Guide to the Types of Energy Plans

If you live in a deregulated state such as New York you don’t have to purchase your electricity or natural gas from your local utility. You can choose from over 240 retail electricity providers in the state. Finding alternate energy suppliers is as easy as entering your zip code in the search engine on one of the many web sites that let you compare electricity and natural gas rates.

You can compare your rates to those of other energy suppliers and to the different plans and options available. Electricity and gas plans can have fixed rates or variable rates with different terms, lasting from one month to 18 months or even three years. They can include anywhere up to 100% renewable energy and some even let you choose a specific power source.

Alternate suppliers’ rates are usually compared to your utility’s default service or Standard Offer Service (SOS) rate. Make sure you’re comparing the correct rates by looking at the “Price-to-Compare” rate on your most recent utility bill. Some suppliers offer incentives such as free gift cards, LED light bulbs or free energy audits when you sign up for one of their plans.

Most suppliers offer free mobile apps, which allow you to access your account information and pay your bill. You report outages and stay up-to-date on the restoration status through the app as well as check your usage and compare it to weather trends and to the previous months’ consumption.

Most New York energy suppliers offer fixed rate plans for term lengths ranging from 6 months to 36 months. With a fixed rate plan, you’re paying the same rate for your electricity or for your natural gas every month until the end of the contract term. Constellation, for example, offers three fixed rate plans for electricity customers and a fixed rate plan for natural gas customers in New York. 

Fixed rate plans are the most common type of plan. They guarantee the prices for a kilowatt-hour of electricity or a therm of gas for the length of the contract, without regard to wholesale market prices. Typically, the price per kilowatt-hour of electricity or per therm of gas goes down, with longer contract term lengths.

Besides fixed rate plans, many energy retailers offer variable-rate plans. While variable-rate plans have no long-term contract or cancellation fees, the rates are subject to change from month to month. Rate changes are based largely on the cost of electricity on the wholesale market. 

Variable-rate plans make sense if you don’t want to commit to a long-term contract. Check out the energy retail supplier’s historical pricing to learn about the price range of their variable-rate plans.

Some energy suppliers offer hybrid plans. These plans are basically a combination of fixed and variable-rate plans. The customer may pay a fixed price for a certain time and then switch to a variable rate until the end of the contract or pay a fixed rate for a certain amount of kilowatt-hours and a variable rate for anything over the threshold.

Another option are indexed plans, which are more common for natural gas pricing but also used for electricity pricing. Indexed rates are tied to the market price of natural gas or electricity. This can be a direct connection to the price of natural gas or the closing price of an index like the NYMEX natural gas futures contract. 

The formula used to calculate your energy bill must be fully disclosed in the contract. The electricity rates for indexed plans can vary like variable-rate plans. They can also be fixed for the length of your contract using an index price on a pre-defined date. An indexed plan can make sense if you want to get the cheapest rates available. However, you‘ll have to monitor market rates closely and be able to deal with more frequent rate changes.

A variety of indexed plans are time-of-use (TOU) plans. Electricity rates are tied to the time of day and sometimes also the day of the week. With TOU plans, electricity is typically cheaper at night and on weekends and holidays. However, during peak hours, rates are higher than with other plans. TOU plans make sense when you’re either not at home during the day or when you can shift larger loads, for example running appliances such as washer, dryer and dishwasher, to the off hours. 

Some companies offer prepaid plans where customers buy a certain amount of electricity and natural gas in advance. This option often doesn’t require a credit check and can be beneficial for customers with low credit scores.

Each utility company continues to offer a default service for customers who have never shopped for an alternate energy provider. This default service serves as a benchmark for energy pricing in the market.

Regardless of the retail energy provider (REP) you choose, the local utility in your area will continue to deliver the power to your home. New York State is served by six large electric utilities, which distribute the electricity and natural gas purchased by REP customers in their respective areas. Therefore, alternate suppliers may offer different rates for customers for a different utility company’s service area.

Electricity and natural gas rates vary with the location you’re getting it delivered to. In New York City, retail energy provider customers pay for the delivery service from the local utility Con Edison and for the actual energy supply from alternate suppliers such as Constellation. Hence, energy bills consist of supply charges, transportation charges and delivery charges. 

In the Constellation example, the supplier offers three fixed rate electricity plans and one natural gas plan to New York residents. In New York City, Constellation electricity customers can choose between a 36-month term, a 12-month term or a 12-month term with electricity from 100% wind power. The current electricity rates for these plans are 7.99 cents/kWh, 8.09 cents/kWh and 8.49 cents/kWh respectively. A $100 Early Termination Fee applies for all three plans if you want to cancel the plan before the contract runs out.