Pros and Cons of Third-Party Energy Suppliers

An uncle of mine spent his professional life as an automotive engineer. In his free time, he used his engineering expertise to hand craft wooden boats—rowboats, canoes, kayaks, and sailboats. They were beautiful pieces of work, no two alike, yet each a masterful expression of the ability of his hands and the intent of his mind.

I never had the time to truly learn his craft. I did, however, learn one important lesson about boatbuilding from him. It’s something that has stuck with me ever since those summers spent watching him work. It was something he’d learned in his years of engineering and design: to build anything, a boat, a car, a life, requires tradeoffs. Each finished piece has a series of pros and cons. If you build your boat to be fast, it won’t be as stable. If you build your boat to be strong, it won’t be as light. To sail round the world, you have to leave home. That’s a lesson I’ve carried with me as I’ve traveled through my own life. In every undertaking, in every project, there are tradeoffs. Even now, helping people decide to switch to a third-party energy supplier, I see myself surrounded by a series of pros and cons each person must consider to make the choice that makes sense for their unique situation.

Benefits and Drawbacks of Third-Party Energy Suppliers

Every aspect of the energy industry comes with benefits and drawbacks. For instance: nuclear power can be inexpensive, but only on a massive scale that requires an enormous initial capital outlay. Solar power consumes no fuel and releases no emissions, but solar panels are expensive and they only work when the sun is shining. Coal is cheap; but coal is dirty. Even third-party energy suppliers themselves, when compared with traditional utility companies, have their share of pros and cons.

Neither third-party energy suppliers nor traditional utility companies are the only, perfect way to purchase electricity. Some people prefer switching to a third-party supplier; other people prefer sticking with their utility. Some people like their boats fast; some like them stable. The ideal energy supplier depends on the needs of each individual customer. What’s important is to be aware of the benefits and drawbacks so that you can decide for yourself.

Pros of Third-Party Energy Suppliers

Separate from Utility Companies

One of the main reasons third-party energy suppliers exist is to offer an alternative to traditional utility companies. In order to pose a viable alternative to the traditional way people have purchased their electricity, third-party energy suppliers must go above and beyond to attract customers. Often, third-party energy suppliers will offer more flexible energy agreements than utilities, with more options for consumers. Also, to demonstrate a meaningful difference between themselves and utilities, third-party energy suppliers often invest heavily in customer service. Unlike utilities, they aren’t handed their customers, so they work hard to earn them and keep them.

Fixed-Rate Energy Plans

Most utilities offer what are known as variable-rate energy plan agreements. Under these agreements, customers purchase their electricity at a price that varies depending on the current market price. As the current market price is constantly in flux in response to changing energy demands, customers are always paying a different amount for their electricity. Third-party energy suppliers, by contrast, offer what are known as fixed-rate energy plans. On a fixed-rate plan, customers and the energy supplier agree on a set rate for a duration that usually runs between six months and three years. Then, no matter what the current market price of electricity is, customers pay the set price. This provides customers greater stability than variable-rate plans do, helping you plan your budget and protecting you from market volatility.

Energy Innovation

Third-party energy suppliers are all relatively new companies and are finding unique ways to operate in the energy sphere. For decades, the only option electricity customers had was to purchase their energy from their local utility monopoly. That changed as states restructured their markets to allow third-party suppliers. Now, these new companies are coming up with creative ways to handle the changes occurring in the modern energy industry. As renewable energy, distributed energy generation, and a smart, responsive grid come online, third-party energy suppliers are generating innovative plans that allow customers to directly promote clean, green energy.

Cons of Third-Party Energy Suppliers

Limited Geographic Range

Currently, only certain states allow third-party energy suppliers to operate alongside their traditional monopolies. Unfortunately, this limits access to energy alternatives for most of the country. Customers are only allowed to purchase energy from third-party energy suppliers in Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, Texas, Delaware, Maine, Michigan, New Hampshire, Rhode Island, Oregon, Virginia, California, and the District of Columbia.

Subject to Less Regulation

Third-party energy suppliers are subject to fewer state or federal regulations than utility monopolies. For instance, third-party energy suppliers are not subject to restrictions on the rates they can charge for energy, while utilities are. This lack of regulation in itself has pros and cons. On one hand, it frees third-party energy suppliers from the burden of following unnecessary rules, helping them to save money they can use to improve their customers’ experience. On the other hand, with less oversight, unscrupulous companies are able to engage in negative practices, like raising prices, that utilities are not allowed to participate in.

Overeager Sales Tactics

Energy utilities, by default, provide electricity to every customer in their territory. That means that each customer a third-party energy supplier serves must come originally from the utility. This creates a strong incentive for third-party energy suppliers to zealously market their product and they often employ call centers and door-to-door sales teams to do so. While sales and marketing are normal and essential aspects of business, sometimes these sales teams can lose sight of customer service in their pursuit of quotas and goals. When sales teams become over-aggressive, it is up to the energy supplier themselves to reign them in.

Finding the Right Provider for You

Of course, not all third-party energy suppliers are alike and it’s vital to look at the specifics of the company and the plan you are considering. Do they offer you choices that make sense for your lifestyle and your budget? Do you have the option to promote the development of renewable energy technologies and a healthier future by purchasing Renewable Energy Credits? Are you valued and listened to as a customer? Is the company responsive, value-driven, and committed to excellence? These qualities are what can truly set a third-party energy supplier apart and ensure that your experience is the best it can be.

At Liberty Power, we believe that people should have the freedom to choose who they purchase their energy from, and how they do it. We also believe it’s important for people to be able to make an informed choice, which is why we are always happy to answer any questions you have about third-party energy suppliers and what we can do for you. Contact us to learn more about what we have to offer and let us help you find the perfect energy plan for your home or business.


Photo Credit: Robert Crawford

Liberty Power Editorial Team
The Editorial Team at Liberty Power is a swashbuckling group of passionate and creative Energy experts bringing you the hottest topics on exciting market trends, booming products and services, and the latest news in the industry.
October 3, 2017