First Person: Switching to an Independent Energy Provider Didn't Cut My Utility Costs

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In 2011, The Washington Post published an op-ed, "The lesson from Solyndra: It's time to deregulate the energy market." The author envisioned deregulation of electricity in all states (similar to many countries in Europe) would mean lower prices. Currently, retail consumers in 15 states have deregulated electricity markets where they can shop around for the lowest cost provider. Basically, electricity is becoming like long-distance telephone service. In deregulated markets, the distribution is still by the local utility, but the generation is by a third party. As of the time of the article, 60% of consumers in Texas (a mature deregulated market) had chosen a third party provider. I have had an independent electricity provider for 15 months now. Did I save money by lowering my electric bill?

A couple of years ago, independent electricity companies, such as Constellation Energy, Gateway Energy, Green Mountain Energy, and Viridian Energy entered my state. Many of these provided a clean or greener energy (wind or solar) compared to the local utility (coal and natural gas) at competitive prices. I noticed some providers were offering a fixed price that had onerous contracts with high termination fees, and bait and switch selling methods. However, I opted for a variable price plan provided by a 20% renewable energy provider. The company gave me a modest signing bonus and advertised a 10% savings over the utility rate. It also donated money monthly to a charity I am affiliated with, and continues to do so.

I estimated, based on my modest consumption patterns, that I would save $75 annually, much of it in the summer months. For the first several months, my average price was 8% lower. However, in five of the past year, my electric rate was 1-7% higher than what it would have been if I had not switched at all. In the other months, it was either the same, or only 1-2% lower. Over 15 months, I actually paid slightly more money for my electricity. Was a victim of bait and switch, or was it just bad timing on my part?

I checked my independent electric company's website and although their introductory rates were lower, their overall marketing message had changed from "saving green" to "being green." My rate was close to the average according to the U.S. National Energy Administration (EIA). Since third party providers buy from the open market, end consumers have to brace themselves for ups and downs in prices. On the other hand, many utilities prices are a 3-year smoothed average, so they are still climbing down their price charts.

Am I disappointed I didn't save any money? Yes. However, I am glad the electricity I use is a somewhat more renewable product, making my carbon footprint a bit smaller. In the past 15 months I have never had a service disruption or a billing issue. My bill is also the same one I get from my utility and my auto-debit is unchanged. I could always switch back to my utility or another provider if the rate difference increases, just like I would switch long-distance carriers.

If someone asked me today if I would recommend switching to a third party electricity provider, I would say if you want to only save money, then no. However, if you are keen on using a greener electricity product that reduces your carbon footprint, then switching is the way to go.


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