Some electric providers offer what sound like really great incentives, but their rates are actually more expensive in the long run.
When you choose an electric power supplier, a small error in judgment could cost hundreds or even thousands of dollars.
Learn how to calculate whether offered rates actually add up by keeping in mind these key factors.
Don’t Be Fooled by Variable Rates
Comparing variable rates can get you in trouble.
They always start low but then go up and never seem to come back down.
Variable rate plans can be dangerous because providers can increase the rate at any time without notice.
Sometimes fixed-rate plans work best because you know exactly what you pay at the end of your term, but keep in mind that fixed-rate plans in a market with falling electricity prices can seem expensive.
You may want to negotiate with your supplier to get a better deal: you’ll be surprised at the power of negotiation when suppliers deal with the threat of losing customers.
Know the difference between fixed and variable rates before you take the plunge.
Beware of Special Offers
It’s easy to fall for special offers like free nights, prepaid plans and free weekends advertised by many utility companies in Washington D.C. and the 13 states with deregulated electricity.
Many companies advertise low rates with the promise to charge unchanged prices.
These ads can be misleading.
A few plans may offer low introductory rates that later skyrocket.
Others may charge you high termination fees if you decide to get out of the contract.
Check for Over Billing
Many consumers pay their bills without double-checking the charges.
Electric suppliers are expected to provide an “electricity facts label” that contains standard information about fees, rates and contract rules.
As a rule of thumb, always check your bills to make sure it is similar to the signed contract.
You may find inflated rates that you don’t actually need to pay for.
Compare the cost per kWh with that of a public utility so you know whether you’re being overcharged or not.
Calculating Energy Bills
An electric company measures electricity consumption in kilowatt-hours (kWh).
Bills may have multiple kWh charges, including transmission, distribution, generation, renewable energy and energy conservation.
Some companies have kWh charges only for generation and distribution, while others have added charges.
Find out how much kWh you pay with these steps:
- Get a copy of your electric bill and add all the kWh charges mentioned along with the tax.
- Check the kWh charged in summer and winter so you understand seasonal pricing in your area.
- Compare your electric kWh rate with a public utility to know if a private provider is giving you a good deal.
- Check your electric consumption because rates are tiered. For example, you might pay 10¢ per kWh for the first 300 kWh and 15¢ per kWh above that threshold.
- Keep in mind that the average U.S. national retail price for electricity in residential homes is 12.35¢ per kWh. This should help you benchmark your electricity prices.
How to Choose an Electrical Provider in a Deregulated Market
A deregulated market promotes competition between electricity suppliers, which should lead to lower prices and good deals for customers.
Electricity costs depend on where you live, the season, how much you consume and your provider.
Before you start shopping, consider several factors that go beyond price.
Do research on reliability by checking online reviews and business ratings.
This will give you insight into previous customer experiences.
Check the load management and carbon footprint of each provider.
Is the provider supplying clean energy or coal-based energy that’s harmful?
Check for additional fees: sign-up fees, early-exit fees, switching suppliers and spiked prices during winter months are all typical examples.
Lower your energy prices by understanding your bills to effectively forecast, budget and choose between energy service providers.