By Richard Spilky, Constellation . . .
Since the late 1990s, millions of business power customers in certain states have had the freedom to choose their own energy supplier. With Energy Choice, your local utility continues to service all equipment, such as meters and wires, but you can pursue pricing options and strategies with competing energy suppliers. This is a big change from the traditional approach where businesses purchased energy supply with the utility.
It’s not a surprise that you may have questions about how Energy Choice works. Here are answers to some frequently asked questions about energy choice.
- What are the choices in Energy Choice?
Over the last fifteen years or so, 13 states and the District of Columbia have enabled Energy Choice. They have restructured their utility markets. This allows you to select among competing power suppliers. Delivery of the power supply is provided via non-discriminatory access over the network of wires operated by the local utility. The delivery service rates are set by state utility regulators.
Restructuring treats generation and delivery separately. Restructured energy markets establish a range of supply options for varying contract terms and conditions. For example, you can choose fixed prices*, variable pricing or combinations of the two, different contract durations (e.g. one, two or three years) and desired levels of renewable energy.
- Can competition make prices lower?
In competitive markets, generation owners compete with each other at the wholesale level to serve load at the lowest price. Most energy choice states take part in multi-year capacity auctions. Generation owners make generation capability available on a multi-year basis at fixed prices. The energy produced at any given moment is a function of load levels and competitive regional market prices. Competitive markets also enable price transparency.
Customers in competitive markets can better manage their energy costs by choosing contract options that work for their unique usage patterns. Typically, default service offerings (available in most competitive states) do not effectively recognize these differences across businesses. This has created a “one size fits all” approach in the form of a tariff.
- If I choose a Competitive Electricity supplier, do I need to worry about reliability?
This is a question that often came up in the early days of retail electricity choice. The answer, then and now, is no. The network of wires at the bulk transmission and local distribution levels does not discriminate based on energy supplier. The grid pools all generation produced at any given time to balance with customer load. You will see no interruption in your service and the utility will still respond to any storm- related or other types of power outages.
- If I choose a Competitive Electricity supplier, what changes should I expect to see?
If you’re switching from utility service to a competitive power supplier or from one competitive supplier to another, you will not see any disruption in service. There is no change in reliability or service quality. The changes will depend mainly on what purchasing option you choose.
For example, if you choose a multi-year fixed* price contract you will likely have more price certainty than you would with the utility’s default supply. Utilities can petition state regulators for rate changes according to their own schedule. Although competitive suppliers and utilities both have the ability to pass through certain charges, suppliers usually can only do so as part of a change in law event under fixed price contracts. Utility default service often passes through various charges routinely per its tariffs.
Competitive suppliers can usually provide more usage information and analytics that could help you better manage your energy costs.
As a leading competitive retail supplier, Constellation offers more than just an alternative to your utility company. We provide trusted expertise and integrated solutions to help businesses purchase energy more strategically and manage energy more efficiently. We also offer a variety of renewable energy options to help companies meet their environmental goals.
Contact Constellation today if you’re interested in learning more about energy choice.
*Product availability varies by state and customer class