6 Ways Your Supplier is Ripping You Off

In this case we mean the supplier on your electricity bill. You can pick how much you pay for electricity or natural gas in deregulated energy markets.

There are rates as low a $0.0319/kWh and as high as $0.3121/kWh in island states like Hawaii. According to the EIA.gov the average residential rate in the United States is $0.1289 per kWh.

But, how do you know a good rate when you see one? And where can you save money on your rate? Well, here are the states where you can choose who supplies your electricity or natural gas.

  • Deregulated for Both Electricity & Natural Gas

  • ​California, Connecticut, Illinois, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Virginia, Washington DC

  • Natural Gas Only

  • Colorado, Florida, Georgia, Indiana, Iowa, Kentucky, Montana, Nebraska, New Mexico, South Dakota, West Virginia, Wyoming

  • ​Electricity Only

  • Deleware, Oregon, Texas

If you live in one of these states then you could be getting screwed by your supplier. Here are 6 ways you could be getting ripped off, and how you can protect yourself.

1. Rates (Price/kWh)

The most important part of your bill is your rate. Do not read on to numbers 2-6 until you find your rate and compare it to the rates we found for you.

There are rates that are too good to be true. As a general rule of thumb stick to rates that are in the middle of the pack. Now, what do I mean by that? I spent one week researching 460+ different offers and compiled a weighted average of the rates and terms. Concluding that in fact $0.0656/kWh is the average rate in Ohio. That number may vary, but generally speaking around 6 cents is a good indicator of a solid average rate for Ohio.

Okay, so what about all these super low rates, I could save hundreds of dollars – why don’t I choose the lowest rate?

Rates that are too low often come with a high monthly fee to offset the low rate. Plus they’re usually only offered for 1-3 months, hoping you won’t know or remember how to switch to a new supplier once the term ends. After it ends you’re stuck with a very high rate.

Stay away from any absurdly low rates because often enough they are too good to be true.

We did the research for you. Click to see the results.

2. Term Length

Think of it like your cell phone or cable bill. You sign up for a price that lasts months or years. It’s the same with the supplier on your utility bill. If you don’t want your rate to change this year but maybe next year you want to shop around for other rates, then fix your rate for 12 months. If you know you want to lock in a good deal, then fix your rate for 24 or 36 months.

The key resource here is your time. Unless you really have a lot of time on your hands I wouldn’t recommend going with a term under 12 months. After 6 months you’ll have to research rates again.

Where the suppliers can screw you? Suppliers with short terms are betting on the fact that you’ll forget to switch roll onto a high variable rate.

Take this offer on EnergyChoice.gov for example.

Your rate is fixed for a very low price for 3 months -great! Then they default you to a very high variable rate with an extra fee on top. No Bueno.

Or this other rate that you’re fixed with a pretty decent rate for 1 month, but then your rate skyrockets by 71% to 0.0899/kWh.

Tip: Anything under 12 months is a risky bet.

3. Fixed vs. Variable Rates

I get this question all the time. Why would I sign up for a fixed rate when I can play the market and pay less than the fixed rate?

Okay you got me. If you have enough spare time to track the daily electricity market, then by all means keep a variable rate. But, in a world where time is such a precious resource, you can find a more valuable way to spend your time.

And, energy prices have consistently been on the rise. According to EIA.gov, the average household spends about $112 on electricity costs per month. Compare that to the $75.57 monthly price of 2001, and $103.67 in 2008. See a trend? The average price a residential user has paid for electricity has increased 32.5% since 2001.

Your best bet is to stick with a fixed rate to avoid risk and increasing inflation costs.

4. Monthly & Exit Fees


Costs are built into the rate and if you think you have to pay extra for their ‘work’ then you’re getting screwed. Plain and simple, even if the fee is as low as $4.99 per month. Deregulation is designed to save you money, so don’t pay an extra $60+ a year for the same energy.

Exit fees are another story.

General rule of thumb is to not sign up for program with high exit fees of exceeding $100. If you picked a good supplier then you’re you shouldn't be looking to switch until it comes time to renew your rate. If you have an exit fee that’s under $50, then make sure you’re okay paying that fee if you do want to switch.

Also, look at the terms. Some exit fees may cost $10/month left in your contract. If you want to exit in month 6 of a 12 month contract – then you’ll have to pay $60. But, if you want to exit in month 6 of a 36 month contract you’ll be stuck paying $300.

Expert tip – follow our advice and you shouldn’t have to pay an exit fee.

5. Is the Supplier Legit?

You found a great fixed rate with good terms. But, do you know anything about your supplier?

Do your research! For example, earlier this year the supplier First Energy Solutions (FES) filed for Chapter 11 bankruptcy. Yet they're still offering fixed rates to customers.

Why? Because they're selling off their assets and book of business – aka their customers. Which means later this year that great fixed rate you signed up for the next 24 months may be void or null in the process. So, avoid risk and take 5 minutes to Google the name of the supplier. If you see something that makes you uneasy – choose someone else.

6. Renewable Rate

Congratulations! You signed up for an incredible rate with a super company. First, make sure you get a copy of your contract and mark the start and end date in your calendar. As soon as the contract starts – double check with your bill to make sure your rate matches what you signed up for.

Then 6 months before your contract is up, start searching for better rates. Historically speaking, we know what your price can go up year over year. Ask your supplier if your rate is renewable and find out what their current rates are for fixed terms. If your rate is renewable (same terms and price) then sign up again to avoid inflation. But, don’t forget you have no obligation to stay with them. There is so much competition in the market so you can shop around as much as you want. The good news is that you‘ve already been through this process once so next time you’ll have more experience.

We Did All the Research

The research phase of finding a new rate is the most overwhelming step. Don’t let that stop you from getting a fair price to save money throughout the year. You deserve to save a little cash and use it to pay off other bills or travel the world.

And, if you don’t have time to research, click the button and check out what we found after comparing 460+ offers.

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