Are Competitive Electricity Suppliers Likely to Save Me Money?
With electricity prices 29 - 37% higher this winter than during the fall, the City of Boston is working with the utilities to provide relief (click here to read more about the City’s efforts). Due to the rate increase, many residents are thinking about whether a competitive electricity supplier is likely to save them money. Here’s some advice from our friends at Cape Light Compact about why rates have jumped and what to consider if you’re thinking about switching to a competitive power supplier instead of the basic rate from your utility.
Explanation for the rate increase for December - July 2015 supply prices
- Natural gas is the primary fuel for generating electricity (~50% of electricity in New England is generated from natural gas).
- In winter when we’re using natural gas both for production of electricity and for heating, prices rise, sometimes three to four times higher than during the spring and fall months.
- Prices in the second half of the year are expected to be lower than the first half, because the second half doesn’t include the most expensive winter months (January – March). We expect this seasonality to persist for several years.
Helpful information for consumers evaluating competitive supply options
- Because the price of electricity is higher during the winter months, this is when competitive power suppliers tend to offer teaser rates (short-term rates similar to credit card introductory rates which will then increase), or by offering long-term rates.
- Winter teaser rates generally end just as most the expensive months begin.
- Longer-term offers may look attractive relative to the basic supply price during the first half of the year, but because of the seasonal fluctuation explained above, the basic rate is likely to be lower during the second half of the year.
Read all of the terms and conditions of the contract before signing up with a competitive supplier.
- Check the length of the contract. What will happen once the contract term is over? What will the rate be? Will it be a monthly variable rate that the customer has no control over?
- Are there termination fees if someone wants to leave the contract early?
- Are there monthly service fees?
- Are there provisions allowing for the “fixed” price to change if there are regulatory or governmental changes?
- Are there provisions allowing for the supplier to terminate the contract if it is no longer economically feasible for the supplier to continue?
- If your usage changes or if you sign up for net metering, will your price change?
Things that consumers should always keep in mind
- Never give your electric account number out over the phone. With the account number, the supplier has the ability to switch your account from your current supplier to their supply.
- Never sign up or commit to a new contract over the phone. Verbal offers may not provide you with all the terms and conditions of the contract you are about to enter into.
- Always ask for literature or a written contract, so that you may review the material at your leisure and without the pressure of the solicitor asking you to sign up for their offer.
Adapted with permission from Cape Light Compact