Shocked by your Recent Electric Bill? Me too.

Published on February 3, 2015 By Lauren

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  • If you live in the Northeast, have you looked at your most recent utility bill?  I used to have a cheap energy supplier, but that seemed to change overnight.  I heard in the news that the price of electricity was increasing dramatically for some customers, and I guess I was hoping that we weren’t one of them.  Well, I was wrong.  Turns out that my electricity supplier charges a variable rate and this past winter (or is it still winter?) caused some huge price disruptions.  So I changed my supplier last night.

    And if you are currently on a budget plan that keeps your monthly payment constant – look at your bill from the past month.  You will still be responsible to pay for any cost increases; they will just be worked into your next payment adjustment.

    Here’s a snippet of my electricity bill in January:

    Here is February:

    And here is March (YIKES!):

    So, you can see that my rate went from $0.0499 per kWh to $0.1075 over a 2 month span!  More than double!  And even though I’m getting into the warmer months and using less electricity now, my bill is still going up!  I got angry about this, so I took a look into how the pricing works.

    (You can skip this part if you want) Here’s what seems to be going on based on my limited knowledge and research… here in NYS, and many other states as well, energy has been deregulated and there are many suppliers of both electricity and natural gas.  The energy suppliers don’t actually own any power plants or generators, instead they purchase energy from the generators on a wholesale market, and then re-price it and sell to consumers.  Some of these energy retailers are large companies, and some are fairly small.  Typically, the small ones operate with variable rate contracts terms.  You might have had someone knock on your door or call you asking to see your electricity bill promising to lower it by switching to their company.  Sometimes it can be a good deal… personally, I always prefer to see all competitor prices when shopping, but more on that later.

    Electricity prices that are purchased on the wholesale market are subject to fluctuations throughout the year, as well as supply and demand forces.  When there is a higher demand for energy (like in a bad winter), prices tend to be higher.  On top of that, when other natural gas prices increase then the price of electricity increases as well, since natural gas powers most electricity producing generators.  This winter had both.  It was extremely cold, and other forces caused increases in the price of natural gas (overloaded gas transmission lines).  This combination caused a spike in February/March wholesale market electricity prices.  Electricity suppliers had to purchase electricity at these crazy prices, and then chose to pass it on to the consumers with variable rate contracts.  Like me.

    If there are any experts on this subject out there, feel free to add to the conversation in the comments!

    My energy supplier seemingly got caught up in this and jacked up their rates.  And like I said, they could technically charge whatever they want because my contract was a variable rate.  If your electricity supply contract had you locked in at a good rate, then you did not see this spike in your bill.  So does this mean that the price will go down next month?  Probably, but I have no idea.  Maybe it was an emotional decision on my part, but I decided to switch providers to a fixed contract at a very reasonable price.  And it was WAY easier than I thought.

    Perhaps someone out there has a better way to shop energy suppliers, but I used and found it extremely easy to shop and compare many different suppliers.  It was also a snap to sign up with a new supplier as well.  And I found a better rate on natural gas too.  I chose suppliers that locked my rate for a relatively short amount of time (6-12 months) and I’ll just have to remember to shop again when my contract period is up.

    Some things to consider:

    • Your current energy supplier contract might have a termination fee.  Mine didn’t, but check this out before switching.
    • In your variable rate contract, prices might decrease to something cheaper than the available fixed rate contracts.
    • Check the termination fees in any new contract you are considering.

    Have you seen your bill increase like I did?

    Anyone have better ideas for switching suppliers or the best time to do it?


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