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How Can Electricity Supply Providers Offer Lower Prices Than The Utility?

September 01, 2013

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If you live in a state that offers electric choice, most likely you are able to choose from a host of electricity supply providers to help you save money on your monthly electric bill. Saving money is always on the top of my priority list, including my friends. However, many don’t understand how a supplier can offer lower electricity supply prices than the local utility. I asked our pricing experts at AEP Energy to help explain the concept in a way that’s easy to understand. I feel better equipped to share this with my friends now. I hope it helps you too.

Electricity, as well as most other commodities, is capable of being bought, sold and traded on the open market. In a competitive market (aka electric choice), participating electricity supply providers closely monitor electricity prices, minute by minute, and purchase electricity for its customers based on current market prices. Suppliers then sell this power to consumers like us to help save money on the generation and transmission service portion of our local utility bill. Not all states can participate though. To see if your state participates, enter your zip code at www.AEPenergy.com.

On the flip side, your local utility is regulated by the state’s Public Utilities Commission, which dictates specific rules and regulations that must be followed, including those that prevent utilities from actively participating in the open market. These rules are in place to avoid the monopolization of the market since the utility is typically the largest purchaser in the area.

New options can bring peace of mind

The local utility’s supply charges may fluctuate based on seasonality, utility fuel, and other costs and are ultimately set by the state’s regulatory entity. Since electricity supply providers purchase electricity differently, they can offer customers a variety of different pricing options, like a “fixed” price per kilowatt-hour (kWh). Some customers find this type of price attractive since it brings peace of mind knowing that their electricity supply price is stable and predictable.

In summary, electric choice allows consumers to shop for electricity and find the best deal since electricity supply providers offer prices that more closely reflect current market conditions. Get started today with AEP Energy – a trusted name in the electric industry. We make saving money easy and enrollment only takes a few minutes. Visit AEPenergy.com to learn more or enroll.

Happy saving!

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