What if you were told you could save up to 20 percent on your electricity and natural gas bills? If you’re like most people in the United States you would feel ecstatic, but probably also a little suspicious of whomever offered you the opportunity.
A Gallup national survey this month showed the price of energy was the no. 1 factor hurting the finances of people and small businesses. For some perspective, healthcare costs were ranked fourth.
It may seem a little too good to be true, but if you live in any of those states, you’ve probably seen direct mail pieces or have had someone knock on your door offering that same deal. If you’ve been on the fence, here is how it works, according to Alex Tullo of Systrum Energy, one of the first third-party energy suppliers in New Jersey. The company’s roots began with his grandfather about 90 years ago, in the heating oil business, before shifting its focus in 2007.
For decades, lawmakers in certain states have changed regulations in order to give consumers more choice in their utility providers, allowing customers to receive natural gas and electricity at lower rates than a local utility could offer. Deregulation in these states allowed customers to break away from their local monopolies to find discounts and cheaper rates. Sixteen states have fully deregulated their energy, with others making partial changes.
Your Utility’s Role
If you do sign with a third-party energy supplier, you are still receiving electricity from your local or state utility. Under deregulation, utility companies still own and maintain the transmission and power distribution infrastructure. While utility companies often lock in rates for years at a time, third-party suppliers are able to base their prices on current market rates, which are currently very low, especially for natural gas.
Rather than switching providers, a third-party supplier offers low cost electricity and gas by offering structured discounts to customers, usually at a significantly reduced rate from the local utility. Your utility will make sure that energy is delivered safely through their system, and will usually still send you your bill, but with your discount built in.
Choosing an Energy Supplier
It’s important to realize that third-party companies are not competing with local utilities, but rather working with them to provide savings to customers. Many utility companies will have suggestions for reputable suppliers on their website, so make sure to check which companies your utility recommends. SaveOnEnergy.com allows you to search suppliers by zip code, but some suppliers may only offer commercial service, so make sure you fully understand who you are contacting.
Always Do Your Research
Most states, like New Jersey, require that all third-party suppliers be licensed by the state’s public utility board, which means that they have to meet the same standards and rules that your actual utility company does. Before you sign with a third-party energy supplier, make sure to do your research and never let a company representative pressure you into changing your service. If you feel pressured, contact your utility company directly.