How Third-Party Energy Suppliers Help Ohio Residents Keep Electric Rates Steady
Ohio’s got something for everyone: fast-paced cities and broad, bountiful countryside; a still-solid manufacturing base and cutting-edge university innovation. There are forests and fields, rivers and a Great Lake. The state’s great history and strong Midwest values make Ohio a wonderful and vibrant place to live.
True to the “bit of everything” character of the state, Ohio gets its electricity in just about every way imaginable. Coal plants produce the majority of the electricity Ohio consumes, burning coal dug up locally and in nearby Pennsylvania, Kentucky, and West Virginia. Natural gas extracted from Ohio and neighboring states also powers a significant portion of homes and businesses. Nuclear plants provide a steady, stable power baseload. Solar arrays, wind farms, and hydroelectric dams harness power from the natural world, while biomass plants turn waste into electricity. In keeping with Ohio’s all-of-the-above approach to electricity, the state has also restructured its energy market to allow third-party energy suppliers.
How Third-Party Energy Suppliers Differ From Utilities
In order to get a handle on what third-party energy suppliers have to offer, it’s important to understand how electricity was bought and sold before they joined the mix. Since the early days of electric power in the United States, utility corporations held legal monopolies over certain geographic territories. Within their territory, the utility would be responsible for producing and delivering electricity to every household, business, or government entity. In the state of Ohio, there are currently more than two dozen utilities operating, each within the boundaries of their apportioned territory.
As monopolies, utilities originally produced all the power themselves. In the late 1970s, new rulings allowed other power plants, either independently owned or held as properties of larger corporations, to produce power using coal, natural gas and nuclear material. More recently, as innovation grew, these power producers began to harvest power from wind, water, sunlight, or waste.
Even with the growing influence of independent power producers, utilities still had a monopolistic grip on the customers within their territory—customers who often felt they paid an unfair price or received poor service, with little recourse. Even though state and federal guidelines regulated these utilities, without competition inside their territories, utilities had little incentive to be as efficient as they could be.
That’s where third-party energy suppliers come in. To improve energy industry efficiency, Ohio, like many other states, restructured the energy market to allow other companies to compete with the utilities. These companies also buy energy from the wholesale energy markets, then sell it to their customers. Third-party energy suppliers compete with utilities to offer the best energy plans and service to their consumers. To compete, third-party energy suppliers have come up with new ways to package and sell electricity to their customers, expanding their choices and ensuring each customer can pick a plan that works for them.
Fixed-Rate Energy Plans Give Ohio Homeowners Options
Historically, utility electricity charges were offered on what is known as variable-rate service. Either periodically, or even monthly, the rate would change. Some utilities added adjustments if the price of energy was different from their forecasts. The most prevalent new option created by third-party energy suppliers is fixed-rate energy plans, which provide a direct alternative to variable-rate energy plans.
When you purchase your energy via a variable-rate plan, the price you pay for electricity changes on a regular basis. Your utility or third-party supplier will charge you for electricity according to the amount they paid for it on the energy market, plus a markup. Electricity prices on the market are constantly changing, based on the cost of the generator’s raw materials, the current demand for electricity, and even which types of power plants are supplying the energy. When demand for electricity is highest—such as during the winter, when people keep their lights on longer and turn on electric heaters—the price goes up. Prices are high in summer, too, when the use of air conditioners skyrockets.
On the other hand, under a fixed-rate plan the price you pay for electricity stays the same no matter what the current market rate is. When you sign up for a fixed-rate energy plan, you agree on a price and a plan duration with your energy supplier. Plans usually range from around six months to three years. The prices are generally based on average historical usage and expected rates for the duration of the agreement. Having a fixed rate for your electricity allows you to more easily plan your budget for the length of the agreement, because you’ll never have to worry about rate spikes, whether expected or unforeseen.
Before third-party energy suppliers entered Ohio’s energy industry, consumers had no say in where they got their power from, and utilities had little incentive to provide the best service they could. Now, due to the equalizing power of free market competition, customers have more options than before and both utilities and third-party energy suppliers strive to deliver the best service they can in the most efficient way possible.
As the nation’s largest independent, owner-operated electricity supplier, Liberty Power is proud to support energy choice for Ohio’s residents. Our fixed-rate energy plans help keep your monthly energy bill steady and predictable, so you can focus on what’s really important. Want to learn more about the plans available in your area? We’ll help you get started.