Third-Party Energy Suppliers Bring Consumer Choice to the Electricity Market

Sometimes when I’m driving, the quality of daylight changes. Whether it’s just after a storm or when the afternoon starts fading away and the sky fills with a burst of deep yellow and orange. When I look around me, I see the world in a different way. The shapes of clouds, the types of trees, the lines of the buildings, and the patterns people make as they move are all open to examination, as if I’m seeing them for the first time. It happened to me on the way to the supermarket yesterday. I saw for the first time just how many different cars there were on the road. People drove whatever car they liked, and the cars were as different as the people inside them. Then the variety of food in the store struck me; I had five options for my English muffins alone!

It made me wonder—what would it be like if we didn’t have so many options to pick from? If there was only one car we all had to drive, one uniform we all had to wear, one food we all had to eat? One type of tree. One shape of cloud. What a gray world that would be. Then I remembered: so many people have only one option for electricity!

Utility Monopolies Limit Consumer Energy Choice

In most states in the U.S., people can’t choose where they get their electricity. The utility company has a legal monopoly on the market. Not only is nobody else offering consumers a choice; it is actually illegal for a company to do so. If you think it sounds closer to some nationalized industry from the Soviet Union than how we usually do things in the free market United States, you’re right. These monopolies were purposefully created by the government to protect the utilities back when our energy production and distribution systems were first being built.

Protecting the utilities made sense back then. It took a lot of money to build the grid, and without a monopoly, these companies couldn’t be certain they would get their investment back. So without a guarantee of protection, these companies wouldn’t have built the grid in the first place. If they hadn’t built the grid, we wouldn’t have had one option for our electricity—we’d have none. In this limited instance, governmental control over the market was a wise choice.

All of this happened a long, long time ago. Now, the grid is built and the investment has long since been amortized for the companies that built it. But in most states, the utility monopoly persists. It’s like having scaffolding around a building that was finished years ago, or training wheels on a bike your teenage kid already knows how to ride.  

The monopoly system gets the job done; people get to power their homes. But do they get it as cheaply as they could? Do they get their preferred method of billing or rate structuring? Can it be delivered more efficiently? Within the monopoly system, there is no true incentive to get consumers the best price or greatest level of efficiency, because there is no competition. Good enough is as good as it gets. Fortunately, there’s a better way.

Third-Party Energy Suppliers Restructure Utility Monopolies

Since the mid-1990s, some states have restructured their electricity markets to allow third-party energy suppliers. If you live in Connecticut, Illinois, Massachusetts, Maryland, New Jersey, New York, Ohio, Pennsylvania, Texas, or D.C., you have the option to buy your electricity from one of these suppliers instead of your utility. Not only does this give consumers in these states more options, it puts pressure on utilities to improve their own offerings to keep up with the competition.

Third-party energy suppliers aren’t trying to replace utilities entirely or build new grid systems. They work in a more subtle way. Third-party suppliers purchase power from power plants or energy wholesalers, sell it directly to consumers; and use the existing grid to deliver it. The utility is still responsible for delivery and for the maintenance of the grid. Under this system, the utility still does what they’re good at—delivering electricity—while third-party suppliers negotiate for better prices, develop innovative methods of rate structuring, and offer customized energy plans.

Innovative Electric Plans from Third-Party Suppliers

Third-party suppliers have developed many new, compelling ways to sell consumers electricity. For example, some third-party energy suppliers offer fixed-rate electricity plans. This is a new way for consumers to purchase their power. Historically, consumers have usually paid utilities a variable rate for their energy. This variable rate would fluctuate based on fluctuations in the energy market. The price would go up and down hour by hour depending on supply and demand. With a fixed rate however, consumers know ahead of time exactly what their price will be for the duration of their agreement. Knowing that they can plan their budget more effectively over the course of the year.

Even having agreements with set durations is an improvement on the older utility monopoly system. Under the monopoly system, all agreements were indefinite, because there was no other choice. Under the new third-party system, when an agreement between a supplier and a consumer expires, the consumer has the option to renew, change to a different plan, or switch to a different supplier.

Third-party energy suppliers can also offer their consumers customized options. If consumers have a preference for renewable energy for example, third-party suppliers can sell them Renewable Energy Credits, or RECs. When you purchase a Renewable Energy Credit, the third-party supplier then buys the same amount of energy from a renewable source, such as wind or solar. It’s impossible to separate electricity by source once it enters the grid, but this method does guarantee consumers that their electricity use does not increase the amount of carbon in the atmosphere. Whatever your preferences, third-party suppliers offer choices that make sense for you.

Thanks to third-party energy suppliers, like Liberty Power, consumers in states with restructured energy markets have more options for their electricity than ever before. This gives consumers the power to find the energy solution that’s right for them. To learn more about different options in your area, contact us today.


Photo Credit: Guillaume DELEBARRE (Guigui-Lille) via Visual Hunt /  CC BY-NC-ND

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.
July 18, 2017