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Consumers may save money by changing their energy rate plan or provider. This post justifies projecting an associated savings range of 3% to 10%.

Introduction and Context

Americans relish consumer choice!  However, sometimes we aren’t even aware of our options.  This point certainly applies to energy, where most of us still rely on large electric companies to provide service.  Historically, these utilities have existed as regulated monopolies.  As such, to ensure certain consumer protections, rates and tariffs receive approval from a public oversight commission.  However, despite this nod, choices offered by utilities aren’t always obvious.  And you might have options to save money by changing your energy rate plan.   

As a result, we tend to stick with the same rate structure over time.  Perhaps it is the plan to which we defaulted when we first took over service.  Or maybe we looked at choices once in the past, but never again revisited the issue. Either way, we likely are unaware of new tariffs from the utility or changing habits on our part that point to potential benefits from a different rate plan. 

This tendency to ignore choices may prove even more pronounced in deregulated energy markets (shown below).

In these 28 states and the District of Columbia, we actually may become overwhelmed by too many choices.  For example, in a controlled grocery-store setting, consumers presented six options of jam chose to purchase 30% of the time.  In contrast, when offered 24 options, only 3% took the time to select.  If we have this much trouble with jam, no wonder we struggle with energy!

Nevertheless, though the research remains somewhat spotty, it may well be worth considering the options to save money by changing energy plan.  

Research Summary

Understandably, most studies conducted in this area are highly localized.  Rate structures, deregulation, promotion, and meter technology vary widely across regions and utilities.  Therefore, any high-level conclusions regarding savings must be interpreted cautiously. 

Industry Direction

Despite this caution, we can certainly appreciate that utilities as a whole are moving towards plans to help align their actual costs for providing service (predominantly skewed towards fixed-cost infrastructure) with the manner by which customers are charged (predominantly skewed towards variable use).   The figure below provides a visual example for this mismatch in Arizona:

To accomplish this, utilities such as Xcel Energy have started pilot programs that tier prices, making energy use more expensive during high-demand periods.  On the other hand, using energy during low-demand “off-peak” periods is encouraged through lower prices.  The next figure depicts how such a program works over a 24-hour period.  Note the presence of different pricing on an hourly basis that shifts between summer and winter rates. 

Industry Hurdles

Here we should note that utilities may need to upgrade legacy meters or even more of their infrastructure to enable tariff changes such as pictured above.  For example, the scheme above requires AMI meter technology in order to gauge when energy is consumed.  For regions yet to emplace AMI technology, Xcel may provide upgraded AMR meters capable of tracking peak demand.  (Click here to learn more about AMI vs. AMR meters). 

We should further note that even with these incentives, debate exists around how much savings – if any – consumers may realize.  Some studies suggest that many consumers may see little-to-no difference in their bills.  Others point to meaningful savings across a larger group of consumers: on the order of 10% for most consumers who actively lowered their usage in response to tariff structure.  What is clear: customers would benefit from real-time feedback for energy consumption to help modify use patterns. 

Emporia Savings Calculations

Emporia Energy feels strongly that users should consider how to save money by changing their energy plan where available.  However, doing so requires access to real-time data.  Where appropriate options exist, Emporia anticipates a savings range of 3% to 10% for users of its Vue platform.  Emporia further justifies this range as consistent with (and perhaps even on the low end of) savings identified by some in deregulated energy markets. 


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