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Will an energy retailer save you money?

9 January 2009 24 views No Comment
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Often times on your utility bill you may see a statement like “switching to a retailer may save you $4.72 a month.”

What does this mean?

Basically, you can buy the utility such as natural gas or electricity direct from the supplier, as you probably do now, or through a retailer.

Sometimes a retail agent may be able to offer you savings due to arrangements with the utility company that makes their rate cheaper. It’s definitely worth looking into.

For more information, you can either consult your bill (there should be more information on retailers in there) or call the utility company directly for a list of retailers.

Let’s face it – even if you save $4.72 a month, which doesn’t seem like a lot, that’s $56.64 a year, just by making a few phone calls.

Are there hidden snags?

Ah, there might be. Excellent point. Certainly if you want to make a change in your energy provider there are some things you might want to ask or at least be aware of. Bottom line: do your homework.

Hidden Fees

Sometimes a retailer’s contract or deal is laden with hidden fees or extras that you may not need…or even want. It is important to comb through the fine print before you think about anything. Common hidden fees are minimum usage costs, billing fees, customer service fees, delivery surcharges beyond the supplier’s nominal charges, double taxes or incorrect (if the retailer is out of state), additional commodity surcharges, and artificial inflation of energy rate.

Early Termination Fee

Almost all retailers will make you sign a contract, in effect, locking you into a time when they become your sole supplier of energy. If you decide to change, you are in effect breaking the contract. The retailer will most likely charge you a termination fee which can run hundreds of dollars.

Contract period

Usually contracts run in the neighborhood of 1 to 2 years. I wouldn’t think about going longer than 1 year, personally. The reason is cost. When you sign a contract, often times you are locked in to a pre-determined rate and possibly a rate cap, which in effect caps what they can charge you. In some cases this is a good thing – if you were not with the retailer, the energy company can charge virtually anything they want (within legal limits). A contract protects you from this.

Higher Short Term Energy cost

But…with that rate cap and guaranteed rate comes an immediate increase in your energy bill. The rate will almost always be higher than what you’re paying now. It might even be as high as 50% higher. Retailers can sell this to people because of the chance that if energy costs rise, you will be paying the same rate while everyone else pays more. If you’re willing to take the same bet, then go ahead.

Your supplier will not change!

Even if you choose a different retailer, the company that delivers your energy will not change. The original utility or energy company still owns and maintains the connections to your house. So, they will still be part of your energy solution.

Customer Service/Billing

It is important to know who / which company to call in certain circumstances. If it is a billing question, you’ll probably call the retailer. If it is an emergency or delivery problem, you’ll probably need to call the supplier, your original energy company (ah…but you may need to call the retailer first…make sure you check!) But…who do you call for an installation? Or a service call? Are they scheduled through the retailer and farmed out locally?

Do a BBB / search online

Before you think about signing a retailer contract, do a quick search on the Better Business Bureau site, or on related forums or energy sites to see if they have had any problems with their service, etc. If there are many problems, you may want to look into the company further. Don’t bother checking the company’s website if you are a potential customer…they are basically just marketing brochures. Do you honestly think the information they post on their website is going to give both sides of the story? Nope – its the PR/marketing spin department.

Don’t sign anything without a “trial” or grace period

Usually, most contracts will have a grace period at the beginning of the service period (3 days, 5 days, a week, etc.). Use this time to reflect, do research, and think about your decision. If you don’t feel comfortable with the retailer, call and cancel. Now is the time before termination fees apply.

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