Starting from the late 1980s, the electric industry has been changing from a monopolistic market to a competitive market in many states via deregulation. The process of deregulating splits the energy world between 3 different companies– with the goal of saving the consumer money. These three companies are:
- Generator – produces the electricity by operating generation facilities (coal plants, wind farms etc.)
- Utilities – Manage the process of getting power from the generators to the consumers. They operate power lines, manage billing, etc.
- Retail Energy Providers (aka Service Providers) – Develop plans designed to meet their customers’ unique needs.
Deregulation means that electricity service providers now operate in a competitive environment, and that they work hard to attract and keep customers. And that the advantage is on your side. By choosing a provider with a rate below that of your default utility, you are able to save on your electric bills. Of course, there are many factors to consider; not all providers and plans will save you money over the long run.
Electricity service providers are the retailers of the power market. They purchase at wholesale prices and sell to consumers at retail prices. And like other retailers, they must know the market in great detail in order to be successful. Electricity service providers review trends, conduct research, and prepare forecasts in order to create plans, packages, and discounts for electricity service that fit their customer’s needs.
Plans generally vary by:
- Cost – the price per kilowatt hour can be fixed or variable
- Time – price discounts can be tied to the contract duration
- Generation source – power can be generated from traditional methods (e.g., nuclear or coal), a variety of renewable methods, or a combination (a minimum percentage of renewable sources may be specified)
- Billing type – Rate discounts may be offered in plans that are billed electronically
- Other fees and discounts – these can include enrollment fees, fees for early contract cancellation, other fees tied to plan features, or loyalty programs that offer cash back discounts on purchases.
- Incentives – Gift certificates, airline miles, and one or more months of free electricity are examples of “extras” that can be built into service plans
Plan features are “mixed and matched” to offer different benefits. For example, a fixed price plan may require a certain time commitment (e.g., 12 or 24 months); another plan may guarantee 100 percent renewable energy; another may offer no commitments (e.g., month to month) for a higher rate.
Selecting a provider and plan might seem overwhelming, but electricity service providers offer a lot of assistance to consumers via the Internet and through sales teams. The right plan can be chosen based on a consumer’s historic usage and personal preferences.