When it comes to energy markets, Competitive Electricity Providers or CEP’s are an essential category of services to be aware of. Also known as Retail energy providers (REPs), these CEPs offer energy users with varied options for purchasing power wholesale from generating facilities beyond what is provided by their existing electricity utility company.
Put simply; competitive electricity providers refer to the companies that are certified by a state’s public utility commission to either generate or deliver electricity to local distribution/utility companies. Among the main features of CEP’s include-
CEP’s are separate entities from the utility companies.
- The primary focus of CEP’s is on energy supply only. They compete in the open market to provide energy to retail users. This competition drives the electricity costs down and passes the savings to consumers.
- Although the consumer protection requirements that competitive energy suppliers need to follow are established by the Public Utility Commission, the rates offered by these CEP’s are not regulated by the commission.
Types of CEP’s
Based on the type of energy market you live in, the term competitive electricity providers can vary slightly in meaning. In a regulated energy market, CEPs are generally the part of your existing utility company that works to procure and provide the electricity.
In a deregulated energy market, on the contrary, CEPs are not just limited to being affiliated with your electric utility. There are multiple CEPs in the deregulated market to compete with utility-affiliated electric service providers to supply electricity to consumers.
It is essential to remember here that while CEP’s technically exist in both regulated and deregulated markets, the term competitive electricity providers is primarily used to refer to energy providers in deregulated energy markets.
How Do CEP’s Work?
Before the electric utility industry became competitive, consumers did not have the option to choose their electricity service provider.
But with deregulation and customers having the choice to pick their electricity supplier, retailers of electricity needed to find a way to attract customers away from traditional utility service. They can either do this by lowering the price of electricity or by adding products and services to basic electricity service.
Let’s understand this with an example.
Suppose you’re living in New York and paying your electricity bill as per New York Electricity Rates each month; it essentially means that you are paying for two primary services-
- Transmission & distribution (T&D) of electricity
- The actual supply of electricity
While the T&D charges cover the maintenance and upgrading of the poles that bring electricity to your place, the supply portion of your electricity bill covers the actual energy you purchase and consume.
By making a switch from your standard electric utility to a CEP, you get the advantage of changing the supply portion of your electricity bill, but still need to pay your existing electric utility for the T&D portion of your bill.
Why Do We Need Competitive Electricity Providers?
The wholesale electricity market in the US can be extremely volatile. A CEP or REP steps in to provide buying expertise, demand procurement, and handling risk management.
However, CEPs need to possess the skills required to buy electricity at affordable rates instead of giving in to the pricing whims of the real-time electricity marketplace. To do this, the first thing that competitive electricity providers need to focus on is to forecast demand and buy enough electricity to cover that demand.
How Have CEP’S Affected Electricity Rates In Maine?
Customers in Maine primarily have two avenues for buying electricity. The first one is the standard offer, where a fixed rate approved by state utility regulators each year is given as a default option.
The other option is to enjoy better Maine Electricity Rates by signing a contract with a competitive electricity supplier or CEP, which can offer multiple plans with varying terms and several add-ons.
In the last few years, many Maine residents have realized that deregulated energy provides many more choices, especially in green energy, at a lower cost, and this is the reason why a large chunk of Maine’s population has made the switch to competitive electricity providers since the state started energy deregulation in 2000.
The effect of energy deregulation and the introduction of CEPs can be seen in the form of electricity rates becoming more affordable to consumers in Maine.
Additionally, customers get multiple choices, such as fixed-rate plans and renewable energy options, along with various cash-back incentives that these players offer to the consumers.
Among some of the other benefits of switching to CEP’s in Maine include-
- The competition offers customers choices and allows them to exercise their own choice with respect to environmental concerns, long-term risks, and reliability levels.
- The ability to choose the lowest-priced CEP helps them to save a substantial amount of money on electricity bills.
- Advantage of a simple and hassle-free procedure of switching to CEP with no additional fees involved.
- Competitive market pricing also allows electricity sellers to customize products and services as per their customers’ specific needs, and use demand-side solutions to eliminate supply-side investment, if and when needed.
- Market-based competitive price signals are much more transparent and can stimulate appropriate infrastructure investment, demand response, and energy conservation.
- Competitive energy competition in Maine has fostered the systematic development of green energy and energy & price efficiency that allow retail electric customers to participate in competitive wholesale power markets by receiving payments to curb electricity usage during high demand periods.
The clear benefits of the competitive electricity supply model, as demonstrated in Maine (along with many other states in the US) that provide consumers with the choice to find energy solutions and a supplier, is creating a rapidly growing demand for choice from customers in the states that have been following the traditional monopoly protected price-regulated system.
Having the freedom to shop for competitively priced retail electricity allows consumers to find energy solutions and take complete control of their electricity consumption costs.
With multiple competitive energy providers (CEP’s) available in Maine to offer electricity, both homeowners and businesses get the benefit of enjoying competitively priced energy products and services offered by retail suppliers who are willing to obtain and maintain their customers’ business.
Competitive electricity providers in Maine and other states are attentive enough to fulfill their customers’ needs and can offer innovative energy solutions tailored to individual customers’ needs.