Many areas of the country have embraced energy deregulation, allowing consumers to choose an electricity provider and plan. Regulated markets limit consumers, and many people don’t like this. They feel competition helps bring prices down while improving customer service. When people have the option of choosing an electricity provider, however, they may hesitate. What if they make the wrong choice?
Consumers need to understand the options available to them. Many people assume you find your electricity rate and that’s it. A lower rate is only one factor a person should consider when choosing. Their electricity usage, renewable energy options, and other factors are also important.
Electricity Rates
Several factors affect electricity rates. Location and seasonality affect prices. Weather also influences how much a person pays for electricity, and consumers may pay more during periods of high demand. For example, prices often increase during the summer and winter, when weather extremes are more common. The EIA anticipates consumers will pay more for electricity in 2025, but rates will basically remain the same when inflation is factored into the equation. Residential customers will pay an average of 16.8 cents per kilowatt-hour.
Shopping for an Electricity Plan
Consumers have resources that will help them choose the best energy plan. These tools determine available plans based on the user’s location and allow the consumer to filter the plans by provider, term lengths, and features. Consumers should review each plan carefully to decide which best meets their needs. People should never choose a plan based on price alone because other factors, such as customer service, are also important.
Energy Provider or Utility Company?
People are often confused about how deregulation works. In a deregulated market, a utility company provides electricity and oversees the power grid. The energy provider or supplier sells electricity to consumers and handles billing. Their products rely on the power grid, but they aren’t responsible for its maintenance and upkeep.
Energy Plan Options
Energy plans come in many forms. Consumers often choose fixed-rate plans to know how much they will pay throughout the contract. Rate fluctuations aren’t a concern when this option is selected. However, energy providers often charge early termination fees if a consumer chooses to exit the contract before it ends. The only exception is when someone moves out of the provider’s service area.
Variable-rate plans charge different rates based on current energy market prices. The rates fluctuate with the seasons, and a consumer might find their electricity rate spikes during high demand. However, it may be significantly lower during off-peak periods. Providers usually don’t charge early termination fees with these plans.
Term Lengths
Consumers are often required to sign a contract with their energy provider. Standard contract term lengths are 12, 24, and 36 months. Variable rate plans may offer a month-to-month option. Renters often choose the 12-month term, but homeowners may choose the 24- or 36-month option to maintain stability with their energy pricing. Some providers also offer a no-deposit or pay-as-you-go energy plan for those who don’t meet the provider’s credit threshold or don’t have the funds for a deposit.
Consumers should research all options to find the provider and plan that best meets their needs. Customer service must also be considered when making this decision, as the consumer needs to know where to turn when they encounter a problem. Nobody wants to be without electricity today, and the right provider will do everything possible to prevent that.