Since the 90’s many states have allowed residential and commercial customers to choose their electricity supplier. The idea was that bringing competition to the market would increase consumer options (including longer term fixed price plans, renewable power, etc) and drive down prices. In this article I will briefly explain how the process works and whether deregulation actually delivers on its promised benefits.

So how does all this work?

1. The power stations still generate power and put it on the grid.
   
2. Suppliers buy power from the generators wholesale and sell it retail. They market to consumers on the web, by direct mail, telemarketing, door knockers, and other means.
   
3. Your utility is also a supplier (in fact it is the “supplier of last resort” if you don’t choose one or if your supplier fails to do their job). They buy power on the wholesale market just like other suppliers.
   
4. Your utility still delivers the power to you over the grid. They own the transmission and distribution lines. That’s a natural monopoly and unfortunately deregulation doesn’t provide any means to reduce the delivery part of your bill.
   
5. The utility is generally also responsible for billing (“consolidated billing”). If you have chosen a 3rd party retail supplier the utility collects payment from you on their behalf and forwards it to them.
   
6. You the consumer will still receive the electricity from the utility and the support from them you’ve always enjoyed. For example, in the case of an outage you will still call your utility, not your retail supplier.
   
7. The electricity you receive from one supplier is no different from that you’d receive from any other. It’s the same electricity, down the same wires, on the same bill.
   
8. You don’t have to make any appointments, install any equipment, or make any changes to how you use or pay for electricity. Utility switching is really a bookkeeping operation that happens in the background without your involvement, other than initiating the switch.
   

Which states have energy choice?

The following states / districts allow residential and small commercial utility choice (either electricity, gas or both). For larger commercial and industrial the list is far longer:
CT, DC, DE, MA, MD, ME, MI, IL, NH, NJ, NY, OH, PA, RI, TX

So did it bring down prices?

The answer is ‘it depends’. On one hand it is possible to find cheaper suppliers on fixed rates that can save you money. On the other hand the process of finding the right plans for you, comparing them to the utility to see if you can save, enrolling and then monitoring to ensure you are continuing to save is difficult and time consuming. There are a lot of rules and fine print that can trip up the casual player in the markets. This is probably why most of the benefit of the deregulated markets currently goes to large commercial and industrial consumers who are savvy about the markets and who often employ dedicated utility managers to help them.

We created Utiliz to help bring the benefits of active utility management to the masses. Our service helps residential and small business customers consistently save time and money without having to understand the market or do the work themselves.