Deregulated energy: What it is and how to select a provider

In today's economic climate, it is very unfortunate that one of the least understood opportunities in which homeowners can save money deals with the availability of deregulated energy in N.Y. While many people continue to get direct mailings to their homes in regards to deregulated energy, due to the lack of knowledge in regards to what this opportunity provides - and the reassurance that this is not some type of scam - many homeowners seem to be scared away from getting involved in this type of savings. This opportunity first started in N.Y. in 1996 when the NYS Public Service Commission began to separate the charges on electricity bills into categories for delivery and for the actual electricity. This opened up the opportunity for third-party providers to begin providing electricity to homeowners across the state at a savings over and above the cost provided by their utility company. What "deregulated energy" essentially means is that when a homeowner purchases electricity, they can buy their electricity at competitive prices since these third-party providers are now in the market. Deregulated energy only affects the energy cost portion of your bill; the delivery of that energy to your home is still provided by your utility company. The difference is that the electricity that is delivered to your home is now provided by a third-party company rather than the utility company. The billing stays exactly the same as you will still receive only one bill which will come from your utility company, but this bill will now show you who your third-party provider is. The pricing model used by the utility companies is based on transferring the cost of the electric to you directly based upon the price the utility company is paying for it. Generally, the utility company negotiates the price of these utilities every six months. For third-party providers, there are two different types of pricing models that can be used: (1) Fixed Pricing: The price of your energy will be set and you will be signing a contract, generally for one year, for receiving your energy at that cost; or, (2) Variable Rate: The energy cost will be based on how much the third-party provider pays for that energy on a regular basis (such as on a monthly basis). The savings between all third-party providers is approximately the same, other than incentives given by some of the companies in order for consumers to switch to their company. Over the long-term, for residential electricity, the savings is in the range of 8%. In most instances, the decision of which provider to switch to is based upon what other types of values are provided by the third-party company, rather than the actual cost savings. What are the other values provided? Probably the biggest opportunity provided and the greatest value deals with the use of sustainable energy - energy that does not affect the environment when it is being produced. When selecting a third-party provider, there is no requirement that the third-party company provide any type of sustainable energy, and they most typically provide "brown" (or "dirty") energy. Consumers may find appeal in a third-party provider that offers electricity provided through sustainable energy, such as windmills, solar power or any other source that would not affect the environment. Now that homeowners have the right to choose who provides them with their energy, that competition is available within the industry with no interruption in service, and that billing is the same as was previously provided, the question becomes, "Who is the best provider to select when making this switch?" In reviewing the information above, consumers may want to consider a company which not only provides the option of firm pricing or variable pricing, but that also will provide the greatest percentage of sustainable energy. Mitchell Frumkin, PE, RS, CGP is the president, Kipcon, Inc., New York, N.Y.