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Consumer Choice on Energy: Knowing Your Power to Decide

March 3, 2023
Consumer Choice on Energy

Some utility customers can select an alternative electricity supplier in states where the electric utility sector has undergone restructuring. Consumer choice is also known as retail choice or customer choice. A retail electricity marketer, or alternative supplier, is a business that produces and/or sells electricity. A distribution utility affiliate could be the alternative supplier. Some suppliers sell electricity made using only certain types of energy, like wind and other renewable energy sources. Even when the business responsible for maintaining the poles and wires in their neighborhood remains the same, many homes and businesses nationwide can choose the energy supplier for the energy portion of their bill. Consumers now have the freedom to select the supplier and the plan that best suits their unique requirements. You can shop for a new electric supplier in a deregulated energy market. Shopping around for an electricity plan often results in lower electric rates than you pay today.

The first step is to understand how your electricity bill is made up. There are three parts to your energy bill: supply, transmission and distribution.

Fixed-Rate Plans

Fixed-rate plans lock in your electricity rate for a specific period. This allows you to predict your monthly electric bills and keep track of your budget.

In a variable-rate plan, you pay per kilowatt hour (kWh) that fluctuates with market prices. This means your rate will increase during high energy demand, like summer and winter.

During non-peak seasons, a variable rate plan can be cheaper for consumers. However, these plans have different stability and predictability than fixed-rate plans.

A variable rate plan also makes budgeting a bit harder. Price fluctuations can occur anytime due to weather, supply shortages, or other unpredictable external factors.

As a result, variable rates can make it difficult to budget for electric expenses. This can lead to a higher bill than anticipated and strain your savings and miscellaneous spending goals. Plans with fixed rates have terms ranging from 12 to 36 months. Some businesses provide shorter periods, like three months. Some offer longer durations, such as 60 months. The term length is crucial because it determines your ability to save money.

Your best fixed-rate plan depends on your needs and local energy prices. Comparing intends to find the right one for you and your family may be a good idea. Each State has a different system for managing energy. Your local utility will continue to send you your monthly electricity bill in some States, whereas your supplier will do so in others. Remember that choosing a competitive energy provider does not affect how consistently your electricity is supplied. The same local utility continues to provide your electricity. You only need to select the best plan with the help of websites like EnergyPricing.com. 

Variable-Rate Plans

Variable-rate plans offer flexibility and can be suitable for active customers who always watch for a better deal. They also don’t have early termination fees, which can make it easier to switch providers if you find a better one.

However, variable-rate electricity rates are subject to fluctuation based on market prices. Your rate could be lower when energy costs are standard, but you may pay more if your electricity demand spikes in the hot summer months or the cold winter.

It’s important to note that many retail electric providers (REPs) can change their prices without warning, so it’s crucial to research before signing a contract with one of these companies. You should also ensure that your chosen plan fits your budget and lifestyle well.

You can look at the price history of different REPs and their charges to understand which rates are best for you. You can then decide whether to sign up for a fixed or variable rate plan based on your needs and how much risk you’re willing to take.

Auto-Pay

Auto-pay plans are a great way to pay your bills automatically and regularly. They eliminate paperwork and help the environment by reducing the number of paper bills you receive.

They also can save you money by helping you avoid late payments and penalty fees from your biller, lenders and other companies that you owe. However, it’s essential to consider when auto-pay will make your financial life more manageable and when it won’t.

If you’re living paycheck-to-paycheck and struggle with cash flow, auto-pay could eat up any wiggle room in your budget that you might have. It could also lead to overdrawn accounts, bounced checks or a domino effect of subsequent missed payments and penalty fees that might bring your credit score down.

The best auto-pay plan can be easily adjusted to meet your needs and goals. For example, if you’re trying to pay off a loan early, you may want to use an auto-pay plan that will debit the same amount each month so that you can keep track of your progress.

Prepaid electric service is an electricity product that allows you to pay upfront for your energy. This makes it easy to manage your electric payments and energy usage. You’ll need to monitor how much you’re using and how much your Retail Electric Provider (REP) charges for each kilowatt hour of energy.

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