Ever since the New Jersey electricity choice act went into effect, people have been divided on their opinions surrounding the benefits of a free competitive power market. While customers slow to adopt to energy choice wish for a time when their local utility once again controls all aspects of the electricity process, other savvy customers have taken advantage of their options and have found rate terms and products that best suit their individual needs. As prices have been on a consistent upward swing for most of 2014, consumers are starting to see the benefits of locking in a low fixed electricity rate when they become available.

Residential power customers who have shopped and chosen a competitive supplier in New Jersey have either selected a fixed rate, where the price for electricity is locked in for the term of the agreement, or a variable rate that fluctuates with the wholesale power market, but ultimately is at the supplier’s discretion. Many consumers who had selected the variable rate option in 2013 and early 2014 found out just how dangerous this strategy could be as wholesale power rates skyrocketed in January forcing suppliers to pass along the costs to their customers. Variable rate customers reported paying rates as high as 30 cents per KWh. Meanwhile, many fixed electric rate customers paid prices below 10 cents.

Having an electric bill jump to 20 or 30 cents from 10 cents in one month, and thus causing the electric bill to double or triple, is something that most New Jersey electricity consumers were not prepared to handle. The large price spike has woken up many people to the dangers of variable rate offers. New Jersey electricity suppliers offering variable rates enticed new customers with low introductory offers which would then rise quickly, but more importantly were accessible to the volatility of the wholesale markets.

In contrast, fixed electricity rates offer price security for those customers who pursue that avenue. When a customer enters into an agreement with a New Jersey electricity supplier offering a fixed electric rate, that supplier will purchase the power for the customer for the entire term upfront, and then sell it back to the customer on a monthly basis. For example, if a customer decides to lock in a fixed rate for 36 months, the electricity supplier will buy 36 months of power for that customer from the wholesale electricity market. By purchasing the power upfront for the customer, the supplier is able to keep the rate fixed for the term of the agreement. With variable rates the electricity supplier only buys one month of power for the customer at a time, so when the wholesale market spikes up, the supplier has to either pass on the costs or eat it themselves; usually they take the first option.

As electricity prices have risen in 2014, the fixed rate offers have been going up as well in New Jersey’s two largest service areas. For most of 2013, JCPL and PSEG customers were able to save between 10-20% on their electric bills by locking in a fixed electric rate. While those savings have shrunk to below 10 percent, the advantage of locking in a rate and having price security is still advantageous. In New Jersey, the default basic generation service rate changes every year on June 1, and then again on October first. If you can save five percent today by locking in a low JCPL electricity rate it makes sense to do it to not only save money right away, but also to protect yourself from the potential future price hikes. A rate that yields 5% savings today versus the basic generation servcie default rate might end up being 20% savings a few months from now if the utility companies raise their default prices as expected.


Electricity Rate Savings in Baltimore Result in Increased Power Shopping

October 14, 2013

The Maryland electricity choice market continues to make progress as the number of shopping customers increases as a result of more active electricity suppliers and lower generation rates. With the ability to lower the price of their generation supply rates on their monthly BGE electricity bill, consumers are quickly discovering the benefits of Maryland’s decision […]

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Ohio Sees Increase in Number of Competitive Energy Companies

June 9, 2013

Energy choice participation has increased in Ohio as consumers are becoming more aware of legislation that allows them to purchase their power from alternative energy companies. The creation of a competitive electricity market has created an abundance of electric rate options in the majority of Ohio service utility areas. Ohio has seven main investor owned […]

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Understanding Pennsylvania Commercial Index Electricity Pricing

November 14, 2012

While most Pennsylvania commercial businesses, looking to get off their electric utility high default rate, will choose to lock in a fixed electric rate, another option for larger users is the index product. A growing number of alternative electricity suppliers who wish to remain competitive in the market will offer the index electric product to […]

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Texas Businesses Face Hidden Charges on Electricity Contracts

November 6, 2012

By Todd Yasbin The competitive commercial electricity market in Texas provides small business owners the ability to take bids from over thirty licensed electricity providers licensed by the Public Utility Commission of Texas. Businesses can elect to choose from several rate products ranging from basic fixed pricing to variable price methods tied to specific wholesale […]

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Pennsylvania Electric Utility Commercial Default Rates

September 11, 2012

Since the cap rates expired in 2010 for businesses serviced by Pennsylvania Power & Light, just about 50% of PPL commercial customers have switched over to a competitive commercial electric rate. Those who were early to take advantage of deregulation have enjoyed annual savings of 30% or more. The other 50% is set up on […]

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PECO Offers Choice To Customers

July 11, 2012

In Pennsylvania, where the electricity market has been deregulated, the majority of consumers have a choice of who they want to buy their electricity from. However, depending on what part of the state that you live in will depend on just how many choices are available. While consumers have a choice of who supplies their […]

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Electricity Rates on the Rise for PPL Customers

May 24, 2012

For the second straight summer, residential and business customers of the central Pennsylvania utility Pennsylvania Power & Light will see their generation electricity rates rise drastically. PP&L customers who have not looked for lower electric rates will see their default power prices rise by 15% this summer. Consumers who have searched, compared, and selected to […]

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Maryland Electricity Rates and Choice

May 8, 2012

The majority of Maryland electricity consumers who have not shopped for competitive electric prices will see their electric rates increase in June. Baltimore Gas & Electric (BG&E), Potamac Electric Power (PEPCO), and Delmarva Power will all increase their rates for default paying residential customers. The larges increase will be placed on Delmarva customers who will […]

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PECO Electric Default Rates Go Up

February 28, 2012

Electricity customers in the Philadelphia area who have not taken the time to learn about electricity deregulation and choice will see their electricity bills rise on April 1. PECO Energy, the local utility for the area, recently announced that their default price to compare electric rates will increase for both residential and commercial customers. The […]

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