In many states energy users now have a choice of who to buy their electricity from. While competition provides more options and lower prices for consumers in the long run, it can cause a great deal of confusion for many curious customers. With so many electricity companies competing for business, its not always easy to trust the information you are getting about your power bill options.

When making a comparison of different power bills, it is important to consider fixed rate monthly charges in addition the the rate being offered. Depending on how much electricity consumption you have on a monthly basis will determine how much that monthly fee will effect your overall rate per KWh. For example, a $5 monthly fee will only add $0.0025, or a quarter of a penny to the rate for a household using 2,000 KWh a month. However, if you live in a one bed room apartment that only uses 500 KWh a month, that $5 fee is equivalent to paying a full extra penny. So while an offer of $0.08 with a $5 monthly fee may be attractive to a large house, this offer would be equivalent to a $0.09 rate with $0 monthly fee for someone living in a small apartment.

From a marketing perspective, some power companies understand that some consumers will only shop and compare the electric rate and not bother looking at the monthly fee, believing that this is just a necessary charge. Playing to this misconception, consumers will find electricity rate offers that look attractive with low rates, but have high monthly fees as much as $10 on top of the rate. This can be a significant charge to someone who spends less than $150 a month on their power bill.

This practice is common in Texas where residential power companies are able to charge customers monthly fees on top of the rate. In other energy choice states, such as Pennsylvania, New Jersey, Connecticut, and Maryland, the local state utility commissions have outlawed this practice and instead require power companies to offer rates that include all components of the generation supply rate.
Another component to consider is if the rate is fixed or variable. Many electricity companies are offering variable rates with low introductory prices. The business model for these rate products is clear; get the consumer to agree to buy power at a variable rate, and slowly rise the rate month after month. It is much safer and in most cases smarter, to lock in a fixed rate.

Small businesses serviced by Jersey Central Power & Light (JCP&L) can save as much as 15% on their electric bills by choosing to purchase their power from an energy company offering a lower electric rate than the JCP&L basic generation service rate.  The basic generation service rate is a default electric rate that customers pay who have not taken the time to shop and compare energy prices.

New Jersey has one of the most successful electric choice markets in the country both in terms of number of customer participants and the amount of competitive electric suppliers who are active in the market.  Shopping for lower electric prices is simply about saving  money.  Even after a customer chooses an alternative supplier JCP&L continues to deliver the monthly electric bill, deliver the power through the state transmission and distribution lines, and respond to power outages.  Here are some current offers for small businesses in central New Jersey who receive their electric bill from JCP&L:

Commercial and industrial electricity consumers in Pennsylvania are getting more options when it comes to who they purchase their electricity from due to an increase in the number of competitive electric companies entering the Pennsylvania market.  These electricity companies are also increasing their individual product options giving businesses the option to sign long term fixed price contracts that yield price certainty, wind generation products, and short term variable rate products that are tied into the wholesale electricity market.

Businesses in the PPL and PECO regions, the states two biggest utility companies, have the most electric choice options.  PPL price to compare default rates increased by 33.4% on June 1.  PPL commercial customers who have not selected a competitive supplier can save 30% on their current electric bills by shopping for lower Pennsylvania commercial rates.  Currenty 52% of commercial customers serviced by PPL have not shopped for electricity.  These Pennsylvania businesses, largely located in Harrisburg and Lancaster, can reduce their electric bills by thousands of dollars just by shopping for the best electric rates in the area.

The PSEG electricity bill is divided into a delivery section and a supply section.  The delivery charges are the rates that PSEG charges their customers to deliver the electricity from the generation facilities, to transmission stations, through distribution lines and wires.  These delivery charges are regulated by the New Jersey Board of Public Utilities; no matter who the PSEG customer buys their power supply from (PSEG default or a competitive supplier), the delivery charges will be same.

The Supply section of the PSEG electric bill includes the generation charges, transmission, and capacity costs.  In New Jersey customers have a choice of who they buy their power supply from.  The New Jersey Choice and Competition act opened up the electricity generation section of the market to competition.  This has forced dozens of electricity companies to enter the New Jersey energy market in an attempt to gain market share.

PSEG customers who do not shop for competitive energy rates pay a default rate for their supply charges through PSEG.  Competitive rates are up to 20% lower than the PSEG default rates for residential, commercial, and industrial customers.  Competitive PSEG rates are available for those consumers who take the time to learn about NJ electric choice and compare electricity rates.

