Alternative Energy Providers: Should You Switch?

A Patch reader who identifies herself as "Ellen" posted this question on the site in July: "Has anyone lowered their electric bill by using one of the alternative billing companies that keep contacting me by mail and phone?"

Alternative energy sales representatives are trying to convince users to switch. But should you?

The deregulation of energy in New Jersey allows customers to choose their own electric and natural gas suppliers, and with energy prices coming down, residents can expect to be solicited by third-party suppliers.

What does it all mean, and what should you know before switching your electric or natural gas supplier?

According to the New Jersey Bureau of Public Utilities (BPU) “purchasing your energy supplies from a company other than your electric or gas utility is purely an economic decision; it has no impact on the reliability or safety of your service.” 

Under the Energy Choice program, JCP&L and New Jersey Natural Gas continue to be the distributors (the source for delivering the energy to your home), and will respond to any utility emergencies you may experience, but customers can shop and compare to find the best price for their energy supplies. (See a list of alternative providers attached to this story.)

The reason third-party suppliers may have competitive prices for electricity or gas supplies, according to BPU spokesman Greg Reinert, is that “in a very basic way, third-party suppliers are buying electricity in the market place at current rates, whereas utilities buy it in the Basic Generation Service (BGS) auction” for a three-year period. 

With energy prices dropping, third-party suppliers can currently purchase energy more cheaply than the BGS auction average and that is why customers are seeing an increase in marketing by third-party suppliers.

But if energy costs rise, purchasing through the BGS auction may “protect rate payers from large spikes in energy costs,” says Reinert.

Before switching your energy supplier, here are few things you should know:

• Make sure the supplier is licensed with BPU, and review the supplier’s website. All third-party suppliers must be licensed with BPU. The BPU website provides a list of licensed suppliers, and important questions to ask suppliers.

• Understand your current services and costs. Study your bill and refer to the utility website to obtain the “Price to Compare” information - JCP&L and NJNG so that you can determine your actual savings.

• Read all the terms and conditions of the third-party supplier contract.  Reinert says before switching suppliers, “read and understand the contract, consider the length, how easily it’s canceled, how long a period you’re locked in.” If energy costs rise, you may want to switch back to your utility or to another supplier, so you will want to know these important contract terms.

• Understand your customer rights, and make sure any contract you sign complies, and that there are no hidden fees.

• Third-party suppliers cannot switch your energy supply without your consent (called “slamming”). The supplier must obtain written authorization.

According to Reinert, one of the most common complaints BPU hears is that residents get a sales pitch that they could save a certain percentage of their utility bill, but customers should “understand that the percentage is not of the total bill, only the cost of the electricity,” not the distribution.

Customers will still have the “same service from their utility service and they will get one bill,” but the supply and delivery portion will be separate.