So, you’ve been asking yourself: “How do you switch energy suppliers?” but are unsure how to make the best choice for your business.
Organizations may decide it’s time to switch suppliers for myriad reasons — whether it’s pricing, contract terms, or something else entirely. But when faced with so many options and sometimes confusing contracts, switching isn’t as easy as it may seem — particularly if you’re trying to do it alone.
Nonetheless, you’ve made up your mind and are intent on finding a new supplier. We’ve put together this guide to help businesses just like yours weather the challenges of switching energy suppliers by:
- Providing an overview of deregulated energy markets and how they work.
- Understanding the reasons behind your decision to switch.
- Discussing how to make the right decision for your business.
- Exploring how working with an expert energy consultant can smoothen the entire process.
The Deregulated Energy Market
Not every state has regulated electricity, meaning that if your business operates in a state with a deregulated energy market, the local utility cannot provide your electricity and you must choose your own supplier.
The problem is that competition is rife in these markets, and with so many suppliers to choose from — each with its own strengths, weaknesses, and caveats — making the right choice can be overwhelming.
But before we dive more into the inner workings of deregulated markets, let’s briefly touch on energy deregulation by state.
States with deregulated electricity and natural gas include:
- California.
- Connecticut.
- Delaware.
- Georgia.
- Illinois.
- Maine.
- Maryland.
- Massachusetts.
- Michigan.
- New Hampshire.
- New Jersey.
- New York.
- Ohio.
- Pennsylvania.
- Rhode Island.
- Texas.
- Virginia.
- Washington, DC.
States where only natural gas is deregulated:
- Colorado.
- Florida.
- Indiana.
- Kansas.
- Kentucky.
- Montana.
- Nebraska.
- Nevada.
- New Mexico.
- South Dakota.
- Tennessee.
- West Virginia.
- Wisconsin.
- Wyoming.
State(s) where only electricity is deregulated:
- Oregon.
How Deregulated Markets Operate
The deregulated energy market supply chain typically consists of three main components:
1. Generation
Multiple companies may own and operate power plants or natural gas facilities where they generate electricity or other forms of energy.
2. Transmission and Distribution
After plants generate power, transmission and distribution networks transport electricity or natural gas from those facilities to homes, businesses, and other end-users.
These networks are often regulated to ensure reliability and safety. They may also be operated by separate entities, known as transmission system operators (TSOs) or distribution system operators (DSOs), that use fixed infrastructure to transmit power.
3. Retail Supply
Retail energy suppliers purchase energy from generators and sell it to end-users, such as residential, commercial, and industrial customers. In a deregulated market, consumers have the freedom and flexibility to choose their energy suppliers based on their unique needs, including pricing, contract terms, customer service, and access to renewable energy options.
Are Deregulated Energy Markets Better Than Regulated Markets?
Deregulated energy markets aim to promote competition, increase consumer choice, and lower energy prices by having suppliers compete for business. Energy deregulation can even foster innovation, as competition incentivizes companies to develop new technologies and practices to stay ahead in the market.
That said, regulated energy markets bring about some benefits, too — although federal regulations are driving up energy prices, according to experts. Still, even though investor-owned utilities tend to monopolize the energy market, following regulatory constructs often provide better consumer protection.
Both approaches to energy generation, sale, distribution, and consumption have flaws, but let’s focus on the deregulated markets here, which, without the proper support, can lead to:
- Confusion and complexity: Deregulated markets are complex, which can make it challenging and frustrating for businesses looking to switch suppliers.
- Lack of transparency: It can also be hard for businesses without robust energy market knowledge to understand how prices are determined and whether or not they are receiving fair value for their energy services.
- Energy insecurity: Deregulation may increase the risk of energy insecurity, particularly in regions with limited access to competitive supplier markets.
Why Switch It Up? Common Reasons To Switch Energy Suppliers
Choosing to switch to a new energy supplier doesn’t always mean that you’re having a negative experience with your current contract. Sometimes it’s as black and white as someone else is simply offering better terms, rates, etc.
With that in mind, here are a few common reasons businesses may choose to make a supplier change:
Cost Savings
One of the primary reasons for switching energy providers is to reduce the cost of your energy bill. You may find better rates with a different supplier, which could lower your total business expenses.
Better Contract Terms
More favorable contract terms, such as longer or shorter contract lengths, fixed or variable pricing options, or renewable energy options are appealing. Switching providers can allow you to negotiate better terms that suit your business needs more efficiently.
Improved Service
If you’re dissatisfied with the level of service provided by your current energy supplier, switching to a new energy supplier that offers better customer support, billing processes, or online account management can be worth your while.
Reliability and Stability
Some companies prioritize reliability and stability in their energy supply. If a current provider experiences frequent outages or disruptions, you may choose to switch to a provider with a more reliable infrastructure.
