To Contract or Not to Contract: Why Many Businesses Leave the Utility Rate

In deregulated markets, businesses can choose their own energy supplier instead of accepting the utility's default rate, and for large energy users that choice can significantly affect cost. The utility still delivers the energy no matter who supplies it, but the supply portion of the bill can be purchased competitively when a business chooses its own supplier.

While switching away from the utility rate may sound complicated, the process is typically simple and requires little operational effort from the customer. In many cases, businesses see no change in how their energy is delivered or billed, only in how the supply portion of the energy is purchased.

What Does the Process of Switching Entail?

If there is one benefit of paying the utility rate, it’s that there is no extra effort involved.  Switching to a third-party energy supplier can sound complicated, but when done properly, it's a straightforward transition.

It will probably look something like this:

• Receive competitive supply rates from multiple energy suppliers

• Select a supplier and sign a contract for the supply portion of energy

• The utility continues delivering energy to the property

• Billing typically remains the same through Utility Consolidated Billing (UCB)

Customers can contract directly with a supplier, but many choose to work with an energy broker who helps compare supplier offers, negotiate pricing and guide the overall strategy. Brokers also help facilitate the contracting process, making the transition away from the utility rate straightforward and giving customers peace of mind.

Most customers will see no operational change after switching to a third-party supplier as certain billing types, like UCB, mean that customers will still only receive one bill from the utility. The only thing that will change will be the rate that you’re paying, which in many cases will be lower.

Unmanaged Energy is a Missed Financial Opportunity

The biggest risk of staying on the utility rate isn’t just price, it’s lack of strategy. Although deregulation is not a new concept, the energy market has become increasingly volatile over the past few years making it essential for deregulation to be on any large energy user’s radar. 

With the right strategy, customers can take control of their energy spend and gain clarity into an unpredictable market. Businesses that stay on the utility rate risk overpaying for energy and falling behind competitors that have moved to a more strategic buying approach. In deregulated states, staying on the utility rate can mean exposing your energy bill to inflated prices and can make budgeting difficult. Switching to a third party energy supplier offers an opportunity to navigate the increasingly volatile market, instead of accepting high prices and overestimating annual budgets to accommodate.

Volatility is not expected to slow as grid strain and severe weather continues to impact the energy market. While unpredictability can be daunting, it is a great opportunity to reevaluate how you manage your energy to capture market opportunity and protect your bottom line.

The Value of Managing Energy Beyond The Contract

In addition to gaining control over energy spend and managing risk related to market volatility, many large energy users find value in actively managing their energy portfolio over time. Depending on the partner they work with, companies may also receive support with monitoring contract performance, tracking market conditions and addressing billing or utility issues that arise throughout the year. This type of oversight helps ensure that energy contracts continue to perform as expected while minimizing internal workload.

Some organizations also benefit from energy budgeting support, which uses current market data and forecasts to help predict future energy costs more accurately. For finance teams and property managers, this can make planning and cost control significantly easier.

Key Takeaway

Businesses in deregulated markets aren't required to pay the utility's default rate. Switching to a competitively priced third-party supplier is typically a low-effort process that keeps the same delivery and billing structure, and staying on the utility rate instead means missing the chance to manage energy as a strategic, ongoing decision rather than a fixed cost.