3/7/13 Switching energy suppliers can result in savings, but watch those rates

  • By Nick Sabo
  • March 7, 2013
  • 323
                        
SUMMARY: Suppliers offer competitive rates Consumers can switch to a new gas or electric supplier any time they please, but finding true savings means keeping a careful eye on changing market rates and contract agreements. Thanks to legislation deregulating the natural gas and electricity generation industries, residential consumers have a host of energy suppliers to choose from. (Electrical co-ops, such as Holmes/Wayne, are exempt from deregulation). These suppliers offer rates that can change on a variable basis or allow consumers to lock in a price for long periods of time. When their rate is below that of your current supplier, it may be time to switch. After you change suppliers, you will continue to be billed by your current provider. Some fees previously charged by your provider may still apply. Your provider is the entity that actually owns the power lines and infrastructure that delivers the utility. Suppliers generate, or trade in, energy or energy commodities. SWITCHING ELECTRIC SUPPLIERS Finding savings on your electric bill starts with looking at the current rate you are paying, then looking at all options available. Your electric utility bill will have a price to compare (ptc), which is calculated based on the total amount you would no longer pay your utility company for the generation portion of your electric supply if you choose another supplier, divided by the kilowatt hours used. “Anytime you can get below (the ptc), you can save money,” Matt Schillings, a spokesman with the Public Utilities Commission of Ohio (PUCO), said. “It’s hard to say for anyone when it’s time switch. Each individual needs to look at their price to compare.” On an American Electric Power bill, for example, the ptc is printed in italics beneath the summary of charges. Next, visit PUCO’s ‘apples to apples’ comparison chart on their website, www.puco.ohio.gov/puco/ (it’s located in the top third of the page, under the ‘Save Money’ heading). The Ohio Consumer Council (OCC) webpage, pickocc.org/, has a similar chart accessible by clicking on the ‘Electric Choice Information’ header located half way down the far right side of the page. The charts list suppliers and their offers. Any supplier that can deliver electricity at a lower cost than your current supplier could result in savings. Electric deregulation dates back to the late 1990s. After a five year period during which rates were frozen, deregulation placed electric suppliers on a market-based system. Previously, individual power providers generated their own electricity, setting the price. Through deregulation, consumer choice now has a hand in the markets. Over time, consumer participation has been huge, Shilling said. A study of the Cleveland area shows 85 percent of customers now buy their electricity through a competitive supplier. But consumers should be wary when choosing a new supplier, Amy Kurt, with the OCC, said. Contracts that offer a fixed price lock the consumer in, whether the ptc goes up or down. With a variable rate contract, price can go up or down, based on a variety of factors. Also, many contracts carry penalties for early cancellation. A selection of contract terms offered on PUCO’s apples to apples chart March 6 have early cancellation fees running from $25 up to $100. Some suppliers do not charge an early cancellation fee. “We encourage carefully reviewing contracts,” Kurt said. “Understand the rate with your current supplier, where you are now.” In a changeable market, a contract that offers 10 percent off the ptc is the only way to have guaranteed savings over your current supplier’s rate, Kurt said. SWITCHING GAS SUPPLIERS Switching your natural supplier can be carried out in much the same way. Both the OCC and PUCO offer charts of the current offers out there. To find savings in natural gas, compare your provider’s standard choice offer (sco) to those rates offered by suppliers. If a supplier can offer a lower rate, you may see some savings. But it may be best to leave well enough alone. Kurt says that historically, it is best to stick with the provider, rather than go with a supplier. The provider charges a market based price, set through a series of competitive auctions. On average, those who have switched to a gas supplier actually ended up paying more than if they had stayed with the provider, Kurt said. In the period from 1990 to 2012, customers who made the switch have paid an aggregate $850 million more than if they had stayed put. The OCC lists the sco offered by your local natural gas provider at the top of its list, which can be found at their website just below the header for electricity. Again, comparing price and contracts is key before switching. WHEN TO SWITCH? IT’S UP TO YOU You don’t have to wait for suppliers to present you with an offer. Gas and electric suppliers want your business, and they are open to adding new customers anytime. The supplier’s going rates can change from month to month. The apples to apples charts on the PUCO websites are updated weekly, and the OCC tries to update regularly as well, Kurt said. Those envelopes coming in the mail promising low rates and savings are “just marketing” by suppliers, Shilling said. Deregulation also allows more choice in how your electricity is generated. For example, AEP Energy offers wind-only generated electricity.


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