The PECO electric utility is responsible for delivering power to over 1.6 million consumers of electricity.  For the first time these customers have a reason to shop for electricity prices thanks to the Pennsylvania Electricity Choice law.  Both business and residential power customers are finding savings on their energy bills by shopping for competitive electric rates.

Customers who do not perform their energy shopping pay a default rate that is charged on the PECO electric bill.  However the profits from the default rate are transferred from PECO to electricity companies who have won auctions held by the State to serve default customers.  Selecting a alternative electric company’s lower price simply replaces the default rate on the PECO bill.  Due to the fact that PECO does not profit from the generation default rates, they do not care if their customers shop for lower electricity prices.  PECO Energy receives their revenues and profits from the electricity delivery rates on the bill which are charges that remain regulated by the Pennsylvania Public Utility Commission.

Competitive electricity companies have moved to the PECO market quickly in recent months because of the large savings that they can offer customers.  Residential customers can lower their electric bills by up to 20% by doing their energy shopping, and small business can expect similar savings.  Electric choice is working throughout Pennsylvania as customers have options of who to buy their power from, different rate structures, and different generation sources.

Illinois electricity deregulation is providing energy price savings for residential customers of the electric utility ComEd.  ComEd serves 3.6 million electricity customers in the Chicago, IL and surrounding areas.  While the majority of these electric bill payers are unaware that they have the ability to shop for low electric rates, the word is starting to spread due to the amount of savings available.

When Illinois became a deregulated electricity market, ComEd went from being in charge of electricity generation and delivery to just being responsible for the power delivery.  ComEd charges a default generation rate to customers who have not shopped for competitive electric rates.  These default rates are based on auctions held by the state for competitive electric companies who bid for the right to serve the default customers.  ComEd does not profit from default rate payers and actually encourages their customers to shop for better rates.

When you choose an alternative electricity company you still remain a customer of ComEd as they remain your regulated electric utility company; which means that they are in charge of delivering power to your home, responding to emergencies, and maintaining the electric lines and wires.  Choosing an alternative electric company is simply about shopping for a lower rate or buying power from a specific generation source such as wind power.

Electric choice is giving Illinois customers options when it comes to who they buy their electricity from, and that is what the whole idea if electricity deregulation is about.  The ComEd default rate includes the generation and transmission rates.  Those rates will be at or above 7.753 cents through May 21, 2012.  Currently competitive electric rates are available that will save residential customers 19% off of the ComEd default rates.

Energy choice markets require business customers to become smarter energy purchasers.  Many businesses have elected to use electricity brokers and consultants to assist them with their energy contract decisions.  Whether they elect to do it themselves or work with a consultant, it is important for business owners to make sure that the person handling their energy decisions has a good understanding of electricity rate markets which will result in smart forward pricing decisions.

Forward pricing is the ability for customers to “lock-in” a fixed rate at one date, but to have that rate start at a specific date in the future.  For example, in August a customer can lock in a 12 month fixed electric rate that is set to begin in December when the customer’s current contract will come to an end.

Forward pricing gives the customer the flexibility to watch electricity prices for several weeks, or even months prior to their contract expiring.  Instead of businesses waiting until their contracts expire and then being at the mercy of market prices, forward pricing allows these businesses to take advantage of market drops when they occur.

Good energy brokers will keep an eye on prices several months before their client’s contract is set to expire.  Electricity prices have to be locked in quickly, so having a good relationship with your electricity broker is important.  Quick communication can result in tens of thousands of saved dollars in energy expenditure.

Electricity choice options have been available in Illinois for business customers since 2007.  Illinois electricity companies have been competing to service commercial and industrial clients in the ComEd and Ameren territories since long term rate caps expired in those areas.  However electricity rate options had not reached the residential market until recently.

The Illinois Electric Service Customer Choice and Rate Relief Law of 1997 opened up the Illinois electricity market and allowed electricity companies to enter the market and offer generation supply rates.  Prior to Illinois electricity deregulation, the incumbent utilities (ComEd, Ameren) were responsible for all three aspects of electricity – generation, transmission, distribution – as well as all customer interactions.  Illinois electricity choice separated the power generation from the power delivery.  ComEd is now only responsible for delivering the electricity (transmission and distribution), however it should be noted that transmission charges are included in the price to compare with the generation rates.

