Retail Energy Providers vs. Utility Companies: Understanding the Difference

Choices matter when it comes to controlling how much you spend. That is as true when it comes to selecting your retail energy provider as it is when choosing the stores you visit and the products you buy. Energy deregulation and the emergence of retail energy providers gives you both choice and control.

You might be wondering: What is a retail energy provider? Since energy deregulation began in the gas industry in the late 1970s and the electricity industry in the late 1990s, energy providers have been permitted to sell natural gas and electricity directly to consumers in those states that have deregulated. In those states with energy choice, consumers can choose among energy suppliers, driving down costs while improving service and sparking innovation. In this article, you will learn how a competitive energy market gives you energy choice.

What is a utility company?

A utility company is the company responsible for providing your home with utility services, such as natural gas, electricity or water. In the case of natural gas and electricity, utilities traditionally had a monopoly over both supply and delivery of electricity and/or gas in their service territories. In states with energy deregulation, the utility company is still responsible for maintaining the pipes and/or wires that deliver energy products to your home, but the customer can choose which energy company provides commodity supply – that is, the actual natural gas or electricity supply – that the utility then delivers. In some deregulated states, the utility company may also offer supply service, also known as default service or standard offer supply, to those customers who do not select a competitive energy supplier.

What is an energy supplier or provider?

An energy provider is a business or entity that sells power, such as electricity and natural gas, to consumers. Retail energy providers may buy energy at wholesale from producers, or they may operate their own power plants such as nuclear generators, or wind and solar farms. The power that’s purchased or produced is then sold on the open market at competitive rates. Retail energy providers can also offer contract options and may invest in alternative energy and energy conservation technology.

What’s the difference between an energy supplier and utility?

In deregulated markets, you have an alternative source of electricity from several energy providers. They use the utility company’s power transmission lines and gas pipelines to deliver power to you but may offer more choices and flexibility.

Unlike utility companies that offer the same rates and contract terms to everyone, electricity suppliers may give you a choice of rates and terms for your home energy options. You can, for example, lock in rates for longer periods of time than the utility provides, take advantage of time-of-use pricing and save money by shifting your usage to off-peak periods, or even choose renewable or clean, carbon-free energy sources.

To win and keep your business, competitive energy providers are always looking for ways to innovate when it comes to service and technology.

How do retail energy suppliers and utilities work together?

Utility companies manage the infrastructure that delivers gas and electricity to your home or business. Energy providers offer price stability, innovative products and services, and contract options.

What is the benefit of using retail energy suppliers?

Contracting with an energy supplier for your electricity or natural gas may offer you many benefits over buying from a utility.

Competitive rates top the list. Because they have to work to earn your business, energy providers work hard to be efficient, keep costs down and offer you competitive prices and contract options. These include fixed-rate plans that protect you from price increases and variable-rate plans that allow you to manage your consumption to potentially save money.

Superior customer service is another way retail energy providers compete to win your business. When customers have the option to switch providers, both utilities and competitive suppliers have an incentive to invest in a positive customer service experience.

Discounts and promotions are another way some retail energy suppliers compete to get you to switch energy suppliers and then stay with them to renew contracts.

Innovation comes primarily from retail energy providers. Clean and renewable energy options, such as solar energy, are areas where retail energy providers are making considerable investments. They also offer innovations like renewable energy certificates and carbon offsets.

Which is right for you: the utility company or a third-party supplier?

Getting dependable energy at a fair price with good service is the goal of most people. If you live in a state with a competitive retail energy market, such as Texas or Georgia, achieving those aims is much easier.

If you are interested in learning about how to have more control over your residential energy bills, contact us or request a quote for your small business.