This might come as a surprise, but you may be able to save money on your electricity costs by choosing a new energy provider.
It’s called deregulation — or retail energy choice — and over 45 million US electricity-consuming households have the option to choose their electric provider to find a better price. This is according to CNET’s analysis of 2021 aggregated data from the US Energy Information Administration.
Ohio residents felt the pain of electricity supply price increases this summer when certain AEP utility customers saw a near 30% increase. According to CNET’s Mary-Elisabeth Combs’s reporting, AEP customers that didn’t exercise their energy choice defaulted to the utility’s price. Those that exercised their retail choice and enrolled with a supplier’s fixed rate did not see bill increases.
Currently, 17 states plus the District of Columbia have full or partially deregulated electricity markets where residents can choose their own electricity supplier, rate plan and price.
That means energy companies compete for your business in these markets. This energy marketplace competition is beneficial to consumers, according to Chris Ercoli, president and CEO of the Retail Energy Advancement League, a national energy deregulation advocacy organization.
In a deregulated market, “suppliers are looking at the specific needs of customers and saying, ‘I can offer you that service,'” Ercoli said. People today want to choose what type of resource is powering their home and want unique billing options, Ercoli said.
Here’s how to know if you are eligible to choose, where you can shop for the best electricity plans and how to decide if retail energy choice is right for you.
How to know if you’re eligible for energy choice
To learn if you can choose your energy supplier, go to your state’s public utility commission website. Each state’s PUC will have information on your state energy choices, if any.
Where to shop and compare providers in my state
Here is a list of states that allow residents to choose, along with each state-managed shopping website. These are trustworthy sources of energy choice information, according to Ercoli.
Another way to know if you are eligible is to enter your ZIP code into an energy choice marketplace, such as chooseenergy.com. Here you can shop and compare energy plans available in your area. (Choose Energy, like CNET, is owned by Red Ventures.)
Choose a supplier vs. stick with your utility
Here is the best part about living in a deregulated state: You don’t have to switch away from your default utility supplier. But you have the power to choose if you want to. For example, there are more than 100 Pennsylvania energy suppliers.
The benefit of choosing your own electric provider is getting some control over the costs of electricity. When it comes to taking the leap and choosing a supplier, Ercoli says it’s about control, choice and convenience.
“Control is obviously the most important thing: You need to measure your usage and you need to manage it,” Ercoli said. Some supplier companies have features that deliver notices to consumers and alert them when usage is unusually high. “If your default utility provider is not giving you the tools to control your energy use, you need to find the retail supplier that is going to deliver you notices and alerts on how you control your monthly utility spend,” Ercoli said.
The more options available to you, the more likely you’ll be able to find a product that fits your needs, Ercoli said. That’s another benefit to deregulated markets compared with those in which consumers have only one company to buy energy from.
You might also find greater convenience with an alternative supplier. “Set it and forget it” options like fixed monthly bills might be only available with an alternative supplier, Ercoli said.
On the flipside, some experts say people with choices are subject to confusing pricing, tricky marketing tactics and bad actors, and that, sometimes, you’re not getting the lowest costs.
There are benefits and risks either way. If you have the option to choose, take your time deciding until you feel comfortable with your choice. Ask your neighbors if they’ve switched to a supplier and see what they’ve observed.
Utility vs. your electric provider: What’s the difference?
Your utility is the entity assigned to your location that owns the lines, the meter and the wires that deliver electricity to your home. If you live in a deregulated area, and you don’t choose an energy supplier, the utility will choose one for you.
In deregulated states, these two costs typically show up as two separate line items on your electric bill. One is your transmission and delivery costs, the second is the supply — the cost of the actual electricity as a commodity.
What’s on your electric bill:
- Transmission fees
- Distribution costs
- Supply charges
Check out this electric bill provided by fellow CNET editor Jon Reed. The bill is from a deregulated AEP Ohio. Circled in red are the supply charges from AEP Energy (the supplier) and above are the transmission and distribution fees from the utility (AEP). In a regulated market, all of these charges come from the utility and usually aren’t itemized separately on your bill.
In an energy choice area, the line item you can control is the supply portion, or how much the actual electricity costs. That can be lower in areas where there is competition.
Deregulated markets also allow you to choose where the electricity you purchase comes from. It may not be the cheapest option, but many deregulated markets offer renewable options where a provider purchases electricity from green sources such as wind, hydro or solar power.
“Your utility is the electrical distribution company, its primary responsibility is to deliver you reliable service. It is effectively distributing an electron from point A to point B,” Ercoli said.
The supplier is providing you electricity as a product, Ercoli said. It’s the seller of the electricity, but it’s not delivering it to you. “The electric distribution utility delivers the electrons to your home,” Ercoli said. “The retail supplier is the one that buys it and sells it for you.” An analogy Ercoli used is, the supplier owns the product and sells it to you; the utility is like FedEx, which delivers it.
Deregulated electricity is still regulated
Ercoli and other experts like to refer to deregulation as “restructured.”
“The reason we call them restructured and not deregulated states is because the retail supplier industry is still highly regulated,” Ercoli said. The public service commission or public utility commission regulates and issues a license to the suppliers in the states that operate as a supplier. PUC’s or PSC’s handle consumer complaints and issue sanctions as needed to suppliers breaking regulations.
When a state or area goes deregulated, it allows competition. But this doesn’t mean the state is uninvolved. Each state, regardless of deregulation, has a state-run public utilities commision. In states with energy choice, the PUC can be your best friend. It acts as the watchdog for bad actors in the retail electricity space. It’s also where you file a complaint against electric companies or utilities, or to find reputable providers.
Our analysis shows us that 45 million American households are eligible to choose or switch energy providers. Here’s how we got to that number. The data used to reach this figure was provided by the EIA’s list of all US eclectic-consuming households in 2021. CNET filtered and summed only the states that are fully electricity deregulated and didn’t include states with limited deregulated electricity options such as Michigan and California. The list of states included in the statistic are: New York, Pennsylvania, Illinois, Ohio, Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, New Jersey, Delaware, District of Columbia, Maryland, and Texas. It’s important to note that even states identified here as deregulated may have portions of the state that remain regulated.