What Is Retail Choice Electricity and What Can It Do For You?

In grade school, we were taught the basic principle of capitalist economics: competition makes for a better market. That is the case for consumers, at least. I learned this lesson firsthand when, as a young kid, I drew my own comic books and sold each new release to my classmates for the grand sum of one quarter. This was a fantastic plan until a fellow classmate had the same idea and sold hand-drawn comics for only ten cents. Our friends started buying exclusively from his stock, and I didn’t have the business savviness to bring them back to mine. That was the end of my elementary school monopoly. As my young entrepreneurial spirit was crushed, I observed that competition was inevitable in the business world. The very same idea applies to the electricity that powers our homes. You may not be aware that there is actually a competitive market for power and many states have already introduced this principle into policy. This system is called “retail choice,” and it means that you have the power to choose your supplier (and your plan).

Retail Choice Electricity in Action

Here’s an example to make retail choice easier: you move across the country and into a new house in central Texas. The first thing you do is set up your electricity service to begin when you get there—there’s no sense in moving in the dark, after all. But you’ve heard that this state offers retail choice, and you’re interested to see how you can support green energy and power your home at the same time. You visit “Power to Choose,” the retail choice website for the Texas market, and browse companies until you find a plan that fits your needs. You sign up online, and you’ve officially chosen your own electric provider. Don’t worry—the Lone Star State isn’t the only market that allows retail choice. According to a 2016 study, 17 states and more than 10 countries worldwide have deregulated their electricity markets. And the benefits seen in these regions are worth acknowledging. The same study found that “roughly half of commercial and industrial load has switched to competitive suppliers” in areas where retail choice exists. And residential customers are also taking notice. In fact, citizens of European Union countries with retail choice report higher levels of satisfaction with the quality of their electric service. This has a lot to do with the way retail choice is regulated, but “the EU experience suggests that retail choice, when well implemented, improves customer satisfaction.”   Retail choice also promotes the use of renewable energy because it gives eco-conscious customers the opportunity to vote with their dollars to support environmentally friendly practices. Besides this benefit, retail choice saves on costs: “the end of monopoly protections and price regulations resulted in billions of dollars in economic savings for U.S. consumers.” That’s a fact that definitely can’t be ignored. On a smaller scale, the benefit of retail choice in your own household extends past the signing of your contract with a new provider. You get to support green energy endeavors in your area that help to reduce our global carbon footprint. Better still, competition drives rates lower and gives you a potentially lower electric bill than you were expecting. And you’ll get the same high quality service as everyone else in your neighborhood, regardless of who is supplying your power.

Your Retail Choice Cheat Sheet

As I see it, there’s only one major downside to the retail choice system as it exists today: the plethora of terms, programs, and state agencies that are involved make it almost impossible for consumers to keep everything straight. We’re here to shed some light on the subject. Here are some of the terms you’ll commonly see in your quest for choosing a supplier:

Supplier Also called your “electric provider” or “alternate energy supplier,” this is the company that supplies your electricity. Suppliers purchase energy in bulk and sell many different customized products, offer fixed rates and renewable energy plans. In states with retail choice, you’re free to choose your supplier.
Utility Your local distribution utility is the company that you’re probably used to receiving bills from. They own the power lines that run through your city. This is the company that checks your meter and delivers your electricity to you. Even in retail choice states, you don’t get to choose your local utility.
Dual Billing Retail choice electricity doesn’t mean that you pay double! Some companies put the cost of your electricity and the cost of distributing it on one bill for your convenience. Others divide these costs between two bills—hence, dual billing. In this case, your electric price will be split between one bill from your supplier (for supply) and one from your utility (for delivery).
Deregulation Deregulation means introducing the helping hand of competition into the electric industry. A state that is deregulated is one that allows electric suppliers to compete for your business—and you’re free to choose which one you’d like to partner with. Check out this handy map to see if your state is deregulated.
Infrastructure The wires, power lines, and pipes that transport your electricity and natural gas to your home are known as infrastructure. They are usually owned by a utility, but are shared by all suppliers. This means that when you choose an alternative retail supplier, they don’t need to string up new lines to your home. And when your power goes out, you’ll still make a call to your local utility to get it fixed.

We’re hoping that these terms can help you make sense of the retail choice system in your area. The jargon may be a bit confusing at first, but the benefits are worth fighting for. These terms may also prove useful if you’re passionate about advocating for the entrance of retail choice in your area in the future.

Honoring Your Freedom To Choose

As the benefits of retail choice become increasingly evident, more states are debating the topic and choosing to bring retail choice to their residents. States like Nebraska (which currently employs an entirely public power market) may soon choose to introduce deregulation in order to “take advantage of economies of scale.” This trend opens up more options for homeowners to support green energy production and to support the companies that align best with their needs and values.   The fact that retail choice is being brought before state legislatures means that this is a topic that citizens care about and are willing to fight for. At Liberty Power, we definitely understand this drive—we believe wholeheartedly in the benefit of competition to power our nation, and are dedicated to providing electricity at a competitive rate in the majority of states that allow retail choice. Reach out to us to see our best rates in your area and to start your search for your own electricity provider.  


Photo Credit: Jeremy Brooks

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.
May 18, 2017