What's in it for Constellation and other third party electrical providers?

Submitted by chroniclerofblarney t3_zs91x5 in Connecticut

I can't see any reason not to change suppliers in advance of the Eversource rate hike, but before I do, could anyone explain why a third-party (like Constellation) can provide electricity at 30%+ lower rate per kwh than Eversource? Presumably there is some way for third parties to profit and they are not just doing this for charity. But, like, what's the catch here? Are there even more obscene fees with these third parties? Are they just hoping the cost of power drops below their $0.17/kwh rate? Would love some insight on why this deal is even available before I dive in.

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BrutalPeach t1_j16tby4 wrote

There can be several reasons why a third-party electric supplier may be able to offer electricity at a lower rate than the average supplier. Some possible reasons include:

Lower overhead costs: Third-party electric suppliers may have lower overhead costs than traditional utilities, allowing them to offer lower rates to consumers.

Different pricing models: Third-party electric suppliers may use different pricing models, such as variable rate plans or fixed-rate plans, which can result in lower rates for consumers compared to traditional utilities.

It's important to note that third-party electric suppliers are not regulated by the same agencies as traditional utilities, so it's important for consumers to do their research and carefully compare rates and terms before switching to a third-party electric supplier.

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jbushee t1_j183zgb wrote

Isn't this what happened in TX a year or two ago, when everyone who'd signed up for third party suppliers got slammed?

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NoBarracuda2508 t1_j18eo7k wrote

Yeah I’m pretty sure variable rate plans are not allowed in CT, that’s what really messed people up in Texas

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jbushee t1_j18ezfd wrote

Think you’re right, now you remind me. Demand peaked and prices did too.

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NoBarracuda2508 t1_j18fo40 wrote

The cost of power will drop below what they’re charging now, and yeah they hope people will sign on and forget to cancel and switch to a better contract in the summer. 90 percent of people just get their supply from Eversource, so this is a good opportunity for them to bring in new customers.

It is a good deal, and you should take it, just make sure you set a reminder to check again in like April and June when you’ll find better prices.

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omild t1_j16u6h3 wrote

Third party suppliers give you all the info you need up front: fixed or variable rate and whether or not there is a fee for canceling or changing the supplier before the contract is done. For example I am using a company based out of AZ I have a three year contract with for 7.9c per kwh that ends in October of next year. At that point I'd pay whatever fee they currently charge unless I switch to a different supplier. I face no fees if I change suppliers before then. The big thing I'd say look out for are places with really low fees but short contract times such as 6 months because it is easy to forget to change your supplier. I tend to set phone reminders the month before my contract ends so I can look for the next best deal if my current supplier rate is set to spike after the contract ends. I imagine some places are so much lower is based on where they are located and how they generate or supplement generation of electricity. Like my company is in AZ so maybe it makes sense for them to sell electricity to a heavily populated state like ours where people desperately want cheaper per kwh rates.

I have used third party providers exclusively since CT has allowed them and have never been hit with any hidden fees or surprises since I read all conditions in each contract before signing on.

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[deleted] t1_j18wgto wrote

[deleted]

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chroniclerofblarney OP t1_j19sqsz wrote

OK. That makes sense to me. So they already have purchased the electricity, in a manner of speaking, at a price lower than what they want to charge me. In that case, it seems like a no-brainer to sign up for it until eversource lowers their kilowatt hour px. Thank

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Swede577 t1_j19l6uo wrote

Correct all these suppliers are buying and reselling long term futures when natural gas was much cheaper.

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ObiOneKenobae t1_j19zon0 wrote

I haven't seen all the numbers in years, but used to know where all the suppliers broke even. I suppose the math is probably changing with how many customers they have now, but 17 cents is a comical amount of profit over what they would have paid.

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rwilcox t1_j18fyhk wrote

In general a third party provider may use alternative energy sources. It’s heavily implied that Eversource is increasing prices because of the increased price of natural gas making electric generation more expensive for them.

But, if you have a nuke (to pick one) heavy provider, theoretically they’re decoupled from that cost. They could keep their prices lower in an effort to gain market share (or jack them up too because increase shareholder value.

(I did some analysis specifically on Constellation earlier…)

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kesagatame-and-Chill t1_j19eut9 wrote

You can still make money and not be greedy. My family business did this successfully for years. It was the American standard until the '80s.

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chroniclerofblarney OP t1_j19s8ae wrote

I get it. But in this case, the third-party has to buy the energy from eversource at a higher rate than what they are charging to the customer (i.e. me). So how are they making up for that loss? If electricity costs $.24 per kilowatt hour from eversource and the third-party is only taking $.17 from the customer, how does that work? The only thing that makes sense to me is what another poster put here, which is that they are hoping that the price that eversource charges will drop below the $.17 and customers will be too lazy or forgetful to change their supplier when the time comes. That seems like such a strange gamble, as it depends upon the rather unpredictable irrationality of the customers. But it’s the only explanation that makes any real sense to me.

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