Don't be afraid of asking "dumb questions" when shopping for an energy plan. It could save you a lot of stress down the road.
If you live in a state that has its energy deregulated, that means you have the option to choose where your electric or gas comes from. But shopping for an energy plan can be a bit tough if you don't know what to look for -- or the right questions to ask an energy supplier. Doing a little research beforehand might get you lower rates and help you spot some red flags, like hidden fees and rate hikes. Before choosing your energy plan, you'll want to ask the supplier a few key questions to ensure you're getting a good deal with a reputable company.
Cost is probably the first reason why deregulation is appealing, Robert Brook, senior vice president and managing director at Neara, an electric utility software company, told CNET. I think the second reason is a personal preference for one type of electricity over another.
We'll help you find the best electricity rates in your area
Here are the questions you'll want to ask these energy companies.
Why shop for a new energy supplier?
In most states, energy utilities are regulated monopolies -- acting as the supplier -- giving you no choice as to where your energy comes from and how much it costs. There are 18 deregulated US stateswhere residents have a choice in which electric or natural gas providers they sign up with. The two biggest reasons people shop or switch are to get a cheaper rate or because they care about renewable energy.
We'll help you find the best electricity rates in your area
Potential cost-savings
If you live in a deregulated energy market, not only can you choose your energy supplier, but you can also shop around for cheaper electricity rates and how long you want to lock it in for.
"Having a deregulated market is great because it gives the consumer a choice," Christine Ciavardini, a client relationship manager with MD Energy Advisors, told CNET. "It improves competition, and when you don't have competition, you have really narrow pricing and limited options for the consumer."
There are also options for those wanting to support clean energy. Most electric providers offer plans where a portion of (or all) the energy supplied to your home comes from renewable sources like solar, wind or hydroelectric.
How to shop for the best energy provider
When it's time to look for an energy supplier, talk to neighbors and friends in your area to see if they have any recommendations, or companies to avoid. Ask them if they're happy with the rates and terms they're getting and if there's anything they would change. You can also read online reviews to spot any immediate red flags.
Ciavardini recommends searching on your state's public utility commission's website, which may offer information about some of the more reputable suppliers in your area. This can also help you compare your options.
"You don't want to get into a situation where you [sign a] contract with somebody that is less reputable, or you've never heard of before, and then all of a sudden they go out of business or something like that," she said.
7 questions to ask your energy supplier
Doing a little research beforehand could save you even more than a little bit of stress later on. When evaluating energy plans, it's important to understand rates, fees and the terms of the contract. Don't sign up for a plan unless you fully understand what you're getting into. Here are some questions to ask energy suppliers to make sure you get the best value.
1. What is the plan's rate?
The electricity rate is the most important thing to look at on an energy plan. Get all the details about what you're paying for and how much before you sign anything. Make sure you know the contract length as well. You don't want to be locked into a rate you're not comfortable with for a long period of time. A low introductory rate may only be good for so long before the price jumps up.
"If it seems too good to be true, it probably is," Brook said. "Some organizations will offer you upfront price cuts to get you into a contract, but if you don't read the fine print, you'll find that you're bound to that supplier for a longer period of time."
2. Is this a fixed or variable rate?
Your electric rate is either going to be fixed or variable. A fixed rate stays the same over time. Variable rates can fluctuate with the market. While it's easier to predict what your energy costs are going to be on a fixed rate plan, a variable rate plan could net you a lower rate during cost fluctuations.
Your energy rate could change for a variety of reasons. Demand, time of year and utility cost adjustments are just a few reasons. Consider your energy needs and budget carefully when deciding between these types of rates.
3. How long does this rate last?
The right energy plan can make budgeting your energy costs a bit easier. Some suppliers' rates change monthly or quarterly, which can make it difficult to budget for future utility bills.
"One of the reasons to shop around is to lock in a rate for a period of time," said Ciavardini. "That can range anywhere from six months to 48 months or even 60 months, so you can get that budget certainty for a very long term."
Much like shopping for an internet plan, your energy supplier might offer a promotional rate for new customers or switchers. These low promo rates might look nice on paper, but they might only last for a few months. Make sure you understand the actual rate you'll be paying once the promotional period is up.
4. What are the fees associated with the plan?
Ask prospective energy providers about any fees or charges associated with the energy plan, like base charges, monthly flat fees, usage threshold requirements, enrollment fees, early termination fees or meter reading fees.
If you want to get out of your current plan before the contract term is up, you'll most likely have to pay an early termination fee. This could be a simple flat fee or a charge based on how many months you have left in your contract. Make sure to check you know your plan's early termination fee before committing to anything long term.
"Look for early termination and auto-renew language," Ciavardini says. "Do you get penalized if you terminate your contract prior to the expiration? Does the contract auto-renew? You could find yourself in a situation where all of a sudden, your great rate expires and you're paying a much more expensive rate. The verbiage in the contracts really matters."
If you're a renter, or a homeowner who's planning to rent out or sell your home in the near future, you'll want to consider the length of the agreement to avoid potential fees.
"You're signing a long-term contract, and if you're renting a property or you're planning on selling your property, you may sign a contract that lasts longer than you're planning on being someplace," Brook said. Make sure to also ask your potential energy supplier if they have a "movers clause" where you can earn an exemption to an early termination fee due to moving or changing addresses.
5. Is there a deposit required?
Some energy suppliers or utility companies may require a deposit when signing up for service, typically as a security against nonpayment. Deposits may apply to customers who don't meet certain thresholds for creditworthiness or have a history of unpaid utility bills.
6. Does the plan include renewable energy?
Showing support for renewable energy in the marketplace is a great reason to shop around. You might even be able to choose from different renewable energy sources. However, clean energy suppliers sometimes have higher rates.
"Deregulation gives you the option to work with a generator who is producing green power," Brook said. "If you're using a renewable energy provider, they have a certificate that says they're bringing a certain amount of renewable power onto the grid."
Brook said that just because you're purchasing renewable energy doesn't mean the actual power running through your home is necessarily from that source. Rather, paying a small premium means that you're helping to bring more green power onto the grid.
7. What happens if I miss a payment or have trouble paying?
Before you sign a contract with an energy provider, make sure you understand the implications of a missed payment. Inquire about any payment assistance programs that may be available. Sometimes your supplier will have options for deferring payments in case of financial hardship.
What to do if you sign up for a bad deal?
The best way to protect yourself from getting stuck in a bad deal is by doing your research beforehand. Read the fine print in the terms of service or electricity facts label, and ask questions upfront to vet the supplier. Knowing your electric rate and recurring fees are the most important things to understand before signing. Check for any early termination and meter reading fees too.
You do all this research in the hopes that you don't get locked into a bad deal, Brook said. "You have signed an agreement, and there's probably going to be a little bit of pain associated with getting out of it."
If you're unable to resolve an issue directly with your energy supplier, review your contract to see what your options are for early termination. If you think you've been misled or suspect you've been scammed, reach out to your state's energy regulatory agency or consumer protection bureau to file a complaint.
Frequently asked questions
Can I save money by switching energy providers?
Switching providerscan save you money if you find a plan with lower rates or better terms. Compare different offers and consider details like contract length, rate structure and fees to make sure you're making the right choice.
Are energy suppliers legitimate companies?
Most energy suppliers are legitimate businesses licensed to operate in their respective states. But not all of them are trustworthy. Research the reputation and credentials of an energy supplier before signing up for their services. Your state's public utility commission's website is a good place to find reputable suppliers.
