Home / Culture and Society / In Search of Money Saving Solutions: What is a Third Party Energy Supplier?

In Search of Money Saving Solutions: What is a Third Party Energy Supplier?

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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.

In more than a dozen states now, it is possible to save from 5 to 20 percent on your energy bills through a third-party energy supplier, thanks to energy deregulation.

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.

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About Brian P. Russell

Brian Russell lives in University of Florida's Gator Country. He enjoys exploring new places and learning new things, plus sharing what he's found with others. Turnoffs include double spaces after periods and emails with unneeded CCs. He plays H-O-R-S-E at 3 p.m. EST every weekday at 352 Media Group.
  • Ann Shirley

    Great tips! I agree, it is extremely important to do research and compare energy suppliers. Third parties are an interesting idea that I never thought about before. The way I see it, energy is always the same so if I can save money, why not give it a try? I have also been looking into North American power prices to find a new energy supplier. They help people choose from various rates, plans, and providers in order to get one that best meets their current needs.

  • Jeff

    Residents in CT are now learning that 3rd Party power suppliers are not regulated and can raise rates at any time without notice. Some being 110% increase. Buyer beware.

  • Sconels

    Buyer Beware indeed! I switched to a company called Gateway, charge was about 20% under JCP&L, then noticed that after some months the rate was about 10% higher. Switched to Systrum energy at 0.0866 which lasted for a while then they went to 0.093 – still OK. This month got my bill and Systrum had raised my generation rate to 0.1658 – a 78% hike in one month! The money I had saved just disappeared.

    • Ari Agnon

      I also signed up for Systrum about 7-8 months ago, and it did look good, and I was happy to save money. But this month, they also raised their price on me by 65%, to 0.1650!! In one month!! I called to complain, and the guy said that the cost of electricity has gone up, and everyone will have to charge more; however, JCP&L will raise it June 1, when people use far more electricity, and Systrum chose to raise it now, when people have smaller electricity bills. Not sure if this is all true, but he said it will come down by June and will be cheaper than JCP&L. He switched me over to JCP&L for now, and said I should call in May if i want to switch back. Meantime, it’ll take a month to get switched, and whatever I saved by being their customer is pretty much wiped out between this month and next.

  • sorry

    Just received my bill for January from Systrum Energy Electric Supply and the rate went from .100115 to .296300 because of lack of contracts and “futures traders speculating”. What a total gauging. There is something to be said for the Utility companies with contracted rates and making sure you conserve wherever possible at home. If anyone else is having same issues google in your area for the class action lawsuits as that is the only way you may make a difference.

  • Ace

    Same experience about Systrum Energy. my rate went from $0.09x to $0.200 within 1 month without any notice. TOTAL BS. There is no such thing as energy generation went up to the point it doubles.