Why Switching to an Alternative Energy Provider Could Cost You Big If You’re Not Careful By Anthony Giorgianni

If you live in one of the nearly two dozen states or the District Columbia that allow residential utility customers to pick the company that supplies their electricity and/or natural gas, you may have received a letter, phone call or visit from an alternative energy supplier promising big savings or benefits if you sign up for its service. If you’re like a lot of people, you have no idea how to decide whether you should switch from your traditional electric or gas company’s standard service. Or if you did make the change, you may be wondering if you saved anything or even ended up paying more.

Energy choice is complicated.Energy choice, which is nearly 20 years old in some states, promises low energy prices for consumers, as suppliers buy electricity or natural gas on the wholesale market and resell it to retail customers in a competitive environment. But whether those lower prices actually have occurred depends on whom you ask.

In April, the COMPETE Coalition, an industry group that supports electric competition, released an analysis of electric rates from 1997 to 2014 that says residential rates have risen less than inflation [3] in states with competition, while rates in other states have gone up more.

But that same month, the American Public Power Association, which represents more than 2,000 community-owned electric utilities, says electric customers in deregulated states pay more [4]. For example, in 2014, it said, customers in deregulated states paid 3.3 cents per kilowatt-hour more on average than those in states that haven’t adopted competition. That’s about $30 a month more for an average residential customer, who uses about 900 kilowatts of electricity each month.

One thing is certain. Choosing an alternative supplier is a complicated and often frustrating task that has left some people in energy-choice states paying much more than they would have had they stayed with their traditional utility’s standard service. Part of the reason is that there can be many companies competing in a given market, offering different deals and rates that can change unpredictably and be hard to compare. Many customers of alternative suppliers don’t even know the rate they were charged in given month until they receive their bill.

Also, in their effort to pry people away from traditional utilities, some alternative suppliers have resorted to high-pressure and deceptive sales practices, sometimes offering below-market teaser rates for a short period and then moving customers to variable rates that can be many times those charged by their traditional electric or gas company.

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