Lower Your Electricity Bill by Switching Providers

On average, consumers in states that let you choose among suppliers save the equivalent of one month's bill in the first year after switching.

I often get offers in the mail about switching electricity providers. How do I assess whether these companies offer a better deal than my local utility? --J.L., Silver Spring, Md.

Many states passed legislation in the late 1990s and the 2000s deregulating energy companies, opening the door to competition among electricity and natural gas suppliers. In about one-third of the states, you can shop suppliers to get the best deal. Your local utility still delivers the energy to your home, sends you the bill and handles power outages. On average, consumers in states that let you choose among suppliers save the equivalent of one month’s bill in the first year after switching, says Phil Croskey, CEO of PointClickSwitch.com, which compares suppliers in seven states.

Most state public utility commissions make it easy to compare rates (www.naruc.org/commissions). Texas, Ohio and Maryland, for example, have tools that show the price per kilowatt-hour from the suppliers in your area and specify whether the rate is fixed or variable, the duration of the term, any cancellation fee, incentives (such as a small sign-up bonus), and the estimated monthly charge based on your energy usage (look at your old bills for the number of kilowatt-hours you use). Most states also show the number of complaints lodged against suppliers.

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Be mindful that variable rates can change daily or monthly based on market conditions and can spike during a frigid winter or a hot summer; you’re probably better off sticking with a fixed rate, says Terry Hadley, of the Texas public utility commission. Croskey recommends comparing your current rate with those of other suppliers at the beginning of every season. You can switch at any time, although you might incur a fee. The new supplier can make the change.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.