Green Energy Initiatives
With increasing awareness of environmental issues, many companies are looking to reduce their carbon footprint by purchasing energy from renewable sources. Switching to a supplier that offers ample renewable energy options that align with your sustainability goals can help you make progress.
Consolidation or Diversification
Companies undergoing mergers, acquisitions, or restructuring may consolidate their energy procurement contracts or diversify their supplier base to optimize their energy portfolio and streamline their operations.
How To Switch Energy Suppliers: A Step-by-Step Guide
Switching suppliers should not be a hassle. With a consultant to help guide you, it can even be headache-free.
If you’re planning to make a switch, consider these five steps to streamline the process from start to finish:
1. Assess Your Current Contract
The first step to switching energy suppliers is to review the terms and conditions of your current energy contract, including its outlined end date, any early termination fees, and notice requirements for cancellation.
As an initial step, it’s also important to determine what your current contract lacks and what a new, ideal contract might look like. This can be challenging, especially if you’re not sure what to look for.
Working with a procurement partner to help answer some of the following questions can help paint a clear picture of your current energy usage, future needs, and more:
- How reliable is our energy supply under the current contract?
- Is our current energy contract providing competitive pricing compared to market rates?
- Have there been any disruptions or outages that have impacted our business operations?
- Is the contract structured to provide stable pricing and protection against energy price volatility?
- Does the current contract align with our sustainability goals and environmental values?
- Is the current contract flexible enough to accommodate changes in energy demand or business growth?
- How responsive is the energy supplier to inquiries, complaints, and service requests?
- Are there any upcoming regulatory changes or policy developments that may impact the current energy contract?
So, before you decide to switch from your old supplier to a new one, we recommend speaking with a professional.
2. Find a Trusted Energy Consultant
While some businesses may decide that facing their state’s deregulated energy market alone is the best choice, the value of an energy consultant cannot be overstated.
A trusted consultant has the knowledge and expertise required to navigate market complexities, including market trends, pricing dynamics, regulatory requirements, and more. With a partner at your side to advise on your energy-related decisions, you’ll be able to take more informed steps forward regarding which suppliers you ultimately choose to work with — ideally, those that can help your business reduce costs and save a lot of time.
3. Discuss Your Unique Needs With Your Energy Consultant
EnerConnex understands that every business is different. When you lean on us for energy consultancy, you get tailored solutions with the best interests of you and your business in mind.
Here are a few things we’ll be looking to learn about your business so that we can help you choose a power supplier that aligns with your needs and goals:
- Current energy usage and costs.
- Operational requirements and restraints.
- Financial objectives and budget considerations.
- Sustainability and other environmental goals.
- Risk tolerance and risk management preferences.
- Overall expectations moving forward.
While some of this information can be gathered from historical data, having an open conversation about what you want to achieve throughout your procurement partnership will ensure that we can set you up for business success.
4. Determine the Right Terms for Your Business
Based on the information gathered and learned about your unique needs, EnerConnex handles the procurement. If you had decided to go it on your own, it would be up to you to negotiate contract terms directly with suppliers. And like any business, suppliers are trying to make money, which means they may not always have your best interests at heart. That could shine throughout in unfair rates, lackluster contract terms, and reduced transparency.
With EnerConnex, we use reverse auction bidding technology to secure the best possible rates and contracts based on your energy requirements. It works by incentivizing suppliers to offer more for less as they compete to win your business.
5. Monitor Performance
Once a suitable new supplier is selected, EnerConnex handles the ongoing monitoring of your energy consumption and the market at large to ensure stability, fairness, and business continuity. We’ll develop an energy plan unique to you that helps you make more informed decisions about your energy buying strategy.
FAQ About Switching Energy Suppliers
Still have questions? Here are common queries:
What’s the Difference Between an Energy Supplier and a Utility Company?
Public utilities are regulated entities responsible for the transmission, distribution, and sometimes generation of electricity, natural gas, water, or other essential services within a specific geographic area. In regulated markets, this is how businesses and individual consumers get their power as there are no other options available to them.
An energy supplier, also known as an electricity supplier or retail energy provider (REP), is a company that sells electricity, natural gas, or other energy products directly to consumers or businesses.
Is It Worth Switching Energy Suppliers?
If another power supplier in your area is offering better rates or contract terms, it may be worth it to switch; however, it doesn’t always make sense to do so. If your business has a long and healthy relationship with its current supplier, you’re satisfied with the service, or tend to be risk averse, switching can be tricky. Always talk with a procurement professional before making any resolute decisions.
Do What’s Best For Your Business
Thinking of switching energy suppliers? Save yourself time, money, and headaches. Learn more about Energy Procurement Services with EnerConnex and how we can help you secure lower rates, contract terms more suitable for your business, and put time back on your side.