Common questions about competitive energy – answered
Competitive energy is a bit complicated. Let’s untangle it here.
Is Competitive Energy For Me?
What is competitive energy, exactly?
Competitive energy is the power to choose (no pun intended) who provides your energy. This choice is available in states with de-regulated energy markets. You can learn more about deregulated energy here.
Do I need any special equipment to get on a competitive supply rate?
No, you do not need any special equipment. In fact, you don’t need any equipment at all.
Enrolling with a competitive supplier is easy. Choosing the right supplier, the right rate and the right plan for your business is a bit more complicated. That’s where Nextility can help. We work with over 20 of the top competitive energy suppliers and we serve hundreds of businesses. We are energy experts and can help you make a smart choice.
I see a lot of bonus or incentive programs from competitive suppliers. Are these for real? Do they really help?
Many competitive suppliers use marketing incentives like these to attract customers to sign up for their offer. They’re real – if you meet all the conditions outlined in the programs, they will give you points or prizes. Unfortunately, there’s no such thing as free lunch.
In most of these incentive programs (we weren’t able to look into all of them) the cost of the rewards programs are rolled back into the rates you’re being offered, and the end price matches or outweighs any benefit offered by the incentive.
Put another way, a company could offer you $100 if you pay your bills on time and in full for 12 months in a row. Seems neat, but that $100 has to come from somewhere, and that somewhere is rate payers like you. You end up paying a little more each month in the hope that you’ll get some of it back one year later.
So yes, you can do a rewards program if you want – but we think you’re better off paying less.
Choosing An Energy Plan
Let’s suppose I’m interested in a variable rate. Is there a limit to how high or low the rate can go? Is the rate provided at the beginning of the month?
Variable rates are tied to the underlying wholesale energy market. They’re typically set monthly, and in addition to wholesale prices, they can also be driven by the various other costs that comprise an energy rate.
These variable rates aren’t all set at the same time – the day in which they’re set can change by utility or supplier, and most customers don’t know what their rate was until the billing period concludes. It’s rare for variable rates to have a set cap (maximum price) or a floor (minimum price). This makes them highly unpredictable due to their volatility.
With variable rates, the customer owns the risk and reward of being exposed to market fluctuations. You, the rate payer can benefit tremendously when prices fall – and you can also pay through the nose when prices start climbing with no end in sight.
Most of the time the upside risk of higher rates far outweighs the potential downside benefits. You need a good strategy and good access to market intelligence to make the most of a variable rate.
What is the utility’s price to compare, and how long is that price effective?
In almost all competitive energy markets, the local utility company also serves as the default provider of energy supply (also known in some agreements as the “energy provider of last resort”.) This means if you don’t pick a competitive energy provider to supply your energy, the utility will act as your energy provider.
A utility will offer a Rate To Compare, which is also known as the Standard Offer Service or Default Rate. This Rate To Compare is the regulated rate that the utility will charge you for energy if they are acting as your energy provider. This rate is set by the utility and covers periods from one month to one year depending on the utility, although the most common periods for rate-to-compare is 3 and 6 months.
Why should I care about being offered historic pricing information?
You can’t make smart energy decisions without relevant and easy-to-understand information. The best place to start is by knowing what you’ve paid for energy in the past. When you know what you’ve been paying, you’ll have one data point that you can use as a benchmark for any new rates that are offered to you.
It’s not the only piece of information you’ll need to succeed – energy markets are extremely volatile and subject to a wide variety of forces. The price you paid last year might be completely unrealistic today. But with more information, you’ll be able to make better judgments and smarter energy decisions.
What’s the deal with introductory rates?
Suppliers are competing for your business, and one of the ways they try to get your interest is with an introductory or “teaser” rate. This intro rate is usually below going market rates and lasts for a short period of time (usually 1 to 3 months) before being re-set to a higher ongoing rate.
We always tell our clients to steer clear of introductory rates, and we will never recommend one.
Do price quotes from suppliers include all taxes?
This depends upon where you are. When comparing rates from different suppliers for your business, you need to be very careful because it’s not always an “apples-to-apples” comparison. Some may include taxes while others may not.
Because we at Nextility are energy experts, we can help analyze the rates from different suppliers to make sure they 100% comparable to each other. We bring clarity to a confusing process.
Can a supplier change my price during my contract term?
A supplier can only change your price if you’ve agreed to a variable rate contract.
Each supplier has its own rate products, but the vast majority offer two basic rate structures to residential and commercial customers: fixed and variable price rates.
A fixed price rate is by far the most popular because of its stability. As its name suggests, the price or rate for your energy will not change during the term of the contract.
The other rate structure is a variable rate which can change virtually anytime during your contract term. Typically, variable rates change monthly and there is often no limit on how much they can change from month to month. We recommend using these very carefully (if at all). Should you decide you want a variable rate, make sure you understand the risk you are being exposed to when you sign up.
Life On Contract
Are there fees or penalties for switching before my contract term expires?
Just like a cell phone plan, many competitive energy contracts have an “Early Termination Fee” (ETF) clause which sets how much you will pay if you decide to terminate a contract before its expiration date. assigns a specific fee should you decide to terminate a contract before the end of the contract term. These fees, assessed by your current supplier, can be steep.
If you’re thinking about changing energy providers and you’re not sure if your current energy contract has an ETF, we recommend checking your agreement or calling your supplier. We also recommend double checking your contract end date.
Will I receive a notice before my contract expires?
In most markets, you will receive a notification from your current supplier somewhere between three months and 45 days prior to your contract end date. It often comes as a letter in the mail so take care not to throw it away.
It’s very important that you know your contract end date. If you forget about it and don’t renew your service or pick another supplier in time, you may roll onto a “default variable” rate. This is a month-to-month rate that is often very high compared to other competitive rates.
At Nextility, we will contact you six months prior to your current contract end date and we will work to make sure you never roll onto a default variable rate.
How soon should I start thinking about renewing my contract (or shopping for a different contract)?
At Nextility, we recommend you start actively shopping six months prior to your current contract end date. This will give you ample time to explore options and review pricing proposals without being pressed against a deadline. With our patent-pending technology platform we make the energy shopping process easy and hassle free. And we will always let you know when the time is right to start looking at new energy options.