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Energy deregulation essentially breaks down
the monopoly previously held by utility companies by separating power
production from power distribution. Energy deregulation actually began in the
1970s, when the Public Utilities Regulatory Policies Act (PURPA) created a
structure for independent power producers. But deregulation became much more
widespread and viable after the Energy Policy Act of 1992, which eliminated
restrictions on prices charged for wholesale electricity.
The reasoning behind choosing a different
electricity generation company is fairly simple: If you live in an area where
the electricity market is deregulated, then choosing an alternative home
energy supplier could allow you to compare rates, products, services and then
pick the best option for your needs while still receiving your power through
the public utility as you always have. Actually choosing that supplier,
however, can be a little more complex. Here are the five questions you should
ask before signing a contract:
1. How
Does Pricing and Fees Work?
There are two main
pricing models used by suppliers. One is a fixed model, in which you pay a
set price for electricity as long as your contract is in effect. The other is
a variable or floating model, in which your price depends on several factors for any given month. Some companies might
use a hybrid between these two models. You should also ask about any fees you
will pay on top of the cost of your actual energy usage.
2. What
Contract Lengths Are Offered?
Before you sign anything,
you should know if you are allowed to switch back to your previous supplier
at any point or if you are required to stay under contract for a set length
of time. You should also ask about the penalties should you want to get out
of your contract early.
3. How Are
the Two Aspects of Billing Handled?
Since deregulated energy
markets split production and distribution into two services. In many cases
you will continue to receive the same bill from your current public utility company,
with the only thing that changes is the name of
the delivery provider within that bill. But you should ensure that you will
continue to receive only one electric bill and if not, understand how the new
bill will be coming to you so no payments slip through the cracks.
4. How Do
You Generate Your Electricity?
Each electric company has
a slightly different profile in terms of how it generates its power. If you have strong
feelings about sustainability or renewable options, then you will want to choose a supplier that shares your values in
terms of green electricity generation. Remeber to ask about those power production methods and decide
if they line up with your values.
5. When
Will the Switchover Happen?
There will be no
interruption in your service if you switch to an alternative electric
supplier, but you will probably want to know for bookkeeping purposes when
your new supplier anticipates the switchover occurring. The switching time frame is controlled by
state laws and/or regulations. For
example, some states allow switching to occur in a few days while other
states have proceedures which may result in the switching taking up to 1 to 2
billing cycles.
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