Electricity Providers

In the “old” days, before electricity deregulation, the power that came into our homes over the wires appeared to come from one place: the electricity companies whose names were on our bills.

Not any more.

The U.S. power picture has changed. Electricity we receive today is generated by electricity service providers and delivered to us by utility companies. In other words, the name at the top of our electric bills is not necessarily the name of the company where the power originated.

This is an important distinction, because if you live in a deregulated state, you can now select from electricity service providers that are different from your utility company without any change to wiring, meters, or billing arrangements.

Deregulation has cracked open the competitive environment in affected states. This means that offers from cheap electricity providers, green electricity providers, and other electricity providers vie for customers’ business. This is a big benefit, because it means big savings – 15% or more – over current electric bills.

Electric Service Basics

Electric service is made up of three separate parts, collectively referred to as the electrical grid:

1. Generation – the production of electricity by electricity service providers
2. Transmission – the movement of electricity from the point of origin to a distribution system
3. Distribution – the delivery of electricity to customers’ homes or businesses by utility companies

Prior to electricity deregulation, power was supplied by regional monopolies that owned and operated all three parts of electric service. In response to a growing demand for competition in the industry, spurred by the success of deregulation in the airline and telecommunications industries, Congress passed the National Energy Policy Act in1992, allowing electricity generators to compete for the sale of electricity to utilities. In 1996, the Federal Energy Regulatory Commission issued Order 888 which required utilities to open their transmission lines to competitors. This opened the door for the states to pursue deregulation, and nearly half have done so.

What does this mean to you? It means that you may be able to select who generates your electricity. When you choose an electricity service provider, the utility company that takes care of distribution of your power will remain the same (the transmission part is usually covered by the rate your pay your electricity service provider).

Here is an important note about changing electricity service provider:

When you choose a different electricity service provider, your bill will look the same, and any needed maintenance and repairs will be requested through and handled by your utility company.

In many areas of the country, competing electricity service providers offer a range of packages for residential consumers. A number of electricity providers offer rates that can cut a customer’s previous electricity costs by as much 15 percent or more.