Guide: How to Purchase Residential Electric Power and Natural Gas

 In Energy Deregulation

Residential and commercial accounts in states with deregulated natural gas and electric power markets have the “power to choose”. Account owners are no longer restricted to the local utility to purchase energy. Saving money by switching suppliers is now simple and easy to do with websites such as UtilityDiscount.com.

Many residential accounts remain with their historic local utility power provider. The rates these customers pay are typically set by a state regulator, usually the Public Utilities Commission (“PUC”). These regulated rates may be okay, but substantial savings, often over 20%, can easily be achieved simply by switching to a competitive energy supplier. The local utility remains responsible for delivery of electricity or gas to the resident’s home; there is never a service interruption with a change in energy supplier.

Switching is easy, but there are many traps for the unwary consumer.

Be wary of unsolicited mail offers and especially door-to-door salespeople. If the deal sounds too good to be true, it probably is, especially when it comes to slick energy promotions. The problem seems more pervasive with electric power sales. Gift cards, airline mileage points, introductory teaser rates are all designed to lock customers into expensive deals while confusing the consumer as to the actual price per kWh under the contract. Read the fine print to make sure you can verify the advertised rate and you understand exactly what the price will be during the whole term of the contract.

There are many types of contracts for energy supply, fully fixed, variable rate, block and index, time of use, etc. However, for most accounts, simple is the best and that is a fully fixed rate which will provide budget certainty at a fair price. This is especially true given the current stable, low-cost market for energy supply where one can now lock in longer-term fair priced contracts. Offers for supply, other than a fixed per kWh rate are often difficult to compare without sophisticated computer analysis and typically offer little value to the average small account while exposing the customer to an unknowable and often unmanageable upside risk.

Utility Discount has fully fixed energy supply offers on display, so visit UtilityDiscount.com and compare electricity and natural gas prices and rates in your area.

The challenge of price discovery.

How do you know if you are getting a fair deal? Is the advertised rate really any good? For residential and small commercial accounts, the process is fairly simple, use a website like UtilityDiscount.com to see what competitors have on offer and make an “apples to apples” comparison for the best price for the contract term length of service you want. The account’s current rate should be listed on the energy bill. Always check the regulated tariff rate where available, sometimes it will be competitive, but be sure to understand when the regulated rate expires. For example, historically, rates in Illinois for Commonwealth Edison (“ComED”) customers are reset every May. An excellent tariff (regulated) rate now will change, make sure you know when in order to make an informed decision.

Can you make a “like with like” comparison between the tariff rate and competitive offers? The ultimate key question to ask is, “can I get a good rate now and lock it in to achieve budget certainty?” If the answer is yes, your decision should be easy.

Is now a good time to sign a contract?

Could pricing go down? Sure, but we don’t see any reason for a significant price decline in the next few years. Wholesale natural gas and electric prices are near historic lows. There are plenty of reasons why prices could increase over time such as inflation. More problematic are shorter term price spikes. Natural and manmade catastrophes, unfortunately, happen all too often and cause real and immediate price increases. You risk paying a substantial premium in price if you do not have a longer-term contract locked in place when prices invariably rise. We recommend at least a year and are comfortable with customers entering into two and three-year contracts to secure a fair priced contract and achieve budget certainty.