Slash Energy Bills by 20%

It's a little-known bargain that's available to consumers in 18 states, including Arizona, Illinois, Michigan, Oregon, Texas and most states in the Northeast. Because of the deregulation of the electric industry, which some states implemented in as early as 1998, consumers are able to switch their public utility and opt to receive power from an alternative-service provider. The costs are typically lower compared with what the public utility offers, and many companies are involved in green energy production.

The typical savings run around 20%, according to Jerry Jackson, an energy economist and professor at Texas A&M University. That can result in meaningful dollars, especially if you have a larger home or live in a climate that requires air conditioning for the better part of the year. "The average person may only save $20 a month, but a larger household can save $70 or $80," he says.

Yet, according to Jackson, by February 2006 — the latest month for which data is available — only 29% of Texas residents had switched to an alternative provider, a choice they've had since 2002. And Texas is one of the states with the highest switch rates. The Energy Information Administration last issued nationwide statistics in 2003, when rates ranged between 3.6% in Maryland and 26% in Pennsylvania.

Why are consumers walking away from potential savings? For one thing, many don't know about the programs, says Joe Aliceaacosta, a managing partner at Houston-based Quantum, an energy consulting company. Most private energy providers don't market their services to residential customers, he explains, preferring to go after the bigger revenues brought in by industrial clients, schools, organizations and other large businesses.

And even when they find out they have other options, many consumers aren't willing to spend the time investigating them. Typically, state organizations like the Public Service Commission or the public utility itself are charged with educating consumers about their choices, but in many states consumers must call the alternative providers to research rates, fees and other contract terms. For some, the potential savings don't seem to justify the several hours they need to spend making phone calls and comparing confusing offers.

Most importantly, notes Jackson, many folks aren't exactly sure what happens if they make the switch. They're concerned that a private company may not be as responsive as their well-established public utility in emergencies, such as power outages. But that shouldn't be the case. "What happens when you switch providers is your local utility still has to maintain the power lines that bring electricity to your home," he says. In other words, you will still receive power — and in most cases, your bill — from the utility company you've always dealt with. But instead of buying that power from the utility, you are buying it from a competitor.