How to Choose Your Suppliers of Gas and Electricity
Sixteen states and the District of Columbia have deregulated electricity markets. Natural gas markets are deregulated in 22 states. Deregulation means consumers can purchase electricity and natural gas directly from suppliers in a competitive marketplace. The utility companies no longer hold a monopoly on supplies, they are required to distribute power to consumers. You will usually pay a lower rate than what the utility charges when purchasing energy directly from a supplier. Consumers should compare different suppliers and their varying rate structures to find the best deal.
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Instructions
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Determine if your energy consumption is high enough for you to save money buying from a supplier. Most energy suppliers offer rates at fractions of cents less than utility companies; for example .10 cents per kilowatt hour from the supplier to .12 cents per kilowatt hour from the utility company. If your energy consumption is relatively low, savings are usually small over the length of the contract. In some cases, utility-provided energy rates may drop below supplier rates for certain months during the contract period.
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Find out whether suppliers are licensed by the state public utility commission. Even in deregulated markets, suppliers should be licensed with the utility commission to insure reliability. However, even licensed suppliers provide varying rates. Buyers should be aware of all the details in the contract before signing it. There is little recourse once contracts are signed.
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Analyze rate structures to find the one most suited to your consumption pattern. Three different rate structures exist: fixed, floating and hybrid. A fixed rate is set for the life of the contract, for example, .10 cents/kWh for a 12-month period. A floating rate rises and falls each month in response to wholesale gas and electricity rates, for example, .01 cents/kWh less than wholesale prices. A hybrid rate is a combination of fixed and floating rates, for example, a floating rate during the months of December, January and February for natural gas and a fixed rate for the remaining months of the contract.
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Determine the term of a supplier's energy rate. Be sure the term for any agreed upon rate structure is explicitly stated and included in the contract. Energy rates fluctuate based on supply and demand and capacity. Natural gas rates usually rise in the winter when heating demand increases, however, natural gas rates sometimes fall on the wholesale market if warm weather occurs unexpectedly. Natural gas consumption falls significantly during warmer months, while electricity demand and rates rise as consumers cool their homes. It's important to track your overall energy use to avoid getting locked into a higher rate for a full-year contract.
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Analyze natural gas and electricity consumption for a calendar year. It's important to understand consumption patterns for a full year to determine whether a supplier is offering significant savings. Ask the supplier to track your consumption patterns, then provide the appropriate rates to insure savings.
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References
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