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Reviewing Our Electricity Utility Supplier

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Electrical power linesEvery year around this time, my electricity supplier sends me a notice about renewing our electricity supply agreement. Last year, I ignored it because the pricing was competitive and it automatically renews for a year. While we’ve only been using Washington Gas Energy Services for two years, I thought I’d take a closer look this year to make sure we’re still getting a good price.

The electricity supply agreement sets a flat annual kWh price on electricity supply of 10.8¢. In pricing electricity, usually there is a summer price and a winter price, with the summer price being higher in our area. With this agreement, it would be a flat rate throughout the year. To give you an idea of energy use, we typically use more energy in the winter than we do in the summer (about 1,000 kWh per month in the winter, 600 in the summer).

Supply & Delivery

Electricity and natural gas supply have been deregulated in a lot of states, including Maryland, so you have plenty of options when it comes to the supply and delivery of power. When it comes to supplying electricity to your home, you often have to make decisions on two parts. The first is the company that will be supplying the electricity. The second is the company that will be delivering the electricity. Very often, the two companies are the same and it’s usually the company delivering the electricity.

At our home, and I believe this is common, we have no choice on the company delivering the electricity – it has to BG&E. They own the wires and the pipes, so they will deliver the power. For the supplier, there are plenty of options and the only requirement is that they must be licensed by the Maryland Public Service Commission (PSC) and registered with BG&E.

Shopping for Electricity

Right now, our electricity supplier is Washington Gas Energy Services. They recently sent me an electricity supply agreement that would renew our plan at 10.8¢ per kWh. We have the option of renewing for one year or two years at that same 10.8¢ rate. Is that a good deal?

It is if BG&E would charge us more. On our electric bill, BG&E lists the “Price to Compare” at 11.97¢ per kWh. That is BG&E’s estimate of how much an average BG&E residential customer would pay on our schedule per kWh. In other words, working with Washington Gas Energy Services would save us over a cent per kWh, or nearly 10% off. We use around 6-700 kWh’s a month, so it’s a savings of $6-7 a month.

I would’ve expected WGES to have a price in between BG&E’s summer and winter rates, but it’s not. It’s lower than both. WGES is a better choice even with our uneven seasonal use of electricity.

Sign a Long Term Contract?

The next question is whether we should sign up for a one year renewal, which is the minimum requirement, or a two year agreement. Whenever I’m presented with this decision, I try to avoid over thinking and over analyzing it. I’m expected to save $6-7 a month based on BG&E’s estimates, which I have to believe are on the low end of their range because they want me to buy their electricity. I also expect energy prices to go up, that’s just the direction they naturally move in, so locking in long term makes sense.

What’s the risk? Electricity prices plummet, but I can’t believe they will plummet so far that I’ll feel burned by taking a two year 10.8¢ offer when BG&E’s projections are 10% higher. Last winter, the price was 11.75¢ per kWh. This past summer, it was 12.66¢ a kWh. Now, it’s 11.97¢ per kWh… prices aren’t going to drop so far that 10.8¢ looks like a bad deal.

We’ll be locking in the price for two years. There’s an added benefit of 5% of the electricity will be coming from wind power, that’s icing on the cake.

What do you think? Am I missing a big piece to the puzzle somewhere? This seems like such an easy decision that I feel like I’m missing something. I’d love to hear your thoughts!

(Photo: mpeterke)

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15 Responses to “Reviewing Our Electricity Utility Supplier”

  1. lostAnnfound says:

    We don’t have the opportunity to shop around for a supplier, as we get our electricity from the city. They generate their own power, which in turn supplies the residents. Supply rate from the city is 8.9 cents per kWh. It is the least expensive in the area as compared to the big supplier and some other municipalities in our region.

  2. zapeta says:

    I live in IL, and I didn’t even realize that residential customers could get a different electricity provider. A quick search showed that I have a total of 5 options so I’m going to break out the bills later and see if it makes sense to switch.

    In some IL locations, you can do the same for your natural gas supplier but mine is not one of them.

  3. Neil says:

    The only piece missing is other third party providers. I get my electricity for 8c/kWh, similar setup. The “regulated” rate (which is really just a monthly average of the commercial floating rate that changes hourly), is usually between 11 and 12 cents/kWh.

    Also, on our bill there are numerous costs, fixed and floating. Actual power represents about 1/2 the price, with the other half being mostly made up of a carrying charge (set by the wire owner), and a fixed “administrative fee” which does vary by supplier, between $4.50 and $6.50/month…ours is more or less in the middle.

  4. eric says:

    Mine is 12.42¢ per kWh. Argh.

  5. Glenn Lasher says:

    We have options here in New York, to be sure. In my case, I actually chose a slightly more expensive option, on the grounds that my supplier uses 100% renewable energy.

    They offer two products:
    * 60% wind, 40% hydro for about 6¢/kWh; and
    * 100% wind for about 7¢/kWh.

    The default from National Grid is about 5¢/kWh.

    Additionally, between delivery and tax, everyone gets billed an additional 10¢/kWh above the energy price.

    My total cost ends up being 16¢/kWh roughly, after all taxes and fees, for the 60/40 blend. This is not far from typical in my area, and ultimately the extra 1¢ I’m paying only adds about $7 to my bill on the average month. I’m good with that.

  6. joruva says:

    Here in Macau (China) it’s 15¢ per kWh plus $2.50 in random fees, but the government cuts almost $19 off the bill each month :)

  7. lsward says:

    We live in Virginia and have only one choice, a local electric co-op.

    kWh cost for last month was $0.08762 before fees and taxes and $0.13625 after they are added.

  8. Chris says:

    I pay 13.7 in Orlando with no other option but solar, which takes too long to pay for itself.

    • saladdin says:

      I have thought about solar also. But I get my electricity from the TVA @ $0.084 kwh. No way would solar pay for itself the way the prices are now.

      saladdin

  9. James says:

    I live in the central MD area and just got a pretty good offer in the mail. Dominion is offering 10.37 cents/kWh (12 % lower than BGE) and that price is good through 12/31/2010.

    I forget when MD deregulated energy utilities, but it seems like an awful long wait to get my first offer this year.

  10. Chuck says:

    I just switched from BGE to WGES. I think my rate was 10.20 cents through July 2010. I estimate I will save $10-15/month. It all adds up.

    In Maryland it is very easy to switch suppliers.

    • sharon says:

      I live in MD in A.A. Co., and just got an offer from WGES good through Nov. 23, 09 for 11.4 cents/kWh. Wonder why my offer is for a higher cost?!

  11. Charlie says:

    Did you notice that this offer from WGES is a one way street. If the electric rates go down, you are stuck paying the higher rate that is in your contract with WGES, however if the rates go up such that WGES has to pay a higher rate to buy their electricity, they can cancel their obligations to you with a 30 day notification and you are stuck paying the higher rate that BG&E is sure to have. For WGES this is a no-lose proposition.

  12. omnatio says:

    Avoid WGES at all costs. Note they will try to hammer you with a $480 “termination fee” if you try to switch even after your contract has expired. This is one reason the have F and D ratings with BBB


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