If you are fortunate enough to live in a state where the electricity has been deregulated, you are free to shop around for the best price on this essential utility. But what should you look for in an electricity plan? The larger the number of providers, the more confusing it can become to get the best deal.
Here are several things to look out for.
You Will Still Need Your Local Provider
Your local provider is still essential because they are the ones who maintain the power lines, utility poles, and infrastructure needed to deliver power to your home. You will just be choosing which company will provide the power flowing through the wires.
Some local providers set up their own subsidy/ies to provide power to you. They may use traditional methods, or green ones. In some cases, you can actually get a credit. If you’ve made the switch to solar power, for example, and are providing an excess of power that can be diverted to other homes in your area, they will take money off your bill each month.
Green Considerations
In addition to solar power, some providers offer wind or tidal power. Some local providers will give you a discount for lowering your carbon footprint and using cleaner energy.
Rate versus Cost
It’s easy to get confused by the numbers. There are different rates from company to company, and at certain times of the day. Power is most expensive during the day and cheapest overnight, for example.
The rates might look great, but then there are taxes, and fees. The taxes are usually applied after the fees, so you are getting hit twice with extra charges and might do better to pay a slightly higher rate with fewer fees – especially if you and your family are good about energy conservation in the home.
Types of Plans
There are three main types of plans:
* Fixed rate
* Variable rate
* Indexed rate
Fixed rate plans have the rate per kilowatt-hour locked in for the length of the contract.
Variable rate contracts allow the rate to vary based on electricity costs and the discretion of your electricity provider. Variable rates are typically associated with month-to-month contracts rather than long-term ones. Fixed rate plans could lock you in to a higher rate, but variable rate plans can leave you vulnerable to unpredictable electricity bills.
Indexed rate plans might offer a special perk, such as free nights and weekends. Read the fine print.
Then there is another plan that could be applicable to all three: level billing. The company looks over your charges for the past year, divides by 12, and makes that the amount payable per month. It could be a good deal in the summer when the rates and usage will go up, but if there is any difference between what has been paid and what was used, you could get hit with a big bill, and they might boost your monthly payment if you miss making a payment on time.
Prepaid plans are often used for completely new customers just moving into the area, or people who have defaulted on their bill in the past.
Other Incentives
Sometimes you will get an incentive for switching carriers, such as a discount off your first month, gift cards, veterans and active military discounts, or charitable contributions on your behalf (such as donations to help people who are struggling to pay for their electricity).
Compare each plan and the rates, fees and perks, and you should soon be able to find the right electricity plan for you.
