of electricity providers, it makes good sense to compare electricity rates offered by different companies. More and more people do have this choice because of energy deregulation policies. Not everyone takes the best advantage of their choice, particularly if they don’t know the right way to compare contracts.

The Electricity Marketplace

As states deregulate their electricity markets, companies rush in to pursue the business of homeowners who could be getting a better deal. In Illinois, Pennsylvania, and elsewhere, these companies are competing heavily with each other to appeal to potential customers.

One thing they can offer you is a low rate. Indeed, almost all of these companies can give you a lower rate than your default provider. But rate isn’t everything, especially if the advertised rate is going to change from month to month. When you do go to compare the different contracts, make sure you pay attention to the following:

Elements of a Contract

Some other things that a savvy consumer will pay attention to:

• Length of contract. A contract might last for six months, a year, two years, or more. Some companies also offer a month-to-month option that buyers can cancel without a fee. Think about the contract as a whole when you decide how long you want to be locked in for.
• Change in rate. Electricity contracts can be fixed, variable, or somewhere in between. A fixed contract charges you the same rate for electricity across its whole duration. If the rate is variable, that means it changes from month to month along with the market. (Note that your default utility also varies its rate; you’re almost certain to save money when you compare electricity rates to your utility’s.)
• Signup bonuses. Many companies offer you extra incentives to sign a new agreement with them. Consider how this bonus figures in relative to the rest of the contract.
• Energy source. Some plans, without too much additional expense, allow you to get your energy partly or exclusively from a renewable source. Electricity choice gives you the option to subsidize green industry with your energy dollars.

All these features go into your agreement with the electricity retailer. Consider how they work together when you choose a new company and plan.