If you are a small or large business in California you have the option to shop and compare California electric rates from several electricity providers in the state. The way deregulation works is a little counter-intuitive at first as doesn’t one company own the generation, transmission, and selling of electric service? In a large part that is true but to encourage a more fluid, competitive market that has fewer bureaucratic big government trappings the deregulated state will do some things to encourage the deregulation process to work.
To start off with they will separate the transmission and generation electricity business away from the retail sales business. You would think this doesn’t make since although a large part of retail electricity sales is to hedge the raw electricity power on a commodities market such as the natural gas commodities market. Farmers do the same thing and it is a big part of insuring their profit when selling electricity or in the case of the farmer, corn.
So the power generators make their profits from selling this wholesale power but the retail electricity providers also make a profit by creating a “fixed electricity rate” product that may be fixed in price for a year or more. To make the rate fixed they have to hedge their electricity on the commodities market. The retail electricity provider has a very thin profit margin but they are generally able to save a California business searching for the lowest electricity price a good deal of money.
To use a case study, our energy consulting company was able to save a chemical plant in Texas almost $50,000 a year by choosing a competitive retail electricity provider. The reason they were eager to switch electricity companies without worrying about reliability issues is because the power still comes from the same source. Because there is this separation between power marketers, power generators, transmission and generation and retail electricity sales you don’t have to worry even if your competitive electricity provider were to go bankrupt.
Let me caveat that statement about not having to worry by saying, if the retail electric company in California were to go bankrupt there would be the problem of having to renegotiate the electricity agreement at potentially a higher price with a different electric supplier. Since the retail electric provider in CA went bankrupt they probably lost millions of dollars because they did not hedge their energy but were basically gambling that commodity fuel prices would go there way. Some of the biggest players in the retail electricity space have made this mistake.
What happens when your electricity company in California goes bankrupt is simple. Just as in Texas you would be put with what is commonly known as the provider of last resort. You may not like the electricity price but you are now open to shop around again. The provider of last resort is simply a way to avoid you having your electricity service in California cut off because you no longer have an electricity provider.
So all in all the point is that you will never be disconnected from your electricity service when choosing an unfamiliar retail electric provider unless you fail to pay your electric bill on time and do not respond to disconnect warnings and notices that give you plenty of time to respond.
So what is there to worry about when picking a competitive electricity supplier in California?
Over and over again it ends up being an issue about tricks and gimmicks. CA electricity suppliers that come into the market look for an edge to get your business and this generally translates into hiding certain fees and charges in the finer details of your electricity agreement. Don’t fall for this!!!
To avoid the tricks like these you simply need to work with an experienced energy consultant in California that can send your electricity usage through a reverse auction process. Once this process is complete they put your electricity bids in a detailed electricity proposal that shows you who has the cheapest price. This transparent process includes any potential hidden fees and charges so you will have a clear apples to apples electricity rate comparison side by side your current or favorite electricity company in California.
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