With deregulation has come competition that seems good to the consumer. But, with everyone and their brother (or sister) “selling” electricity like Avon products, are they legit? How does the parent co make money? I hear they will raise your rates once you’re comfortable, but wouldn’t competition force them to stay honest?
I WAG these companies are counting on a large volume of customers to keep their rates low? Or, was PT Barnum’s famous quote (a sucker born…) just an understatement?
I have a friend who was involved in this in the UK. It is essentially a pyramid scheme, with the first ‘distributor’ getting a cut of the profits from each ‘distributor’ down the tree.
The utility companies are counting on volume to make a profit.
For what it is worth, my friend was making about 30 pounds a month total from “his” distributors (around 10 below him in the food chain). So not really worth while - but this is a guy to whom pyramid schemes seem to be the ultimate investment opportunity.
Deregulation of the electric market is legitimate. But as is the case with any activity, there can be bad apples in the barrel. Just be sure to read all of the agreements you sign to be sure there aren’t exorbitant cancellation fees.
As for how the salespeople make money – commissions, just as insurance agents, car salesman, etc. etc.
Ah… In other words, they scam their “employees” to maintain low rates for their customers. I’ve heard they toy with the rates, too. But, they probably cannot afford to jerk around the customers too much.
Ah! This reminds me of the old days when they would just come round on a horse and cart with a big bucket of electricity, and just ladle some into each of your appliances. Then you just had to hope there was enough to keep everything going until the next time they came round, which might be a month or more later!
I’m pretty sure each state sets its own rules through the appropriate state body, so there can’t be a single answer for this.
In New York, the independents work exactly the same way as the old power companies. They have two sets of rates, fixed and variable. Fixed costs try to estimate what the costs will be for the next year, and charge 1/12 of that each month. Variable uses actual month by month costs. The consumer in essence makes a bet against the house on what the heating/cooling will be and whether they want to take a chance on surprises. Each contract lasts a year and the rates change with each contract.
The independents distribute power and nothing else. Anybody can make power and sell it to the system. The old power companies maintain the lines. They can also make and distribute power on their own. They all buy power from the system suppliers.
Where does the competition come in? The costs of buying the power. Each power plant has a different cost to its electricity. Hydro is cheapest, but that’s almost all allocated under long-term contracts. Nuclear, coal, oil, wind, solar, whatever, has a variety of costs. The independents may have lower overheads but can’t afford to buy power in bulk to get discounts. The old companies are guaranteed rates by the state to cover the extra maintenance costs they must maintain.
I don’t see how to run a scam on any of this (except to solicit money and then never provide any service, but that gets the law on you after people wind up in the dark the first day of the contract and to my knowledge has never happened here). There might be in other states with other rules, but I’d have to see more evidence than the OP’s usual bizarre rumors.