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.