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Your Guide to Products in Competitive Retail Electric Markets

Your Guide to Products in Competitive Retail Electric Markets

The Retail Energy Supply Association (RESA) advocates for consumers to have the power of choice when it comes to selecting their energy provider. Consumer education is important, as customers need to understand their available options so they can pick a plan that works best for their budget and energy usage. 

Fixed-Rate Products 
Description: A  retail electric provider (REP) offers a specific rate for electricity that will not change during the contract term (e.g. a term can be 12-months). This is the most common type of electric product offered.

Customer benefit: A fixed-rate product provides consistent costs per kilowatt-hour (kWh) for  customers electric rates. As a result, bills will fluctuate based on actual electric usage.

Variable-Rate Products
Description:  A variable rate per kWh can vary month-to-month based on market demand.

Customer benefit: Variable-rate products may provide lower prices and shorter-term contracts or no term commitments. This may be helpful for customers at the end of an apartment lease or want additional time to shop.

Indexed-Rate Products
Description: The customer enters into an agreement with a REP to pay for electricity at a price that is designed to fluctuate based on a formula  from publicly available indices, like natural gas costs or wholesale power prices.

Customer effect: Customers may see very low prices when the product design’s inputs are low. However, customers also bear significantly more risk, particularly under wholesale indexed-rate products.

It’s important to understand the difference between variable-rate products and indexed-rate products. Indexed products are tied to the wholesale power market, which may offer extremely low prices at times, but also expose customers to massive price fluctuations. 

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