Electricity provider switching
Electricity provider switching is the ability of power consumers to have an option—or the "power to choose"—their electricity provider in a deregulated electricity market as permitted by a state public utilities governing body.
The Australian market has been somewhat deregulated, but still sees consumers provided with a narrow band of choices. Due to these deregulations, companies are springing up to help consumers find the best priced electricity, which given it is a commodity has allowed for downward pressure on pricing and a more affordable quality of life for the average Australian.
Electricity is deregulated in two Canadian provinces: Ontario and Alberta. Both markets showed price spikes in the first year of dereguation, but then settled down into a volatile but reasonably stable environment. Alberta's market is dominated by fossil fuel generation and as such reacts more closely to the price of natural gas. Ontario's generation mix is about 50% nuclear.
The consumer has the choice between buying from their local utility (Local Distribution Company - LDC) or from one of the deregulated suppliers. There is a large range of contract options from a variable price to 1,3 or 5 year fixed prices. Electricity provider switching is difficult once the consumer is in one of these contracts, unless they are close to the end of a fixed price contract. However, as of January 2010 there is a maximum termination penalty allowed.
A very important element in switching electricity providers in Ontario is understanding the Global Adjustment. This is an adjustment for some commitments government agencies have made on your behalf. It is included in the LDC Regulated Price Plan, but is an additional line item if a contract is signed.
The consumer has the choice between buying from their local utility (Local Distribution Company - LDC) or from a deregulated suppliers. There are however many fewer of these in Alberta. Electricity provider switching is difficult once the consumer is in one of these contracts, unless they are close to the end of a fixed price contract.
There is a price comparison service operation in Canada.
Electricity supply has also been deregulated in the United Kingdom. For a list of suppliers see: Category:Power companies of the United Kingdom at the foot of the page.
In deregulated markets such as Texas and Maryland, the state government may require the incumbent utility energy provider to allow for unlimited competition within the marketplace, where the consumer is free to choose any electricity provider.
Currently, more than 20 of the lower 48 contiguous United States allow for consumer choice in electricity providers, with Texas being the most-widely watched deregulatory scheme. Many other states are surveying the Texas deregulatory model in order to ape its design as a paradigm for the imposition of free market forces within such other power markets.
Electricity provider switching is only practical if a customer is either buying from a utility, or is at the end of a fixed price contract with a provider.
The status of Texas electrical deregulation: Six years later
The primary claim of deregulation supporters was one of lower electric rates. Since electrical deregulation was implemented in Texas in 2002, the residential rate for electricity has been increased seven times, leaving the current Price To Beat at around 15 cents per kilowatt (as of July 26, 2006, www.powertochoose.org). The average American rate is about 9.78 cents per kilowatt, similar to that of the few regions in Texas which chose not to deregulate; for example, Austin residents only pay 10 cents per kilowatt hour. However, it is often meaningless and can be misleading to compare electric rates across different regions to judge the success of electric choice, as a number of factors can affect the pricing an electricity in a region that have nothing to do with competition, including the electric generation mix that serves the region, environmental regulations and the cost of fuel. While it is true that residents of some Texas regions have access to over a dozen different competitors, those competitors offer only a small discount from the Price To Beat; for example, the lowest cost provider in North-Central Texas charges 12.9 cents per kilowatt (as of July 26, 2006, www.powertochoose.org).
If environmental impact is the test for success, then the results are a mixture of good and bad. Flush with profits from the 29% premium being charged to Texas residents in deregulated markets, producers like TXU proposed eleven new coal-fired powerplants which, compared to natural gas-fired powerplants, produce more pollution and higher profits (coal is cheaper than natural gas on a per-produced-kilowatt basis). This effort was supported by Texas Governor Rick Perry who put the proposed plants on a "fast track" process for permits in an effort to be grandfathered in under more lenient EPA pollution rules. Because the Dallas/Fort Worth region already has such a serious smog problem, many public organizations, such as the Environmental Defense Fund, and politicians objected this plan. In a notable moment for climate change activists, TXU withdrew its proposals for eight of the eleven plants on February 25, 2007. This was also a result of Texas Pacific Group and Kohlberg Kravis Roberts acquisition of TXU Corp. On a renewable note, the ballooning profits from Texas electrical providers has drawn considerable investment by wind-turbine companies. In fact, Texas surpassed California in wind energy production in July 2006.
As electric bills have quickly ballooned due to rising rates, residents are proactively trying to reduce their electrical usage by raising the thermostat setting, installing insulation, installing solar screens, solar panels and other such activities. So as with all utilities, usage decreases as the prices rapidly elevate as they have in Texas since deregulation set in.
- Ontario Power Authority Long Term Energy Plan http://www.powerauthority.on.ca/sites/default/files/page/MEI_LTEP_en.pdf
- Ontario Energy Board http://www.ontarioenergyboard.ca/OEB/Consumers/Consumer+Protection/Retail+Energy+Contracts/Before+Signing+an+Energy+Contract
- Independent Electricity System Operator http://www.ieso.ca/imoweb/siteShared/electricity_bill.asp?sid=bi
- Overrated: Deregulation was supposed to lower Texans' electric bills. Instead, rates are through the roof Texasobserver.org June 29, 2006
- Proposed Coal-Burning Power Plants Threaten the Health of Texans Public Citizen Feb. 7, 2006