How Does Switching Energy Suppliers Work?

Switching energy suppliers means comparing rate offers, signing a contract with a new supplier and letting that supplier notify your utility of the change. Your utility keeps reading the meter, maintaining the lines and responding to outages exactly as before. Only the company that sells you the electricity or natural gas itself changes.

What Actually Changes When You Switch Suppliers?

In a deregulated market, your bill has two parts: delivery and supply. Delivery is the cost of getting electricity or gas to your building and your local utility always handles that, no matter who supplies your energy. Supply is the cost of the energy itself, and that's the part a competitive supplier can sell you instead of the utility's default rate.

Energy deregulation allows customers in certain states to choose their energy supplier.

Switching suppliers only touches the supply side of your bill. Nothing changes about who delivers your energy or who you call during an outage.

How Do You Compare Supplier Offers Before Switching?

Suppliers price contracts a few different ways. A fixed rate locks in one price per unit of energy for the length of the contract, so your supply cost doesn't move even if the market does. An index rate ties your price to the wholesale market each month, so it can drop when the market drops and rise when it rises. A block and index contract splits the difference: part of your usage is fixed, part floats with the market. The right structure depends on how much risk your business can tolerate and how confident you are about where the market is headed over your contract term.

What Is Actually in the Contract You're About to Sign?

Before signing, check three things: the contract length, the rate type and the early termination fee. Contract lengths typically run one to three years. The rate type, fixed, index or block and index, determines how exposed you are to market swings during that term. The early termination fee is what you'd owe if you left before the contract ends, and it matters most if there's a chance your business's energy use or ownership could change mid-contract. Comparing offers against your company's actual risk tolerance, rather than picking the lowest sticker price, is the kind of decision that a third party supplier or energy broker is designed to help with.

How Does the New Supplier Notify Your Utility?

Once you sign, the new supplier handles the notification to your utility. You don't have to call your utility yourself. This is sometimes called a drop request: the new supplier tells the utility to stop billing you at the default rate and start billing you at the new contract's rate. The utility processes this on its own schedule, and your account typically moves over on your next meter read cycle. There's no service interruption during this process, because the utility is still the one delivering your electricity or gas the entire time. The only thing that changes is the rate you pay for the supply portion of your bill.

When Does It Make Sense to Switch in the First Place?

Not every business benefits from switching the moment it becomes eligible. Your specific energy market, appetite for risk and budget goals are all factors that should be considered before switching. Eighteen states and the District of Columbia allow at least some commercial and industrial customers to choose a competitive electricity supplier.If your business hasn't compared a competitive offer against your utility's default rate in the past year, that gap is worth checking.

Key Takeaway

Switching energy suppliers means comparing fixed, index, or block and index offers, signing a contract with clear terms on length and early termination and letting the new supplier handle the utility notification. Your utility keeps delivering your energy the entire time. The only thing that changes is who you're paying for the energy itself.