Despite being around for more than a decade in states including Pennsylvania, Texas, Illinois, and a dozen others, electric competition is still new to many customers, who aren't used to shopping for their energy supplier the way they shop for a cell phone or internet service.
As a result, there are a lot of misconceptions out there that keep customers from shopping for an alternative electric supplier offering a lower rate, preventing customers from saving hundreds of dollars each year (with savings of thousands of dollars for businesses).
Here are some of the top reasons customers aren't taking advantage of their power to choose their electricity provider, and why these misconceptions are wrong.
Myth #1: My utility will restore my service more slowly during outages if I choose an alternative electric supplier / My reliability will go down
Reality: This is probably the top reason customers do not choose an alternative electric supplier, and instead remain with the utility's "default" service for their generation supply. But it's simply plain wrong.
Under electric competition, the utility's functions have been separated into two distinct categories -- (1) the generation, or supply, of electricity, and (2) the delivery of electricity. Only the first, the supply of electricity, has been opened up to competition; the delivery of your electricity remains regulated by your state's public utility commission. And as a regulated service, every customer of the utility -- no matter who they buy their power supply from -- receives the same level and quality of delivery service from the utility.
If you shop for your electricity supply, the utility will still deliver your supply over its existing wires into your home -- with no interruption of service, and no need for a new meter. The utility treats all of its delivery customers equally, and does not care about who you buy your electricity supply from, because the utility no longer makes a profit from selling you electricity supply; it only acts as a "middle man" for various wholesale suppliers. You can shop for a lower electric rate with the confidence that nothing about your delivery service or reliability will change.
Myth #2: Shopping for an alternative electricity supplier hurts my local utility, who is a good corporate citizen
Reality: As noted above, the local utility no longer makes a profit on the sale of electricity supply under competition -- it only passes-through costs from various wholesale suppliers. That means if you shop for an alternative electric supplier, your utility doesn't lose any profit, and it's not harmed in any way. Your local utility now makes all of its profit from the delivery of electricity. When you shop for an alternative electric supplier, you still remain a customer of the utility for delivery service, and the utility still recovers its regulated costs from you for delivery, with no change. Shopping for an alternative electric supplier doesn't harm the utility, and your local utility's charitable contributions and local partnerships will continue regardless of how many customers shop for a competing energy supplier.
In fact, many utilities, such as PPL in Pennsylvania, actively encourage their customers to shop around for the best deal, because the utility no longer makes money on supplying the customer. As noted by the Philadelphia Inquirer, "PPL Electric, which serves 1.2 million customers in eastern and central Pennsylvania, is encouraging customers to shop around because the utility does not lose money on customers who choose alternative suppliers."
Myth #3: Staying with the utility for my power supply keeps my spent dollars local
Reality: Your local utility no longer owns power plants. That means if you stay with the utility for "default" supply service, your utility has to go out into the wholesale market to buy your power supply. In places such as Pennsylvania, the wholesale market stretches from Pennsylvania and New Jersey, down to Virginia, and west to as far as Illinois. When you buy power from your local utility, the electrons aren't being generated from local power plants anymore, they're coming from wholesale suppliers who source their power supply from more than a dozen states, and move it around a regional, multi-state grid network -- the same network that alternative retail electric suppliers use to source their power supply. Staying with the local utility for your power supply is no more local than shopping around for an alternative electric supplier with a lower rate.
In fact, many alternative electric suppliers have a large local presence, or are local themselves. The competition that has been introduced into the electricity supply business means entrepreneurs in your local community can create start-up businesses to compete to offer customers power supply, and many states which offer customers electric choice see numerous locally-started companies competing. Other competing electric suppliers invest locally too, to support their operations (local sales forces, call centers, etc.), or to win your business (with local sponsorships and charitable programs).
Myth #4: The savings from shopping aren't worth the effort / The utility offers the best deal anyways
Reality: Is $100 worth the effort? Because that's how much money many residential customers leave on the table each year by not shopping for a low electric rate. Savings obviously vary based on your local utility area and the time of year, but Pennsylvania Public Utility Commissioner James Cawley has said that, "There are many who are leaving $100 bills on the sidewalk," in response to the more than 50% of residential customers in Pennsylvania who have not shopped for a lower electric rate.
As noted above, your local utility no longer makes a profit on electricity supply. But that doesn't mean the utility's rate is the best deal, because the utility's price still does include a mark-up, just not from the utility. Instead, the utility rate for electricity supply reflects the mark-up charged by various wholesale marketers who supply the utility with power. You can shop around among competing electric suppliers to find suppliers offering a lower mark-up, or who are able to leverage their buying strategies to get power at a lower cost. Just assuming that the utility rate is the best is leaving money on the table.