The ComEd price to compare is the official default rate that ComEd customers pay for generation and transmission who do not select a competitive electric company.  All competitive electricity rate offers will include the generation and transmission charges.  This allows customers to accurately compare the ComEd default rate to competitive offers so consumers can see how much they can save by switching suppliers.  Currently customers who take the time to find lower ComEd rates can save over 15% off of the price to compare.

Electricity customers in certain parts of the country are experiencing the benefits of electricity deregulation and choice.  The summer of 2011 is the first summer that millions of customers have the option to shop in their state for lower electric rates versus their utility default rate.  People living in Texas, Pennsylvania, New Jersey, New York, Illinois, Connecticut, and Maryland are finding cost relief on their high summer electric bills.

The power market in Texas was deregulated in 2002 an almost immediately competitive electric companies started to market their services to residential customers.  Customers were slow to switch electric suppliers during the first couple of years because of their unfamiliarity of the electricity choice laws.  However, five years into the passing of the deregulation law and 58% of the eligible Texas electric residential customers had switched electric suppliers at least once.  Many continue to be active electricity shoppers, keeping track of when their contracts expire and signing new ones in order to avoid being placed on default service rates that are often high.  Many customers have not shopped for competitive rates in some time and can significantly lower their electric bills by taking the time to compare Texas electric rates.

In Pennsylvania, customers of PECO energy are able to perform electric rate comparisons for the first time.  Competitive Pennsylvania electric rates are yielding savings up to 18% off of the PECO default rate.  Already close to 20% of the PECO market, which includes Philadelphia power customers, have switched electricity from default rates to competitive energy offers.  PPL energy customers, in their second year of electric choice, also have dozens of electric companies to choose from.  Close to 40% of PPL energy customers have switched electric suppliers.  New Jersey electric rates are showing similar results with 18% savings in PSEG and 10% savings in JCPL.

Customers of ComEd in Chicago and BGE in Baltimore and surrounding Maryland communities are seeing an abundance of electricity choice options for the first time despite being part of states that have had deregulated energy markets for nearly the past decade.  Illinois electricity choice has provided options and savings to small businesses throughout the state since 2007.  However, electric companies were slow to start offering competitive offers to residential customers due to the low default rates that they were paying.   Now that savings are available, electric companies have started offering rate options to ComEd customers and are providing savings up to 17% against ComEd residential default rates.  Maryland electricity has a similar story as electric suppliers have been selling to businesses in the state since 2004.  An uncertain political environment and low default rates kept residential suppliers out of Maryland.  However, now that default rates have become higher and the state has started to show more support for electric choice, competitive electric suppliers are offering BGE customers up to 15% savings versus their summer Baltimore Gas and Electric default rates.

The cost of electricity is dependent on the region of the property as it relates to the primarily source of generation as well as the maintenance cost of the local power plants, and the transmission and distribution grid.  For states that have deregulated their electricity, costs are increasingly becoming more dependent on the electricity shopping skill of the specific customer.

The electricity generation supply portion of the electric bill includes between 65-85% of the total electricity cost, depending the the size of the customer and location of the property.  The difference in electricity costs between electric companies can be as much as 100% in some markets.   In Texas, which has a mature electricity choice market having been deregulated in 2002, the market has had time to see extreme peaks and valleys in pricing.  Customers who do not shop and compare electric rates will find themselves paying electricity rates that are close to the pricing peaks as competitive electricity companies often do not take it upon themselves to lower rates just because the market allows.  Texas electricity rates were three times as high as they were in the summer of 2008 as they were 18 months before that.  All things being equal, a customer who shops for electricity in Texas will pay close to half of the electricity cost that another customer who does not shop will pay.

In Pennsylvania, PA electric companies are offering customers electric rates that are up to 20% less than utility default rates in some areas.  Customers are also finding ways to lower their electricity costs by shopping for lower electric rates in New Jersey, Maryland, Illinois, and Connecticut.  As electric competition becomes more common place in these states and others, the responsibility of controlling electricity cost will be transferred from the state government to the consumer.  It is important for consumers in deregulated states to understand their state’s energy choice laws and options.