A Look at Residential Deregulation

January 26, 2011

Hutchinson Business Solutions (HBS) has been providing deregulated energy management solutions to our business clients for over 10years.

Although we currently do not service the residential markets in deregulated states, I found it prudent to offer some insight to the many residential clients now seeking savings in the deregulated electric market.

Since New Jersey just introduced the opportunity to their residents in the spring of 2010 and Pennsylvania in January 2011, many people have jumped on the band wagon selling electric.

We get several calls daily from our clients asking questions about saving for their home electric.

The first thing that I caution them is to make sure the price that is being presented is fully loaded and contains all the factors that are included to make a price to compare analysis.

Does it include a 7% loss allowance (to deliver 100 kw of electric you must send 107 kw, for there is a 7% line loss in the delivery of the electricity)  

Does it include 7% sales tax. (PA residents 6.46% gross receipt tax)

These factors are included in the PSEG and AC Electric price to compare.

The second thing we caution clients to look for is a fixed price.

Natural gas prices are the lowest they have been in the last 3 to 4 years. Although they have spiked recently due to the winter cold, prices are still very attractive.

Thirty % (30%) of the electric generated in the US is made with natural gas. Because of this, natural gas prices serves as a strong market indicator used for electric market prices.

By choosing a fixed price, you can lock your position for a 1 or 2 year period.

There are many companies offering variable options or 4 month fixed pricing and variable pricing for the remainder of the contract. I do not feel comfortable stating that this presents a good opportunity for savings at this time.

Variable pricing does not lock your position and leaves the pricing upto the whim of the market, therefore this is a more riskier decision at this time.

Proceed with caution and make sure to get all the facts before choosing a deregulated residential electric provider.

Visit us on the web www.hutchinsonbusinesssolutions.com 

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