Should You Switch Electricity Suppliers?

Here’s how to spot a good deal when comparing electricity rates — and when to run from a bad one.

Know a fixed rate from a floating rate? Homeowners in 13 states now have the freedom to pick their energy supplier. But before you sign that new contract, do some research to make sure you're really getting the best deal. Image: Liz Foreman for HouseLogic

There’s been a lot of hoopla around alternative energy suppliers. Can they save you money and even provide more reliable service? We weren’t sure. So we did some digging — some very deep digging — to find out how best to compare electric rates.

Why You Have the Option to Switch

The electricity market began to deregulate in the late 1990s. Today, residents in 13 states get to pick their energy supplier based on price and how the power is generated.

Since energy suppliers have no way to get electricity into your home, your public utility company will still be your provider because they own all the poles and wires. They will also continue to handle customer service issues and infrastructure upgrades.

Tip: When considering a new supplier, make sure they have a state license. They must be licensed to sell energy through a public utility.

FYI: Since your public utility company is still your provider, switching suppliers won’t improve unreliable service.

Will Switching Really Save You Money?

It can if you pound the digital pavement. In a part of New York where consumers pay twice the national average for electricity, we were able to find suppliers that could save at least 10%-15% on our electricity bills. Ditto for Ohio and Maryland.

The trick is you have to find each state’s list of licensed electrical suppliers and then compare prices.

While there are plenty of sites that promise to do the comparative shopping for you, they may not list all suppliers available. State-run sites have the complete list. Other sites may only list suppliers they represent.

Finding a state’s list of licensed energy suppliers can be a frustrating process — that’s why we did the legwork for you. Toward the end of this article, we’ve got the links to each state’s site. These sites provide a list of questions to help you pick a supplier.

Tip: Many state sites post a complaints scorecard. These scorecards show how each electric supplier compares to the average rate of complaints for the entire residential market.

FYI: Electricity generated from a green power source such as sun, wind, or water can be more expensive than electricity generated by fossil fuels.

Related: Tell Your Energy Bill Who’s Boss

What You Need to Know Before You Compare

The key to finding a good deal starts with:

  • Understanding your current bill.
  • Understanding how a future supplier will bill you.
  • Knowing the right questions to ask a potential supplier.

Before you start shopping around, you’ll need to:

  • Figure out the average amount you paid per kilowatt hour (kWh) for the last 12 months.  If you don’t have your last dozen bills on hand, call your electricity supplier.  

Next, take a look at your current bill, focusing on three things:

  • Price per kWh
  • Additional taxes
  • Additional monthly service charges

Everything else will remain the same.

How the Different Rates Work

Now, here’s where things can get tricky.  The following are pricing options that affect kWh costs. They’re considered standard in the industry.  It’s important to understand these terms before agreeing to work with a new electricity supplier.

Fixed: This is a locked-in unit price for kWh throughout the term of a contract.

The good and bad: If energy prices skyrocket during your contract, your unit price won’t be affected. But if prices drop below the unit price, you’ll end up overpaying.

Floating: Also known as a variable rate, this allows a homeowner’s unit cost to rise or fall based on the wholesale value of electricity or natural gas.

The good and bad: Although this may sound like a great deal when prices are low, if the market becomes unpredictable or if prices sky rocket, it can be difficult to manage your home’s energy costs.

Hybrid: This is when a percentage of energy use is billed at the fixed rate and the remainder is billed at the floating rate.

The good and bad: In this case balance is everything. You could end up with a whopping energy bill if the floating rate goes up and it’s applied to a large percentage of your bill. 

What to Ask Suppliers

  • Is price per kWh a fixed price?
  • Is there a monthly service change or any other fees?
  • Are taxes included in supplier cost?
  • Is there a contract and how does this affect cost? Am I getting a special one-time deal?
  • Are there any other discounts and promotions I should know about like referral programs?
  • Is there a fee if I decide to break the contract?
  • For billing issues, can I contact you directly and how?

Tip: Can’t find a better kWh rate? Electricity is a commodity so its rates change daily. Try searching when your kWh rate was the lowest over the last 12 months.

How to Avoid the Gotchas

Be wary of the following:

  • Low introductory offers: Rates like these can go sky-high after the promotion expires.
  • Auto renewal: You don’t want your contract to renew automatically without your permission.
  • Energy suppliers who use misleading tactics: This includes showing up on your doorstep or calling and saying your public utility company sent them, or you must switch suppliers within a limited amount of time. Your local utility company would not send anyone out on their behalf.

Here are Helpful Links to the 13 State-Run Sites

1.  Connecticut Department of Energy & Environmental Protection

What you’ll find:

2.  Delaware Public Service Commission

What you’ll find:

3.  Illinois Commerce Commission

What you’ll find:

4.  Maine Public Utilities Commission

What you’ll find:

5.  Maryland Office of People’s Counsel

What you’ll find:

6.  Massachusetts Office of Energy and Environmental Affairs

What you’ll find:

7.  Michigan Department of Licensing and Regulatory Affairs

What you’ll find:

8. New Hampshire Public Utilities Commission

What you’ll find:

9. New Jersey Board of Public Utilities

What you’ll find:

10. New York State Public Service Commission

What you’ll find:

11.  Ohio Public Utilities Commission

What you’ll find:

12.  Pennsylvania Public Utility Commission

What you’ll find:

13.  Texas Public Utility Commission

What you’ll find:

Group Buying Power

Several states have Community Choice Aggregation (CCA) laws that allow local governments to pool their community’s electricity need in order to purchase power on their behalf.  While savings is not always guaranteed, many municipalities are able to obtain discounted electricity prices.

Tip: To find out if your state plans to deregulate, visit your state’s utility commission website. Go here to find your state’s website. If you can’t find the info on the state site, you can try calling or emailing your commissioner’s office.