Energy Suppliers vs. Utilities: What’s the Difference?

Like most businesses and consumers, you’re probably interested in managing your energy usage to cut costs. After all, you’re concerned about energy efficiency. You might even already know that fluorescent light bulbs use 75% less energy, and you may even have considered commercial solar power for energy independence. You may be concerned about energy sustainability, either to protect the planet or your own wallet. For whatever the reason, energy sustainability is an admirable — and lofty — goal.

However, you may be confused about the difference between an energy utility and an energy supplier, or a retail energy company. By learning to understand this distinction, you can find out exactly who provides your services, how they operate, and what your options are in the retail energy market.

Understanding the Retail Energy Supplier Market

An electric utility owns and controls the wires which transport electricity to homes and businesses. The utility is what responds to emergency situations when the power goes out. They are also responsible for reading electric meters.

On the other hand, a retail energy company — also known as an energy supplier — can give you options like securing your rate (ex. how much money you pay per kilowatt-hour). An energy supplier may also offer alternative energy options, such as solar energy or hydro power.

Utilities manage all the processes involved in getting energy to your home or business. Energy suppliers define your rate and set your contract term based on how much you use and the average cost of energy production in your area.

How Electric Utilities Work

You have probably wondered at some point just how the energy grid works. While there’s lots of complicated technology involved, the basic process is fairly simple:

1. The electricity is created at the power plant. This process begins with a generator, which could be powered by fossil fuels, wind energy, solar energy, or nuclear reactors.
2. This electricity is transported to power substations. Here, it is changed into extremely high voltages by transformers, so it can travel long distances across electric lines
3. Next, the electricity is distributed through these lines to various homes and businesses.
4. At last, the energy reaches the point of consumption: the place inside a home or business where it is used to keep lights on and appliances running.

The Benefits of Using a Retail Energy Supplier

Thanks to legislation passed in the 1990s, the market for energy providers has opened up to compete with one another. But by working with energy suppliers directly, you get the chance to choose between different suppliers and negotiate lower rates.

An energy supplier may offer the choice of using either variable or fixed-rate plans. A fixed-rate plan allows you to “lock in” a certain supply rate of energy for the duration of your contract, which could be more cost-effective for you, depending on your situation. This is a common option for most large retailers who use energy consistently throughout the day.

For more information about utilities and energy suppliers, and how they work, rely on Energy Professionals today.