4 Smart Caveats When Signing A Contract With Electricity Retailers

The Retailer As The Mediator- Dealer

As a consumer, you have the right to choose your electricity retailer. An electricity retailer is a mediator, an independent broker who arranges contracts and transactions between the energy supplier and the residents, or consumer. A contract with an energy supplier lasts for a period of 1 year to 5 years, with an agreed fixed price of the electricity component in the bill.

Electricity retailers quote on the electricity component of the bill, usually procuring 50 percent of the total charges. Other than the sole electricity charges, transmission and distribution charges are also levied in the bill.

Options When Buying Electricity

As a consumer, you can choose to buy energy according to:

• Regulated price plan (RPP)- you pay electricity according to every kilowatt you use. In some states, the regulated price plan is modified twice a year, on May and November.

• Electricity retailer- a contracted price per kwh is charged. That contracted price is actually agreed with the retailer, and in turn affects the electricity line charged in your bill. The state’s electricity board does not regulate this contract price, but on the other hand is determined by the energy retailer. The fixed price of the electricity is indicated in the bill for a number of years, but it is subject to change.

• Spot market pricing- available for consumers with interval meters. Electricity is charged according to wholesale market prices that change every hour.

An energy supplier charges consumers delivery, regulatory and debt retirement charges regardless of whether you choose to pay according to retailer or spot market pricing.

Of the three options, what is the best choice to buy electricity?  It depends on your needs and preferences. If you choose to sign a contract with an energy retailer, here are some tips to consider, but  a basic caveat is: “know who you’re dealing with”.

Before signing a contract with an energy retailer, note these tips:

• Ensure that you’re dealing with a legitimate salesperson. Look at his or her ID badge and get a business card.

• Don’t divulge personal information such as your gas or electric bill details unless you’re sure you want to sign the contract.

• Read the contract carefully before signing. Be particular about the price comparison and disclosure statement discussed by the salesperson.

• Once you’ve entered into the contract, you’re usually given a leeway of 10 days to cancel it. Read the contract in detail, and research about important questions. Clarify with the retailer because consumers are generally given a 30 days grace period to cancel the contract after paying their first bill.

Discuss in details with electricity retailers your concerns about energy usage and charges. These mediators are designated to the legwork because energy suppliers do not go door to door.