What is a retail energy provider?

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Last updated: 06/30/2020
What is a retail energy provider?

What is a retail energy provider?

A retail energy provider (or REP) is a company that purchases wholesale energy to then re-sell at a retail level. 

Traditionally, there was only one way to get electricity to your home and that was through a regulated utility. However, this has changed significantly over the years. Many states have now replaced a monopoly system (in which you have no other choice beyond your local utility) with a variety of retail energy providers. This has opened the market to competition and now customers can choose the best energy service at the best possible price.

See if you could be getting a better deal:

Is a retail energy provider the same as a utility?

In short, the answer to this is “no”. 

The purpose of a retail energy provider is to help customers procure the supply of power while offering different plans and pricing options. 

On the other hand, a utility’s purpose is to operate and maintain the wires that bring the energy to your home. Your utility is responsible for reading your electricity meter and for fixing faulty or damaged lines that cause power outages. In most states, the utility is the company that will also send you your monthly electricity bill. 

Regulated Vs. Deregulated Energy Providers

Regulated Energy Providers

A regulated energy provider is one that owns and operates all the electricity in a state i.e. they have complete control of how energy is supplied to the customer. In states where regulation is still in place, utilities must keep to electricity rates that have been agreed on by state public utility commissions. This type of market is regarded as uncompetitive and it limits customer choice.

VS.

Deregulated Energy Providers

Deregulated energy providers have been given permission by their state to buy and sell electricity. This means that they are not the state’s main utility but, instead, work with a utility or invest in their own power lines to sell wholesale energy to the consumer. A deregulated market allows customers to compare the rates and services of the different third-party supply companies. 

The Advantages of Retail Energy Providers

With the introduction of deregulated retail energy providers, a new market has opened to consumers that offers the following host of benefits, including:

·      The power to choose where your energy comes from
·      Access to flexible and competitively priced energy plans
·      Better customer care and support
·      Access to the latest energy technology
·      Access to resourceful information on how to save energy
·      Access to “green” energy solutions, including solar power

How to Choose a Retail Energy Provider

With new retail energy providers on the rise, choosing an energy supplier has become quite a daunting task. However, it’s important to shop around and compare energy plans so that you get an affordable service that doesn’t skimp on quality and efficiency. 

We suggest that you consider the following factors before settling on a retail energy supplier: 

Price

Deregulation means that REPs must compete to earn your business. This competition applies to the efficiency of their service as well as to price.  Whilst shopping, remember that prices are displayed as cents per kilowatt-hour (kWh).  The lowest rates usually pair with longer plans. 

Term

Many energy plans are tied to a contracted term. Energy plan term options can vary between 6, 12, 24 or even 36-months. As a rule of the thumb, the longer your plan-term, the less you’ll pay per kWh. Choose a term option that will best suit your lifestyle. 

Fixed vs Variable

Retail energy providers typically offer the option to choose between a variable-rate or a fixed-rate contract. Variable rates move up and down with the market, which means that they can lower to be less than a fixed-rate plan (which is a bonus) – but they can also raise to be higher than a fixed fee.  Fixed-rate plans may not lower with the market, but they do protect you from possible price hikes. 

Additional Services

Since REPs are competitive to the market, many of these service providers offer additional services that help to make their plans more unique. For example, they may give you renewable energy options, paperless billing options, or they may even make charitable contributions in your name as a customer. Scrutinize REP’s additional services to see if any appeal to you. 

How do you compare energy plans?

Once you know which factors to consider when choosing an energy plan form a REP, then it’s important to compare quotes. Finance Guru can help you to compare plans that are available to your area. Our energy comparison tool will help you to find all the best options, and who offers the best prices and plans that fit your needs. Just enter your zip code to get started.
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